best regulatory practices for promotion of re

8/3/2019 Best Regulatory Practices for Promotion of RE

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REPORT

ON

GLOBAL REGULATORY BEST PRACTICES

FOR THE PROMOTION OF RENEWABLE

ENERGY & ENERGY EFFICIENCY

BY

KOTHAWADE SACHIN ARUN


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EXECTIVE SUMMERY

Regulation is primarily designed to address the failure of markets to

deliver desired goods, whether these are economic, social or

environmental. One model of regulation will not fit all energy systems.

Whether a system is state-owned or privatized, monopoly or

competitive, integrated or unbundled, established or developing will

affect the role of the regulator and the degree to which the regulator

can intervene in the system. However, various regulatory models can

be adopted or adapted to encourage the development of sustainable

energy technologies.

The renewable electricity sector is a quite advanced sector with

already well developed market and business structures. Most of the

activities reach beyond general awareness raising and promotion.

Issues like favorable, reliable and forward-looking policy frameworks,

investment security, access to electricity grids and fair regulation,

operation and maintenance etc. dominate the picture. Although the

sector is generally very dynamic and well developed, it still faces

considerable regulatory, administrative and grid barriers.

Some of the challenges for utility regulation

Poor financial performance of many state-owned utilities

Inappropriate pricing (usually as a result of political

pressures)


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Managerial and technical deficiencies (regulation is a

relatively new concept for many countries)

Unsustainable subsidies

Limited public sector finance for new infrastructure

Limited private sector participation

Low levels of access to services

Global Regulatory Best Practices for the Promotion of RE | 3


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In addition to above challenges following three prominent issues with

regards to RE based electricity generation which regulatory authorities

must address in order to accelerate development in this sector,

namely:

Share of Renewables

Pricing

Grid connectivity

Thesis is also considering initiatives that must be taken in order to

promote Energy efficiency in India & study of existing mechanisms in

rest of the world. Currently efficiency programmes are largely absent

in most countries. With the exception of a few countries in sub-Saharan

Africa, energy efficient systems development is often undertaken

within an energy planning and policy vacuum. As a result, the

development of energy efficiency systems often follows an ad hoc path

with no reference to a coherent vision and plan. Regulatory framework

and tariff setting mechanisms can play an important role in driving

utilities towards increased energy efficiency in all three segments.



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TABLE OF CONTENTS

CHAPTER 1: THESIS OBJECTIVES ....................................................... 7

CHAPTER 2: RENEWABLE ENERGY TECHNOLOGY OPTIONS ................. 9

2.1 RENEWABLE ENERGY SCENARIOIN INDIA...............................................................10

2.2 RE TECHNOLOGYOPTIONSFOR INDIA...................................................................12

2.2.1 Co-Generation .................................................................................12

2.2.2 Wind Power ....................................................................................12

2.2.3 Solar power ....................................................................................14

2.2.4 Small hydroelectric plants ..............................................................14

2.2.5 Biomass Power ................................................................................16

2.2.6 ALL INDIA REGIONWISE GENERATING INSTALLED CAPACITY (MW) As

on 31-12-2009 .........................................................................................17

CHAPTER 3: RE MARKET MODELS IN INDIA ...................................... 18

3.1 OLDMARKETMODEL.......................................................................................18

3.2 NEWMARKETMODEL......................................................................................18

3.3 NEWINITIATIVES...........................................................................................18

3.4 EXISTING POLICY & REGULATORY FRAMEWORKFOR RE PROMOTIONIN INDIA......................20

3.4.1 New Initiatives ................................................................................20

3.4.2 Fiscal Incentives ..............................................................................21

3.4.3 Foreign Investment Policy ...............................................................23

3.4.4 Other Incentives .............................................................................23

3.4.5 Electricity Act 2003 .........................................................................24

3.4.6 National Tariff Policy: ......................................................................25

3.5 ROLEOF VARIOUS STAKEHOLDERSOF RE SECTOR INTHEPROMOTIONOFDEVELOPMENT IN INDIA

....................................................................................................................26

