Energy Conservation Amendment Bill 2022: It all boils down to targets for industries

Energy Conservation Amendment Bill 2022: It all boils down to targets for industries

Last Updated: Aug 10, 2022

Energy Conservation Amendment

The Energy Conservation Amendment Bill 2022 was introduced in the Lok Sabha August 3, 2022 and passed in the lower house August 8. The bill brings in a list of amendments to the Energy Conservation Act 2001 in order to promote energy efficiency and conservation.

It provides provisions for the regulation of energy consumption by equipment, appliances, buildings and industries. The major amendments proposed are:

  1. Mandating minimum use of non-fossil fuel sources for industries (mining, steel, cement, textile, chemicals and petrochemicals), the transport sector (including railways) and commercial buildings, along with a penalty of up to Rs 10 lakh in case of failure of compliance. It will attract an additional penalty of twice the price of the oil equivalent of energy consumed above the prescribed norm.
  2. The setting up of the carbon-trading market scheme. Carbon credit certificates shall be issued by the central government or any authorised agency to the entities that would need to comply under the scheme. These entities can sell and purchase the certificate based on their requirement.
  3. The inclusion of large residential buildings in the energy conservation code.
  4. The inclusion of energy consumption standards for vehicles and vessels.
  5. The allotment of regulatory powers of State Electricity Regulatory Commissions.
  6. Changes in the governing council of the Bureau of Energy Efficiency (BEE).

The first and second amendments are the ones that would directly affect India’s industrial sector. The government decision to finally bring in targets for non-fossil energy in industry is a good one. But it is not new as many major sectors have already made substantial moves in shifting to renewable energy.

The cement sector has already voluntarily set a target to increase its thermal substitution rate to 25 per cent by 2025 and 30 per cent by 2030 ie using 25 to 30 per cent of alternative fuels for thermal energy demand.

UltraTech Cement, the largest cement-producing company, has already declared a target to scale up their green energy mix to 34 per cent by 2024 and has already achieved a green energy mix of 13 per cent.

Similarly, companies like Tata Steel have already inked an agreement with Tata Power to develop photovoltaic capacities for Tata Steel at Jamshedpur (21.79 Megawatt peak) and Kalinganagar (19.22 MWp). JSW Steel has already contracted one gigawatt of renewable energy, of which 225 MW became operational in April 2022.

The point is that the targets which will be set up for these industrial sectors under this Act should go beyond what the industrial players have already achieved. They should set a high benchmark, unlike how Nationally Determined Contribution targets were watered down post the Prime Minister’s announcement at Glasgow.

The amendments also provides the mandate to industries to buy renewable energy directly. This would help industries accomplish their targets that will be set under this Act. If ambitious targets are put in place, the demand for renewables would also go up.

But some of the major challenges would be the seasonality of renewables (especially solar and wind) ie the peak time of its generation might not meet the peak time of the demand in industries.

This leads to the second issue of not having enough affordable storage technologies, which could balance the demand and supply for all types of industries, especially industries which have continuous operations.

The amendments mention the adaptation of renewable fuels like green hydrogen and green ammonia. Soon, targets might also be set up for usage of green hydrogen and green ammonia in various sectors.

But the government needs to enable some successful research and development and pilots on the ground before setting targets of such fuels for industries. This will bring about a clear picture of their technical and financial feasibility.

The cost of green hydrogen is somewhere between $3.5 and $4.5 per kg and its cost is driven by the price of electrolysers and renewable energy. This cost needs to be brought down to $1 per kg to make it financially viable.

Similarly, biomass has also been mentioned as a clean fuel in the amendments. According to a survey conducted by Delhi-based non-profit Centre for Science and Environment (CSE), the price of biomass has almost doubled since power plants and industries in the National Capital Region (NCR) were mandated to use it as a cleaner fuel.

Its rising price can become an issue in the times ahead. This calls for a price control mechanism to keep it viable in the future.

Currently, power plants in the NCR have also flagged issues in the supply of biomass pellets due to the lack of enough large-scale biomass suppliers. Therefore, the supply chain for biomass needs to strengthened further for it to be set as a target fuel.

Carbon market and penalties

The amendments also propose the setting up of India’s own carbon market scheme. A similar scheme which has set up an energy-based market in India is the perform, achieve and trade (PAT) scheme.

The PAT scheme was brought in to bring energy efficiency in industrial sectors and commercial buildings by the BEE. In case of PAT, ESCerts trading takes place, based on the over-achievement of the given energy reduction target in terms of tonnes of oil equivalent (TOE). ESCerts are similar to carbon certificates that will be sold and purchased under the carbon market scheme.

