Renewable Energy - Green Power Purchase

Who needs to buy Green Power?

Green Power has to be purchased by any consumer that purchases power through the mode of Open Access. Captive consumers (such as steel and aluminum plants) who have captive power plants in their own premises also are obligated to buy green power (as are distribution companies too). This Green Power purchase is obligated under the RPO requirements of each State as per section 86(1) e of the Electricity Act 2003. The RPO regulations differ from state to state. In Tamil Nadu, for the year 2011-12, the RPO requirement is 9% of which the solar RPO is 0.05%. Tamil Nadu has, however, mandated that from Dec 2013 all H.T. consumers will have a specific Solar Purchase obligation at 6% which can be met by self-generation (roof top) or by purchasing from third parties. In Karnataka, the RPO requirement for Open Access customers is 5%.

Green Power also has to be purchased by distribution utilities. The RPO requirements of distribution utilities varies between 7 – 10%.

Customers who are unable to meet their RPO obligations can meet their shortfall by purchasing Renewable Energy Certificates on the Indian Energy Exchange and Power Exchange of India.

Customers can, of course, buy green power in addition to the RPO requirements.

Tamil Nadu and Punjab have the highest number of consumers that purchase power through open access. The CERC report on the Short Term Power market in India for 2012 shows that the number of open access consumers in states like Tamil Nadu are 482 and that in Punjab are 317. The corresponding numbers for the states of Karnataka and Andhra Pradesh are 45 and 48 respectively.

What are the ways to buy Green Power?

Green Power can be purchased by the consumers thorough open access or group captive mode. Open Access implies purchasing power directly from a renewable energy generator and not from the local distribution licensee . Open Access purchases can be through short term contracts (less than one year), medium term (anywhere between one and 5 years) and long term contracts (greater than five years).

Group captive power plant, unlike an individual captive power plant, is a unique structure where a developer sets up a power plant for collective use of many consumers. In this structure the consumers procuring power should have 26% equity in the plant and must consume 51% of the power generated.

What are the costs to buy Green Power? ?

In general, they are transmission charges, wheeling charges, cross subsidy. In addition to this, transmission and distribution losses are also applicable. The costs of buying green power for any consumer through open access – is to pay some charges(Cross-subsidy charges, Surcharge etc.) additional to the cost paid to the generator. These charges depend on many factors. Open access charges differ from state to state and, regulations can change from time to time. The final incidence of charges depends on the location of the generator and consumer (whether they lie in the same distribution area), the voltage at which the power is evacuated and consumed and even the type of power.

Is there a business case for buying Green Power?

Apart from meeting RPO obligations, there have been several examples of companies who are purchasing green power for there captive consumption. This is particularly true in Southern India and for consumers in Tamil Nadu, Andhra Pradesh and (to some extent) Maharashtra. In these states, the costs of electricity have risen dramatically. The open access charges in these states (along with losses) for electricity supply typically add Rs. 1 - Rs. 1.30 to the costs of wind, waste-to-energy, micro hydro and bio mass power produced in these states. Given the current costs of power in these states, buying green power often makes business sense. The situation may change with additional capacity coming on stream.

What are the risks of buying green power and how can they be mitigated?

There are multiple risk areas. Apart from regulatory risks, the risks are on the generation side (the ability of the producer to meet the contractual obligations), the transmission and distribution side (the ability of the state infrastructure to evacuate and deliver the power) and the demand side (changes in the power requirement due to technological and business conditions).

Consumers who opt to purchase green power are recommended to enter into these transactions with the advice of specialized consultants. These consultants perform the following set of services: assessment of power requirements, brokering of deals, contracting and negotiation, analysis of economics and scenario analysis of current and future transmission- distribution conditions.

If the source of green power is not firm (as in wind), how can a constant supply be assured?

This can be assured by the ability of green (for example) wind power producers to be able to bank their power. In simple terms, banking allows the producer to bank the excess power produced during high season and to be consumed (withdrawn) during low season. This is governed by various state regulations. This is also a cause of significant risk. Banking regulations differ from state to state and have also been changing from time to time. Currently, Tamil Nadu has developed clear banking guidelines as per its recent Tariff Order.

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