3.6 CHALLENGES & CONSTRAINTSIN RE DEVELOPMENTIN INDIA........................................28

3.6.1 Current Issues with RE in INDIA ......................................................28

3.6.2 The major barriers for this RE development ....................................28

3.6.3 To address these barriers it is necessary to have ...........................29

3.7 KEY FINDINGS & OBSERVATIONSOF RE DEVELOPMENTSCENARIOIN INDIA.......................30

3.7.1 Features of RE market & Regulations of India .................................30

3.7.2 RE Opportunities for India ...............................................................30

3.7.3 Challenges & Barriers for RE development in India .........................32

3.7.4 Policy Initiatives taken in order to promote RE development in India

................................................................................................................333.8 TARGET AREASAND PRIORITIESNEEDSTOBEFOCUSONTOACHIEVE GOALS.......................34

CHAPTER: 4 APPROACHES & POLICY MECHANISMS .......................... 35

4.1 TYPES OF REGULATORY APPROACHES & POLICY MECHANISMS

ENVISAGED AROUND THE WORLD FOR THE PROMOTION OF RENEWABLE

ENERGY .......................................................................................................35



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4.2 ANALYSISOF VARIOUS REGULATORY APPROACHES/PRACTICES & POLICY MECHANISMSADOPTED BY

RESTOFTHEWORLD............................................................................................41

4.2.1 RE promotion in EU .........................................................................41

4.2.2 RE promotion in Germany ...............................................................43

4.2.3 RE promotion in UK .........................................................................43

4.2.4 RE promotion in Texas ....................................................................43

4.2.5 RE promotion in Thailand ................................................................45

4.2.6 RE promotion in Vietnam ................................................................45

4.3 WAY FORWARDFOR RE PROMOTIONIN INDIA.........................................................46

CHAPTER 5: KEY FINDINGS & SUGGESTIONS ................................... 47

5.1 KEYFINDINGS..............................................................................................47

5.2 SUGGESTIONS .............................................................................................49

5.3 ASSESSMENTOFMAJOR RE SUPPORTMECHANISMBASEDONABOVESTUDY..........................51

CHAPTER 6: SUMMERY & CONCLUSION ........................................... 52

6.1 DIFFERENTMECHANISMTOPROMOTERENEWABLEGENERATION........................................52

6.2 PRO & CONSOF RENEWABLE ENERGY POLICY MECHANISMSFORTHEPROMOTIONOF RE ........536.3 CONCLUSION...............................................................................................55

CHAPTER 7: ENERGY EFFICIENCY .................................................... 57

7.1 INTRODUCTION.............................................................................................57

7.2 IMPACTOF UNBUNDLINGON ENERGY EFFICIENCY......................................................59

7.3 IMPACTOF ELECTRICITY LAW AMENDMENTON ENERGY EFFICIENCY..................................64

7.4 IMPACTOF CORPORATIZATIONON ENERGY EFFICIENCY................................................65

7.5 IMPACTOF INDEPENDENT POWER PRODUCERSON ENERGY EFFICIENCY..............................66

7.6 ENERGY EFFICIENCY POLICIESIN INDIA..................................................................68

CHAPTER 8: CONCLUSION & OBSERVATIONS ................................... 69

LIST OF REFERENCE ....................................................................... 70

DATABASE ...................................................................................................70

SEARCH ENGINES .......................................................................................70

WEBSITES ....................................................................................................71

WEB PAGES .................................................................................................72

ARTICLES & MAGAZINES .............................................................................72



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CHAPTER 1: THESIS OBJECTIVES

This thesis is mainly focusing on the existing regulatory practices for

the promotion of RE technologies & Energy Efficiency in some of the

European Countries & in India; there comparison & implications to

India. Thesis primarily aims to find answers of following questions:-

A. What can be done to overcome the impediments

facing renewable energy and energy efficiency?