CSE’s analysis of the PAT scheme for thermal power plants found that the value of one ESCert is very less — Rs 700 — compared to the actual investment of Rs 4,020 that has to be made for reducing energy equal to one TOE.

Hence, the need to reduce their energy consumption by implementing energy efficiency measures becomes unpopular. The carbon dioxide (CO2) reduction achieved for three major sectors — iron and steel, cement and power — in the first two PAT cycles has ranged between four and 12 million tonnes. That too in a span of three years per cycle. This is clearly very low.

Sowmiya Kannapan, programme officer at CSE, said:    

Low CO2 reduction values achieved in the PAT cycles are a clear indication of unambitious targets being set for the sectors under the PAT scheme. Low targets lead to over-achievement and subsequently, surplus of ESCerts, giving a good face value to underachievers in reality.

The introduction of carbon markets in India is a welcome step. But if the scheme is going to follow a pattern similar to PAT, it might end up just providing an escape route mechanism to carbon-intensive industrial sectors, she added.

Avantika Goswami, programme manager at CSE, looked at the global scenario of carbon markets. She said:

A successful carbon market requires a high enough carbon price that will disincentivise polluting behaviour. The global average price today is about $6 per tonne of CO2. China’s new emission trading (ETS) is still operating at about $8.

“The highest has been achieved by the EU ETS of close to $100, a gradual process since its inception in 2005. The Intergovernmental Panel on Climate Change, in its 1.5°C report of 2018, estimates that prices need to be at a minimum of $135 per tonne of CO2 to effectively limit global temperature rise to 1.5°C,” Goswami added.

This lays emphasis on planning the carbon market scheme of India in such a way that the value of its carbon certificates is increased and can actually make an impact on the ground.

The penalties mentioned in these amendments of up to Rs 10 lakh, along with an additional penalty of not more than twice the price of the oil equivalent of energy consumed above the prescribed norm, may be apt for industries of a certain scale.

But when it comes to bigger players of this carbon-intensive sector, it may not be stringent enough. To make the penalty mechanism more equitable, it should be based on the profit margins the companies make, rather than the price of the oil. 

Overall, the targets for renewable energy and carbon markets need to be ambitious over and above existing targets set by companies. They need to be binding along with an effective monitoring and reporting system which leaves no space for manipulations and inaccuracy.

The right kind of infrastructural, financial and policy support environment needs to be enabled to view substantial impacts on the ground as an outcome of this amendment bill.


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Policy tweak in the works: Green energy purchases likely to be mandatory

Policy tweak in the works: Green energy purchases likely to be mandatory

Last Updated: May 09, 2022

Policy Tweak In The Works Green Energy Purchases Likely To Be Mandatory

The Union government is planning to amend the Electricity Act and the National Tariff Policy to make it mandatory for electricity distribution companies (discoms) and other bulk buyers to meet their renewable purchase obligations (RPOs), a move that will give a fillip to investments in solar, wind and hydro energy sectors.

The move comes at a time when companies engaged in the renewable power segment have lined massive expansion plans and are looking to raise funds from different sources including domestic banks and financial institutions, overseas banks, capital markets and multilateral institutions.

The plan is also sync with New Delhi’s new commitment to meet half of its energy requirement from renewable sources by 2030.

The RPOs were introduced in 2010 under the Section 86(1) (e) of the Act. Via this section, the Centre urges bulk buyers of power, including discoms to meet a certain percentage of electricity requirements through renewable sources.

But compliance with this norm has been lax, as most state governments haven’t showed a firm resolve to enforce it. While RPO rates among states vary roughly in the 9-17% range, some states including Uttar Pradesh have even waived the penalty for non-compliance.

“Now that India has updated its 2030 commitments under the Paris Agreement, there is more urgency to reduce dependence on coal. Since RPO compliance has been found quite poor, the government is now revising the tariff policy to make them mandatory,” said a Delhi-based executive from the power finance sector.

Some of India’s largest conglomerates are ramping up renewable capacity in the hydro and wind power segments, bankers said. Solar energy has been one of the leading sectors for banks in the last few years in terms of loan demand, but capex demand for hydro and wind segments is starting to firm up now, they added.

“There is a clear push from the government in favour of renewable sources. We are seeing strong demand for hydro projects in the states where it is viable, and that includes Himachal Pradesh, Uttarakhand, Jammu & Kashmir and the northeastern states,” said a senior executive with a large public-sector bank.

