India to set rules for companies to ease their shift to green energy

India will be crafting rules shortly that will encourage companies to switch to renewable power entirely, a key step toward decarbonizing the nation’s fossil fuel-dominated economy.

The new regulations will allow companies to purchase renewable electricity from state distributors at “green tariffs,” said power minister, RK Singh at the virtual BloombergNEF summit. 

Hurdles for businesses seeking to buy clean power directly from generators will also be eased, he noted.

The new rules come as India is planning to expand its renewable power capacity nearly five-fold by 2030 to meet its decarbonization targets. By hastening the use of clean energy in offices and factories, the country’s largest power consuming segment, will go a long way in achieving the slated targets to cut emissions per unit of the gross domestic product. 

Companies have shown an eagerness to embrace clean energy, as it will help them improve their environment, social , and governance (ESG) scores by reducing their carbon footprint.

However, companies are faced with difficulties trying to purchase renewable energy. In an effort to ease their concerns, those opting for green power will be allowed open access, when they aren’t tied down to the local distributor within 15 days, instead of having to wait for months, Singh said. That would force state utilities to either meet the demand or risk losing their high-value customers.

Still, providing time-bound open access, though a “welcome move,” may be fraught with challenges, according to Debasish Mishra, a Mumbai-based partner at Deloitte Touche Tohmatsu.

Industrial buyers pay the highest prices for grid electricity and help utilities subsidize poorer consumers. Cash-strapped distributors, already facing precarious finances, often resist losing these customers to other suppliers.

“High open-access charges can often create barriers for consumers to directly access green power,” Mishra said. “And as per law, that’s under the jurisdiction of state electricity regulators who would want to balance the interest of the incumbent utility.”

Addressing that issue, the power ministry has proposed changes in the electricity laws to remove entry barriers in electricity distribution, and Singh expects to seek parliament’s approval for the amendments soon, he said.

Offshore Wind

Separately, India will promote offshore wind projects to get to its 2030 goal of 450 gigawatts of renewable energy capacity, a near fivefold expansion from current levels. That would include 280 gigawatts of solar and 140 gigawatts of wind capacity, the minister said.

Singh cited scarcity of land as one of the challenges for ramping up wind power and said offshore projects will help deal with the issue. The cost of such projects will initially be high and the government is exploring capital subsidies to help developers, he said.

Nonetheless, India is likely to fall short of its renewable capacity goal of 175 gigawatts by the next year due to “some hiccups,” Singh said, potentially linked to the pandemic. The country has had to extend deadlines for renewable projects due to difficulties in importing equipment and getting workers at construction sites.

Leave a Reply

Your email address will not be published. Required fields are marked *