B. Why regulatory/policy intervention for Renewable

Energy Promotion?

Prima facie it gives mainly following reasons for it:-

Present market conditions make renewable uncompetitive

Bur Regulatory support and improvement in RE technology

will help RE to achieve Grid Parity.

In addition, chronic power shortages and increasing fuel

cost builds a strong case for promoting renewable.

During the course of thesis, other reasons of regulatory intervention for

promotion of Renewable Energy & other promotion mechanisms will be

discussed.



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Thesis examines the following themes:-

Regulation is primarily designed to address the failure of

markets to deliver desired goods, whether these are

economic, social or environmental.

One model of regulation will not fit all energy systems.

Whether a system is state-owned or privatized, monopoly or

competitive, integrated or unbundled, established or

developing will affect the role of the regulator and the degree

to which the regulator can intervene in the system. However,

various regulatory models can be adopted or adapted to

encourage the development of sustainable energy

technologies.

The need to develop sustainable energy policies raises new

issues for policymakers and regulators, including how to

integrate possibly conflicting policy goals.

Regulation is carried out in a number of different ways by

different institutions. Each has strengths and weaknesses.

Similarly, there are different models of regulatory strategy

employing a range of incentives and penalties.

Comparison of worlds best regulatory practices for the

promotion of RE Technologies & their implications to India &

Asian countries.



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CHAPTER 2: RENEWABLE ENERGY

TECHNOLOGY OPTIONS

Renewable energy is energy generated from natural resources -such as

sunlight, wind, rain, tides, and geothermal heat-which are renewable

(naturally replenished). In 2006, about 18% of global final energy

consumption came from renewables, with 13% coming from traditional

biomass, such as wood-burning. Hydroelectricity was the next largest

renewable source, providing 3% of global energy consumption and

15% of global electricity generation. Various RE technology options are

discussed below:-

Wind Energy : - Represent 70% of total RE capacity, most

matured/commercialized, backed with highly organized

industry, low gestation period

All major players are in India (Suzlon etc.)

Bagasse cogeneration /Biomass : - Slow, but verypromising.

Solar (PV/thermal) : - Sunrise sector in RE, ridden with high

costs, big players, lack of organized industry, but very

promising in the coming years, second only to wind

Small hydro : -Limited resource and high gestation period

(Huge potential in Himachal & North-East; strategically

important for Rural electrification as a standalone system).



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2.1 Renewable Energy Scenario in India

Conventional sources of energy such as coal and petroleum products

have several drawbacks, especially with respect to the impact on theenvironment and the depletion of natural resources. World fossil fuel

reserves have been depleting rapidly. It has been estimated that at the

current rate of production, natural gas reserves are expected to last for

31-34 years while coal reserves in India are expected to last for 118

years.

Hence, the government has been focusing on exploiting non-

conventional and renewable sources of power. RE market in India is

one of the oldest, developed & matured renewable energy market in

the world Initiated in late 80s. At present, non-conventional sources of

energy account for a negligible proportion of the total energy

consumed in India. India is blessed with an abundance of sunlight,

water and biomass. Vigorous efforts during the past two decades are

now bearing fruit as people in all walks of life are more aware of the

benefits of renewable energy, especially decentralized energy whererequired in villages and in urban or semi-urban centers. India has the

worlds largest programme for renewable energy. Government created

the Department of Non-conventional Energy Sources (DNES) in 1982.

In 1992 a full fledged Ministry of Non-conventional Energy Sources was

established under the overall charge of the Prime Minister. The range

of its activities cover:-

Promotion of renewable energy technologies,

Create a conducive environment to promote renewable

energy technologies,



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Create a conducive environment for their

commercialization,

Renewable energy resource assessment,

Research and development and its demonstration

Production of biogas units, solar thermal devices, solar

photovoltaic, wind energy and small hydropower units.