Historically, the exposure of the banking sector to alternative sources of energy has been limited. According to a March 2022 paper by Reserve Bank of India (RBI) researchers, as of March 2020, only about 8% of the bank credit deployed in the electricity industry was towards non-conventional energy production. The ratio varied from 17% in Punjab to a measly 0.1% in Odisha. The share of non-conventional energy in utility sector credit was higher for private banks at 14.8%, as against only 5.2% in public sector banks (PSBs).

Of late though, thermal power has been losing favour with banks and the lending taking place in the coal-based power segment is largely in the form of refinance transactions. Bankers are also wary of coal-based projects from an asset quality standpoint after the grim experience of the last bad loan cycle. A number of thermal power plants financed in the late 2000s went bad in the absence of power purchase agreements.

State Bank of India (SBI) is now closely assessing its exposure to thermal power projects. “The life cycle of coal projects could be anywhere between 20 and 30 years. So we need to ask ourselves whether such projects could become a threat to India’s global sustainability commitments and, in turn, create asset quality issues for us,” said a senior executive with the bank.

The government had, in 2020, launched the Renewable Energy Certificate (REC) scheme as a market instrument to facilitate compliance with RPO targets. Under the scheme, buyers of conventional power such as discoms and corporate entities who fall short of meeting their RPO targets can buy RECs on the exchanges from registered RE power producers. However, higher prices on the exchanges and regulatory uncertainties have made project developers reluctant to register under the scheme. Also, buyers have started to enter into individual contracts with developers at lower prices compared to exchange rates. So, a mere 4526 MW or 4%of the installed renewable energy capacity stands registered under the scheme as of December, 2021.

In the United Nations Climate Change Conference (COP26) held in Glasgow in November last year, Prime Minister Narendra Modi announced that India will reduce the total projected carbon emissions by one billion tonne till 2030. By 2030, the country will reduce the carbon intensity of its economy by less than 45%, he said.

With inputs from Vikas Srivastava in Mumbai

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Karnataka Reissues Draft Renewable Energy Policy for 2021-2026 With Reduced Targets

Karnataka Reissues Draft Renewable Energy Policy for 2021-2026 With Reduced Targets

Last Updated: OCTOBER 26, 2021

Karnataka Renewable Energy Development Limited (KREDL) has reissued the ‘Draft Karnataka Renewable Energy Policy 2021-2026″ to develop 10 GW of renewable energy projects with and without energy storage.

According to the policy draft, of the 10 GW of renewable energy projects, 1 GW will be rooftop solar. The policy also has several targets to create a more conducive ecosystem for renewable energy growth in the state.

Earlier in March 2021, KREDL issued the ‘Draft Renewable Energy Policy 2021-2026’ to develop 20 GW of renewable projects with and without energy storage. Of this target, 2 GW was set aside for rooftop solar.

KREDL will be the state nodal agency for implementing this policy. The policy will be valid for five years or until a new policy is announced.

Policy objectives 

 With this policy, the nodal agency aims to attract investments in the renewable energy sector and tap into the state’s existing renewable energy resources to meet internal demand and export power. It also seeks to achieve the state electricity regulatory commissions’ renewable purchase obligations (RPO) targets.

The policy targets developing renewable and hybrid energy parks and encourage participation in green energy corridors or transmission network projects. The policy also aims at promoting distributed generation through agriculture solarization and increasing electric vehicle adoption.

The nodal agency has also set goals to develop the energy storage market and integrate more renewable energy into the grid. It also aims to promote the development of wind-solar hybrid projects, floating solar projects on existing hydropower stations, biomass, and waste-to-energy projects.

The policy promotes renewable projects with storage systems as the demand increased for round-the-clock (RTC) supply, peak power supply, higher availability, and bundling of renewable energy with thermal power for RTC supply.

Focus markets

KREDL has focused on 11 key markets, including green energy corridor, renewable energy parks, solar projects, wind projects, solar-wind hybrid projects, energy storage, biomass, co-generation projects, waste-to-energy, mini, and small hydro projects, and new initiatives, as well as pilot projects research and development.

Under the new initiatives and pilot project section, new technologies of off-shore wind, tidal, wave energy, rooftop aero turbine with solar, aero turbine on highways, concentrated solar power, hydrogen fuel cells, and bio-compressed natural gas will be supported. It will also encourage renewable energy-related research and development activities.

Incentives for focus markets

Renewable energy developers can sell power to distribution companies or consumers under open access through captive or group captive models and energy exchanges. The developers can sell energy within and outside the state to promote intrastate and inter-state transmission system (ISTS) projects. However, there will be no banking facility for renewable energy projects implemented under the ISTS category.

Obligated entities are encouraged to set up renewable energy projects in the state to fulfill their non-solar and solar RPO targets.

