India to set rules for encouraging companies' shift to green energy

The new regulations will allow companies to purchase renewable electricity from state distributors at 'green tariffs' said power minister Raj Kumar Singh

India is making rules that will encourage companies to switch entirely to renewable power, 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,” Power Minister Raj Kumar Singh said at the virtual BloombergNEF summit on Tuesday. Hurdles for businesses seeking to buy clean power directly from generators will also be eased, he said.

Accelerating use of clean energy in offices and factories, the largest power consuming segment in the country, will be key to achieving targets to cut emissions per unit of the GDP. It will also help the companies improve their environment, social and governance -- or ESG -- scores by reducing their carbon footprint.

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.

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.”

Offshore Wind

Separately, India will promote offshore wind projects to get to its 2030 goal of 450 gigawatts of renewables 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.

India will 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.