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2.2 RE Technology options for India

2.2.1 Co-Generation

In some industries like chemicals, the manufacturing process

generates considerable amounts of heat, which can be used to produce

steam. This steam, in turn, can be used to run a turbine generator. In a

co-generation plant the turbine runs on low-pressure steam, as

compared with the high-pressure steam used in conventional thermal

plants.

The capital required to set up a co-generation plant is much lower, ascompared with a coal-based plant, as the need for a boiler is

eliminated (due to the availability of process steam). Typically, co-

generation plants cost Rs 20-30 million per MW of capacity, while coal-

based power plants cost Rs 40-50 million per MW of capacity

(SOURCE: http://www.bharatbook.com/Market-Research-

Reports/Indian-power-sector-database.html). The main factors that

determine the cost of a co-generation plant are the quantity and thequality of steam generated in the manufacturing process.

In addition, as the cost of fuel is nil, the cost of the electricity

generated through co-generation is marginal, as compared with the

cost of purchased power. The surplus power (after meeting the

requirement of the manufacturing process) can be sold to the grid.

2.2.2 Wind Power

In India, wind power potential is largely concentrated in the coastal

regions, and is estimated at around 48,500 MW (SOURCE:

http://www.bharatbook.com/Market-Research-Reports/Indian-power-sector-database.htmlhttp://www.bharatbook.com/Market-Research-Reports/Indian-power-sector-database.htmlhttp://www.bharatbook.com/Market-Research-Reports/Indian-power-sector-database.htmlhttp://www.bharatbook.com/Market-Research-Reports/Indian-power-sector-database.html


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http://www.bharatbook.com/Market-Research-Reports/Indian-power-

sector-database.html). The functioning of a wind power generation

starts when the wind turbine converts the kinetic energy of wind into

rotary motion, which can be used, either directly to run a machine

(wind mills or wind pumps), or to run an electric generator, that is, a

wind turbine generator (WTG). The velocity and density of wind and

the size (diameter) of the rotor determine, at a particular site, the

output of a WTG.



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2.2.3 Solar power

Electricity from solar energy can be generated by two methods - solar

photo-voltaic (SPV) cells and solar thermal power. SPV devices

generate power by directly converting light energy to electricity. SPV

modules are composed of semi-conductor material (silicon) and when

sunlight falls on them, it frees electrons, which produces electricity.

SPV modules are made of several inter-connected solar cells, in order

to provide power on a large scale. Modules can be further inter-

connected to form solar arrays. In solar thermal power systems, heat

energy from the sun is concentrated, using parabolic reflectors, to heata fluid like water to a high temperature. The cost of generating solar

power has been estimated at Rs 15 per kWh. The Centre and state

governments have tied up to give incentives of Rs 12 per unit for

generating power from solar energy. Cost of generation from

conventional sources is Rs 2.5-3.5 per kWh (SOURCE:


sector-database.html). Generation of solar power is more expensive

owing to the higher capital costs of solar power plants.

2.2.4 Small hydroelectric plants

Taking into account the problems associated with large hydel plants,

small hydroelectric power plants (up to 25 MW) are considered to be

economical and environment friendly. They are suitable for remote and

inaccessible areas, as a decentralized source of power. Over 4,000

prospective sites, with a total potential of over 15,000 MW, have been

identified to set up small hydel plants (up to 25 MW). The highest

potential is found in Himachal Pradesh, Uttaranchal, Jammu and



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Kashmir and Arunachal Pradesh (SOURCE:


sector-database.html).



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2.2.5 Biomass Power

The Biomass power/cogeneration programme is implemented with the

main objective of promoting technologies for optimum use of countrys

biomass resources for grid and off grid power generation. Biomass

materials successfully used for power generation include Bagasse, rice

husk, straw, cotton stalk, coconut shells, soya husk, de-oiled cakes,

coffee waste, jute wastes, and groundnut shells, saw dust etc. The

technologies being promoted include combustion/ cogeneration and

gasification either for power in captive or grid connected modes or for

heat applications.