In addition, all renewable energy projects will be treated as a manufacturing industry. Therefore, they will be eligible for concessions and incentives as applicable to the manufacturing industry mentioned in the state industrial policy.

The policy proposes providing project developers approval for transmission evacuation from Karnataka Power Transmission Corporation (KPTCL) within 60 days from receipt of requisite documents for registration.

Modules used in these solar projects should comply with the Approved List of Models and Manufacturers (ALMM).

Additional policy measures 

The state government encourages private sector investments and public-private partnerships to develop renewable energy parks and green energy corridors. It will promote renewable energy parks under the public-private partnership model by investing up to 50% equity.

According to the policy draft, the minimum capacity of each renewable energy park should be over 25 MW, and the maximum capacity should be as per the guidelines of the Ministry of New and Renewable Energy (MNRE).

There will be no minimum capacity limit for the allotment of captive or group captive projects. If solar developers set up projects on canal top, they will be eligible for incentives as per the MNRE guidelines.

Solar projects installed within premises and connected to the grid interface of DISCOM or KPTCL will not be allowed for a net-metering facility under the revised policy.

The state will also promote rooftop solar projects through net metering and gross metering per the Karnataka Electricity Regulatory Commission’s regulations. It will also encourage the peer-to-peer model of rooftop solar energy trading as per the guidelines of the state regulatory commission. In addition, the policy will also support off-grid solar, distributed agricultural solar, and floating solar projects.

 Project Allotment

KREDL has also mentioned the procedure for applying for projects and land allotments to set up renewable energy projects.

Solar projects with or without trackers are allowed a maximum of 3.5 acres per MW, while rooftop solar projects are permitted 100 square feet/kW. In the earlier draft, KREDL has allowed a maximum of 3 acres of land per MW for solar projects without a tracker. Wind projects are allowed 4 acres of land per wind turbine generator, and the developer should pay ₹50,000 (~$666)/acre for any additional land requirement. Earlier, wind projects were allowed 2.5 acres of land per wind turbine generator.

Per the guidelines, solar, wind, hybrid, biomass, co-generation, and waste-to-energy projects should be commissioned within two years. They can be extended up to an additional two years. However, time extension fees will be applicable in these cases. Mini and small hydro projects must be commissioned within three years and extended up to additional two years.

According to Mercom’s India Solar Project Tracker, Karnataka is the second largest state for solar installations, with a cumulative installed capacity of 7.7 GW. It has been the top solar state since 2018, with nearly 20% of the cumulative large-scale solar installations in the country.

Rajasthan overtook Karnataka at the end of Q3 2021, with 8.2 GW of cumulative solar installations.

Subscribe to Mercom’s real-time Regulatory Updates to ensure you don’t miss any critical updates from the renewable industry.

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Centre announces 2 new rules to increase investments in renewable energy

Centre announces 2 new rules to increase investments in renewable energy

Last Updated: October 24, 2021

To increase investments in renewable energy, the central government on Saturday announced two new rules to ensure renewable utilities recover generation costs on time and are assured of regular energy purchase by states and power distribution companies.

“The new rules would help create an investment-friendly environment in the country,” the power ministry said in a statement on Saturday. The rules are significant because several renewable energy pacts have been stuck in states such as Punjab, Andhra Pradesh, Telangana, Rajasthan and Gujarat over inordinate payment delays and issues in land acquisition and regulatory clearances, a ministry official said.

“The rules will help investors because the cost of solar modules has been at an all-time high since 2019. This reason for the hike in module price is because almost all of them are imported from China, and the manufacturing there has been largely affected as their factories are run on limited days due to a power crisis. So, the ongoing issue of renewable power generators not getting paid on time in India was aggravating the situation and prohibiting growth in the sector,” he said on condition of anonymity. “So now, a formula has been provided to calculate adjustment in the monthly tariff due to the impact of change in law.”

The notified rules mandate that a must-run renewable energy plant will not be subjected to curtailment or regulation of generation or supply of electricity. “The electricity generated from a must-run power plant may be curtailed or regulated only in the event of any technical constraint in the electricity grid or for reasons of security of the electricity grid,” the ministry statement said.

The move comes when India has set a target of installing 450 GW of renewable energy capacity by 2030. It is aiming to invest ₹ 1 trillion every year till 2030. India has so far invested about ₹ 4.7 trillion in renewable energy over the past six years.

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New renewable energy policy to implement power projects by 2025

New renewable energy policy to implement power projects by 2025

Last Updated: October 1, 2021

The Maharashtra government has come up with a new Renewable Energy Policy aiming at implementing 17,360 MW of transmission system-connected power projects by 2025.

