Power ministry notifies rules to address cost recovery concerns of renewable energy


Most power supply agreements include the CIL provision, under which appropriate alterations are required to be made in the tariff structure if the cost of electricity supply is impacted by enactment, amendment or repeal of any law after the initial agreement has been signed by buyers and sellers.

The Union power ministry has notified new rules to address concerns of renewable energy players about the timely recovery of costs due to changes in law and curtailment of renewable energy by various state-run electricity distribution companies (discoms). The new rules direct electricity regulators to make adjustments in tariffs for ‘change in law’ (CIL) cases within 60 days. They also allow solar and wind power plants to sell power in the exchanges if their supply has been curtailed by their designated buyers.

Most power supply agreements include the CIL provision, under which appropriate alterations are required to be made in the tariff structure if the cost of electricity supply is impacted by enactment, amendment or repeal of any law after the initial agreement has been signed by buyers and sellers. Changes in taxes and license fees are also included in the CIL provision. As per the new law notified by the government, power plants have to give a three weeks prior notice to the buyers about the proposed impact in the tariff to be recovered under CIL. Subsequently, the power company will have to furnish relevant documents and their calculations of monetary impact of the CIL event to electricity regulators for adjusting the tariffs, and the regulator will have to verify such claims within sixty days of receiving the documents.

The latest rules also state that in cases where power has been curtailed due to technical constraints, renewable energy power plants can sell electricity in the power exchanges. If any profit is made by the generator by selling in the spot market, it “shall be adjusted against the compensation payable by the procurer (which had curtailed procurement)”. Electricity generated from must-run power plants can be curtailed or regulated only due to technical constraints or for security of the electricity grid. Compensation for curtailment are supposed to be paid as per the terms of the power purchase agreement.

Despite, renewables having a ‘must run’ status, instances of curtailment are regularly observed in several states. This is mainly because renewable power supply is intermittent and unreliable, and discoms have to spend significant amount in ensuring back-up arrangements when green sources do not supply as per prior promise. India has announced international commitment to set up 175 GW of renewable energy capacity by 2022 and 450 GW by 2030. “These rules will help in achieving the targets of renewable energy generation,” the government said.

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