Potential

The current availability of biomass in India is estimated at about 500

million metric tons per year. Studies sponsored by the Ministry have

estimated surplus biomass availability at about 120 150 million

metric tons per annum covering agricultural and forestry residues

corresponding to a potential of about 16,000 MW (SOURCE:http://www.bharatbook.com/Market-Research-Reports/Indian-power-

sector-database.html). This apart, about 5,000 MW additional power

could be generated through Bagasse based cogeneration in the

countrys 550 Sugar mills, if these sugar mills were to adopt technically

and economically optimal levels of cogeneration for extracting power

from the Bagasse produced by them.



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2.2.6 ALL INDIA REGIONWISE GENERATING INSTALLED

CAPACITY (MW) As on 31-12-2009

Sources / Systems Estimated Potential( MW)

CumulativeAchievements

(MW)

Wind Power 45,195 10,925

small hydropower 15,384 2,559

biomass power 16,881 829

Grid Interactive SolarPower

50,000 6

Bagasse cogenerationprojects

5,000 1307

Waste to Energy 2,700 68

Total 135,160 15694

Source- www.mnre.gov.in

http://www.mnre.gov.in/http://www.mnre.gov.in/http://www.mnre.gov.in/


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CHAPTER 3: RE MARKET MODELS IN INDIA

3.1 Old market model

Captive utilization

Feed-in tariff fixed by state government based on

guidelines by central government

Fiscal incentives (viz. accelerated depreciation)

3.2 New market model

Fixing of RPO by various state governments

Procurement tariff by State Electricity Regulatory

Commissions to achieve the % procurement

3.3 New initiatives

NAPCC targets 5% by 2010 to 15% by 2020

Nationwide tradable REC market mechanism

CERC tariff regulations

Feed-in tariff in form of Generation Based Incentives (GBI)

As an alternative to accelerated depreciation



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National solar mission

20 GW by 2020



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3.4 Existing Policy & Regulatory Framework for

RE promotion in India

3.4.1 New Initiatives

MNRE has announced Roof-top SPV system demo program

in FEB 09 with or without grid connection with total physical

target of 4.25 MW. The program may be extended to include

SWT / Wind-SPV hybrid systems. ( SOURCE: www.mnre.gov.in

)

Under the Electricity Act-2003, Sec. 86.1(e) empowers

regulators to create suitable environment and ensure grid

connectivity for renewable energy systems. Taking benefit of

this provision SWT may be connected to the local grids.

http://www.mnre.gov.in/http://www.mnre.gov.in/http://www.mnre.gov.in/


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Net metering concept can be introduced so as to feed extra

energy generation in the local grids. Net metering concept for

SPV systems is already introduced in West Bengal during 2008

for government buildings.

SWT, SPV-Wind hybrid, Wind-Diesel hybrid systems are

also covered under village electrification program through

Decentralized Distributed Generation (DDG) under Rajiv

Gandhi Grameen Vidyutikaran Yojana. Up to 90% of the total

project costs (capital cost and soft cost) will be provided as a

financial assistance to the implementing agency. (

SOURCE:www.india.gov.in )

Centre for Wind Energy Technology (C-WET), Chennai has

set-up testing and certification unit which provide testing and

certification services to the SWT manufacturers in India.

3.4.2 Fiscal Incentives

Packages of incentives are available to renewable power projects such

as:

fiscal concessions such as 80 per cent accelerated

depreciation,

concessional custom duty,

excise duty exemption,

sales tax exemption,



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Income tax exemption on profits from power generation for

10 years, etc.



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3.4.3 Foreign Investment Policy

Foreign Investors can enter into a joint venture with an

Indian partner for financial and/or technical collaboration and

also for setting up of renewable energy based Power

Generation Projects.