This includes 12,930 MW of solar power projects, 2,500 MW of wind energy projects, 1,350 MW of co-generation projects, 380 MW of small hydro projects and 200 MW of urban solid waste-based projects, said Dinesh Waghmare, Principal Secretary (Energy) at the 4th Edition of ‘CII Renew India 2021’ organised by Confederation of Indian Industry, Maharashtra, on Thursday.

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India needs a carbon policy for agriculture

India needs a carbon policy for agriculture

Last Updated: October 12, 2021

Ashok Gulati, Purvi Thangaraj write: The share of agriculture in India’s total emissions has gradually declined. However, in absolute terms emissions from agriculture have increased to a level similar to China’s.

The Assessment Report of the Intergovernmental Panel on Climate Change (IPCC) Working Group – 1 has literally issued a “code red” to humanity as we rush towards a 1.5 degree Celsius hotter planet by 2040. The UK is set to host the 26th UN Climate Change Conference of the Parties (CoP26) in Glasgow from October 31 to November 12 with a view to accelerate action towards the Paris Agreement’s goals. Union minister for environment, forest and climate change, Bhupender Yadav, says that the focus should be on climate finance and transfer of green technologies at low cost.

If one takes emissions per unit of GDP, of the top five absolute emitters, China ranks first with 0.486 kg per 2017 PPP $ of GDP, which is very close to Russia at 0.411 kg per 2017 PPP $ of GDP. India is slightly above the world average of 0.26 (kg per 2017 PPP $ of GDP) at 0.27 kg, while the USA is at 0.25, and Japan at 0.21. But India ranked seventh on the list of countries most affected due to extreme weather events, incurring losses of $69 billion (in PPP) in 2019 (Germanwatch, 2021). This is worrying. In our Nationally Determined Contributions (NDCs) submitted in 2016, India committed to “reduce emission intensity of its GDP by 33 to 35 per cent by 2030 from 2005 level.”

Sector-wise global emissions show that electricity and heat production and agriculture, forestry and other land use make up 50 per cent of the emissions. But the emissions pie in India owes its largest chunk (44 per cent) to the energy sector, followed by the manufacturing and construction sector (18 per cent), and agriculture, forestry and land use sectors (14 per cent), with the remaining being shared by the transport, industrial processes and waste sectors. The share of agriculture in total emissions has gradually declined from 28 per cent in 1994 to 14 per cent in 2016. However, in absolute terms, emissions from agriculture have increased to about 650 Mt CO2 in 2018, which is similar to China’s emissions from agriculture.

Agricultural emissions in India are primarily from the livestock sector (54.6 per cent) in the form of methane emissions due to enteric fermentation and the use of nitrogenous fertilisers in agricultural soils (19 per cent) which emit nitrous oxides; rice cultivation (17.5 per cent) in anaerobic conditions accounts for a major portion of agricultural emissions followed by livestock management (6.9 per cent) and burning of crop residues (2.1 per cent).

A carbon policy for agriculture must aim not only to reduce its emissions but also reward farmers through carbon credits which should be globally tradable. With the world’s largest livestock population (537 million), India needs better feeding practices with smaller numbers of cattle by raising their productivity. Rice cultivation on around 44 million hectares is the other culprit for methane emissions, especially in the irrigated tracts of north-west India.

While direct seeded rice and alternative wet and dry practices can reduce the carbon footprint in rice fields, the real solution lies in switching areas from rice to maize or other less water-guzzling crops. In this context, opening up corn for ethanol can help not only reduce our huge dependence on crude oil imports but also reduce the carbon footprint. If we can devise a system for rewarding farmers for this switch by making corn more profitable than paddy, it can be a win-win situation. And if we develop global carbon markets, India needs to clearly spell out in its policy how it would adjust carbon credits when it sells to polluting industries abroad so that emission reductions are not double counted in India and the country buying carbon credits

Agricultural soils are the largest single source of nitrous oxide (N2O) emissions in the national inventory. Nitrous oxide emissions from use of nitrogen-fertiliser increased by approximately 358 per cent during 1980-81 to 2014-15, growing at a statistically significant rate of 5,100 tonnes per year. An alternative for better and efficient fertiliser use would be to promote fertigation and subsidise soluble fertilisers. Almost 70 per cent of the granular fertilisers that are thrown over plants are polluting the environment and leaching into the groundwater, while polluting the same. Ultimately, the government should incentivise and give subsidies on drips for fertigation, switching away from rice to corn or less water-intensive crops, and promoting soluble fertilisers at the same rate of subsidy as granular urea.

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