- Companies actively seek renewable energy sources for a variety of reasons, but face political and regulatory challenges when it comes to renewable energy sources.
- There is a need to broaden the avenues for renewable energy procurement through the introduction of internationally successful alternative models in India, experts from WWF India write in this commentary.
- Adopting innovative renewable energy sourcing models from around the world will play a major role in achieving India’s renewable energy goals.
- The views expressed in this comment are those of the authors.
Climate change has been identified as possibly the greatest challenge facing our generation. The latest report by the Intergovernmental Panel on Climate Change (IPCC) underscores the need for immediate action on this front. While the global warming threshold of 1.5 degrees Celsius is likely to be exceeded by the middle of the century, even in the best case scenario, there is still time to drive the future course of climate change and lower temperatures by the end of the century.
However, this will require drastic emissions cuts and countries around the world to meet their net zero targets. India has shown itself to be a trailblazer when it comes to tackling it head-on. India is well on the way to fulfilling the obligations of the Paris Agreement and is one of the few countries that are currently “2-degree compatible”.
Commercial and industrial (C&I) consumers play a very important role in achieving India’s goals as they are responsible for about half of all electricity consumption. Additionally, companies actively seek renewable energy sourcing for a number of reasons, including economic benefits, regulatory compliance, sustainability, and energy security. However, the opportunities for K&I consumers to source renewable energy in India are currently limited to rooftop solar systems, open access (OA) and renewable energy certificates (RECs).
In fact, according to a survey by WWF, 50 percent of companies named political and regulatory issues as their biggest challenge when purchasing renewable energy. Open access is the preferred method of sourcing renewable energy for high-demand P&I consumers, but to date only about 17 gigawatts (GW) of power purchase agreements (PPAs) have been signed by companies, which account for about five percent of total P&I needs.
The rooftop solar sector is also struggling to gain momentum. The profitability of rooftop solar panels for C&I consumers depends on net metering guidelines, including capacity constraints, ease of integration into the grid, and tariffs for electricity sales. These vary widely across the country. Additionally, some distributors in some states fear losing high paying consumers to rooftop solar panels and have withdrawn favorable policies.
At the national level, the net measurement was previously limited to 10 kilowatts, with all loads above this being shifted to the gross measurement. This would have been a severe blow and the proposed tariffs for gross metering would not be sustainable and K&I consumers would not be able to use the units generated from their own installation for their own consumption. Fortunately, this has now been relaxed to 500 kW.
However, if India is to meet the national target of 40 GW for rooftop solar systems, a significant change in rooftop solar policy is required. Establishing an incentive system for sales companies and securing their buy-in could make a major contribution to expanding the rooftop solar system.
Read more: Is India’s solar roof sector being ignored in major projects?
Demand for an alternative procurement model for renewable electricity
The aim is to create market security in India by introducing alternative, internationally successful procurement models for renewable electricity and to expand the paths for the procurement of renewable energies.
India has taken some very positive steps in this direction recently. The first was the announcement of a green tariff policy. While some states like Karnataka and Maharashtra have adopted green tariffs in the past, they have seen mixed results in price-sensitive markets.
Renewable energies have become a cornerstone of Indian energy policy. Photo by Sunny Tank / Unsplash.
According to the announcement, the new green tariff will be lower than the conventional tariff and enable consumers to purchase renewable energy directly from DISCOMs. In addition, the union’s power ministry recently issued the “Draft Electricity Rules 2021” which contains a number of provisions that stakeholders welcome. It significantly promotes OA electricity purchasing by limiting cross-subsidies and additional surcharges, establishing presumptive permits, and establishing model formats and regulations that promote consistency across states. In addition, it enables C&I consumers to cover a percentage of their consumption through green tariffs. These changes are expected to be groundbreaking for Indian C&I consumers.
Virtual PPAs are another very successful model worldwide. In fact, nearly 80 percent of PPAs in the United States fell under this model in 2019. Virtual PPAs are essentially contracts in which a consumer agrees to purchase a certain service from a project developer at a fixed price for a fixed period of time. This provides a guaranteed income for the developers and serves as an investment opportunity for the buyer. In India, virtual PPAs can help K&I consumers break government barriers to buying open access renewable energy. However, the virtual PPA model is unlikely until there is a liquid market for trading renewable energy.
Read more: India Proposes New Green Energy Rules To Promote Renewable Energy
Is the renewable energy trading market a solution?
Another innovative model being explored in India is peer-to-peer (P2P) trading, where blockchain-enabled online platforms bring power producers and consumers together to trade renewable energy. This model offers flexibility and promotes a decentralized form of solar generation on the roof. India has already started research into this concept through pilot projects in Delhi and Uttar Pradesh. There is significant potential for future scaling.
Other options are internationally tradable RECs and creating a dedicated renewable electricity exchange that can be used to trade renewable electricity, as opposed to electricity and the RECs, which are traded separately. These models have significant potential to improve market transparency and efficiency and to offer consumers tailored solutions according to their needs.
It is clear that C&I consumers in India are excited about the prospect of sourcing renewable energy but are grappling with market and policy challenges. The Renewable Energy Demand Improvement Initiative (REDE) by WWF India and the Confederation of Indian Industry (CII) was launched in part to address these challenges and to provide a national forum to address the challenges of sourcing renewables Discuss energies of large companies and find practical and commercially viable solutions.
REDE has been actively working with the government since last year, making recommendations to enable K&I consumers to purchase renewable energy, including green tariffs and relaxation of open access regulations. The announcement of a green tariff policy and the recent draft electricity rules are a positive sign that the Indian government is proactively promoting innovative solutions for the procurement of renewable energy.
The Indian renewable energy policy market ecosystem is also likely to develop rapidly in the near future, given the proposed changes to the Electricity Act 2003 and the proposed National Electricity Policy. These developments would likely revitalize the Indian electricity market and provide new renewable energy solutions. Initiatives like REDE are working with both businesses and the government to find out how best to adapt new models and systems to the Indian market.
Adopting innovative renewable energy procurement models from around the world will play a major role in meeting the renewable energy targets for India, which aims to install 175 GW of renewable energy capacity by 2022 and 450 GW by 2030. India recently achieved installation of 100 GW of renewable energy capacity.
Apoorva Santhosh is Senior Expert in Climate and Renewable Energy Policy at WWF India and Varun Aggarwal is Associate Director-Sustainable Business at WWF India.
Banner image: A solar pump on a private farm. Photo by Prashanth Vishwanathan (IWMI) / Flickr.