Liberalized foreign investment approval regime to facilitate

foreign investment and transfer of technology through joint

ventures.

The proposal for up to 74% foreign equity participation in a

joint venture qualifies for automatic approval.

100% foreign direct investment as equity is permissible

with the approval of Foreign Investment Promotion Board

(FIPB).

Government of India is also encouraging foreign Investors

to set up renewable energy based power generation projects

on Built- Own and Operate basis.

(SOURCE:Paper on New Policy & Regulatory Framework for achieving

the NAPCC and Solar Mission Objectives, Page no 53, Article 7.7, Dated

February 05, 2010 by Sunil Varma Marri, Program Leader Energy

Practice,ICRA Management Consulting Services Limited)

3.4.4 Other Incentives

In addition, a host of fiscal incentives and facilities are available to

both manufacturers and users of renewable energy systems, which

include:



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No excise duty on manufacture of most of the finished

products.

Low import tariffs for capital equipment and most of the

materials and components.

Soft loans to manufacturers and users for commercial and

near commercial technologies.

Financial Incentives/Subsidies for devices with high initial

cost.

3.4.5 Electricity Act 2003

Section 3 - National Electricity Policy and Plan for

development of power system based on optimal

utilization of resources including renewable sources of

energy,

Section 4 - GoI to prepare a National Policy permitting

stand alone systems (including those based on

renewable sources of energy and non-conventional

sources of energy) for rural areas.

Section 61(h) - Tariff Regulations by Regulatory

Commission to be guided by promotion of generation of

electricity from renewable energy sources in their area

of jurisdiction.

Section 86(1)(e) - Regulatory Commission to specify

purchase obligation for licensee from renewable

energy



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3.4.6 National Tariff Policy:

SERCs to fix minimum percentage for purchase of energy

from Renewable Energy sources taking into account

availability of such resources in the region and its impact on

retail tariffs

National tariff policy prefers procurement of power from

NCES based on preferential tariff

Future procurement of power from NCES through

competitive bidding under section 63 within suppliers offering

energy from same type of non-conventional sources

In the long-term, these technologies need to compete with

other sources in terms of full costs



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3.5 Role of Various Stakeholders of RE Sector in

the promotion of development in India

Stakeholders Role in RE Sector

Central GovernmentBodies/Institutions

The Ministry of New and Renewable Energy(MNRE) is the nodal Ministry of the Governmentof India for all matters relating to new andrenewable energy. The broad aim of theMinistry is to develop and deploy new andrenewable energy for supplementing theenergy requirements of the country. - MNREoperates through state-level nodal department

and agencies. Ministry of Power (MoP) is responsible fordesigning policies for grid-connected Powersupply from RE projects. Ministry of Environment and Forests (MoEF)is a nodal agency for the planning, promotion,co-ordination and overseeing theimplementation of environmental (and forestry)programs. Department of Science and Technology isresponsible for research and development of RE

technologies.

Regulators

Central Electricity Regulatory Commission(CERC) regulates the tariff of generatingcompanies owned or controlled by the CentralGovernment. (This includes tariff that stategovernment bodies pay for renewable energy). State Electricity Regulatory Commissions(SERCs) take measures conducive to anefficient electricity industry in the state,safeguard interests of the consumers, andprovide advice to the Government.

FinancialInstitutions

The government owned financial institutionssuch as Indian Renewable Energy DevelopmentAgency (IREDA), Power Finance Corporation(PFC), Rural Electrification Corporation (REC),provide concessional finance for renewableenergy projects.



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Private financial institutions and banks(nationalized and private) provide loans to REprojects on commercial terms and conditions.

Stakeholders Role in RE Sector

ResearchOrganizations

MNRE funded technical institutions such asthe Solar Energy Centre, Centre for WindEnergy Technology, and Sardar Swaran SinghNational Institute of Renewable Energy work astechnical focal points in key RE technologyareas. Educational institutions such as IndianInstitute of Technology (Department of Energy

Studies) help government agencies throughR&D efforts and RE training and developmentinitiatives.

(SOURCE:www.mnre.gov.in)

http://www.mnre.gov.in/http://www.mnre.gov.in/


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3.6 Challenges & Constraints in RE development

in India

3.6.1 Current Issues with RE in INDIA

Development of RE sources in India is still slow to date vis--vis other

countries due to the following reasons:

Lack of experiences for the energy sector;

Limited policy and framework;

Lack of funding for the sector;

Inadequate data and information; and

Insignificant utilization of the RE sources in the contribution

to the total energy supply mix which is based on imported fuel

(coal) for power generation.

3.6.2 The major barriers for this RE development

High initial investment;

Organizational and managerial obstacles;

Lack of means; and

Weakness in financing and banking sectors.



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3.6.3 To address these barriers it is necessary to

have

Human resources, which are both competent and

motivated.

The market should be developed in order to reduce the

cost, and subsidies must be provided.

The International communities must extend their political

influence in order to break the vicious cycle of poverty and

endless donors' assistance, through intelligent and

sustainable development.

Also technology transfer from developed countries to

developing countries is must for the development of RE in

developing countries.

Increasing awareness about RE technologies among the

investors, financial institutions & local communities is very

essential in order to increase their support & participation in

RE development & promotion.



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3.7 KEY Findings & Observations of RE

development scenario in India

3.7.1 Features of RE market & Regulations of India

Large market would drive towards investment by

Utilities

Funds

Constraints will be removed on

Market size & viability

Intermittency

Forecasting protocols

Adopting approaches by Spain and Australia

3.7.2 RE Opportunities for India

RE Sources Opportunities

Biomass

Various fuels available (rice husks,straw, Bagasse, palm oil, forestry residue,

plantation timber/crops (e.g., rubber)) Many technologies now mature and inuse elsewhere Need thorough resource assessment +feasibility studies current fuel uses mustbe investigated

Hydropower

Excellent potential, proven ability in-country Pico/micro suitable in many smallvillages on rivers (Especially in Himachal& other North-Eastern states)

CDM: gather small projects into oneproposal

Wind

Huge Potential available in somesouthern states (Source:C-WET) Huge Potential available in off shore isstill untapped due to lack of technology



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Solar PV

Excellent potential available But duetechnology access problems & hugeinvestments it is still not exploited inIndia.



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3.7.3 Challenges & Barriers for RE development in

India

Poor financial performance of many state-owned utilities

Inappropriate pricing (usually as a result of political

pressures)

Managerial and technical deficiencies (regulation is a

relatively new concept for many countries)

Unsustainable subsidies

Limited public sector finance for new infrastructure

Limited private sector participation

Low levels of access to services



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3.7.4 Policy Initiatives taken in order to promote RE

development in India

Independent Nodal Ministry

Nodal Agencies in Each state

Accelerated Tax Depreciation benefit

Capital Subsidy

Tax Holiday Section 80 IA

Mandatory Procurement of RE Power for Distribution

Licensees

Facilitation of Grid Connectivity

Carbon Credits



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3.8 Target Areas and Priorities needs to be focus

on to achieve Goals

Vertical Key Action addresses five Target Areas

National indicative targets: Actions to increase the

future share of RES electricity (e.g. through benchmarking

and new approaches to use/interpret data).

Support schemes: Actions to add value to existing

support schemes to improve their operational efficiency and

market impact.

Grid system issues (in first instance large-scale

integration): Addressing potential impacts on RES markets

following from changes in the distribution/transmission

networks.

Green electricity: Actions to foster marketing of green

electricity, including information campaigns, to improvemeasures or to help new actors to participate in RES markets.

Distributed electricity generation: Actions to address

policy, legislative or standardization issues related to

distributed generation from RES (including CHP based on

biomass), effects of intermittency, potential benefits of

intelligent grid control, demand management and storage

systems.



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CHAPTER: 4 APPROACHES & POLICY

MECHANISMS

4.1 TYPES OF REGULATORY APPROACHES &POLICY MECHANISMS ENVISAGED AROUND

THE WORLD FOR THE PROMOTION OF

RENEWABLE ENERGY

The age and extent of electricity systems can have a direct impact on

the costs and technical implications of implementing sustainable

energy policies. In a mature system, networks are already

established and are generally geared towards shifting power fromlarge-scale, centralized generating plants to the end user via

transmission and distribution lines. In contrast, less mature systems

can develop to accommodate sustainable energy technologies as they

retain flexibility by virtue of the fact that they are still growing. New

technologies can be designed in to the expanding system, and new

consumers can be offered services rather than just energy supply.

Regulation can have a direct impact on changes and developments in

the system through the provision and regulation of incentives such as

support mechanisms (e.g. investment subsidies, tax credits) for

renewable power technologies or the operation of demand-side

management programmes.

Regulation can also play a less overt role in the technological choices

within energy systems by addressing rules and practices which favour

the dominant technologies in the system. For example, companieshave developed to sell kWh rather than to provide energy services;

regulators can take action to encourage the emergence of energy

service supply companies, which will in turn improve the energy

efficiency of consumers. Similarly, the rules governing connection and

performance have developed to support the large-scale, centralized



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nature of many electricity systems and have therefore tended to

exclude the possibility of connecting smaller-scale generation to

distribution networks. Regulators can address these imbalances and so

provide greater incentives to implement smaller scale, often

renewable, generation.



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Electricity industry structures vary widely from country to country. The

main variations are in terms of:

Level of competition;

The degree of integration (vertical and/or horizontal);

Ownership (public or private);

The degree to which the system is established or

developing.

There are various approaches by which Renewable Energy generation

has been or is being promoted. The various policies may be classified

into various categories ( SOURCE:Paper on Public policy mechanisms;

Page no 21 article 3.3 by Benjamin K. Sovacool Assistant Professor,

Lee Kuan Yew School of Public Policy, National University of

Singapore ):

1. Price Setting and Quantity forcing Policies(E.g. Feed in

tariff & Quota Mechanism)

2. Cost Reduction Policies

3. Public Investment or Market Facilitation Policies

4. Power Grid Access Policies

5. Command & Control

6. Incentive based mechanisms

7.Tradable certificates



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Few of them are discussed in details as under:-

1. Command and control:-

Command and control (C&C) regulation is typically the imposition of

standards backed up by legal sanctions if the standards are not met.

The law is therefore used to define and prohibit certain types of

activity or force certain types of action. Standards can be set either

through legislation, or by regulators empowered by regulation to define

rules. E.g. RPO

Strengths Weaknesses

Fixed performance standardsbacked up in law

Close relationship betweenregulator andbusiness could lead toregulatory capture

Clear definition of unacceptablebehavior

Can be complex and legalistic

Seen as politically decisiveDefining acceptable standardscan be difficult

2. Incentive-based regulation :-

The aim of incentive-based regimes is to induce a regulated entity to

limit or stop an undesirable activity by imposing taxes or granting

subsidiesin other words a carrot and stick approach to ensure a

socially or environmentally desirable end. The scheme of punishment

and reward operates in a mechanical way, so reducing the scope for

regulatory discretion, which in turn reduces the possibility of regulatory

capture. It also allows the company a degree of flexibility in deciding

whether to conform to the rule, or to accept the punishment. An

incentive is any policy, rule, pricing mechanism or procedure that

seeks to modify the behaviour of companies by changing the marginal

costs or marginal benefits associated with particular decisions and



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activities. It could be said that all regulation is based on incentives in

one way or another, as regulation functions through the basic concept

of penalties for bad behaviour and rewards for good behaviour.

One type of incentive-based regulation is performance-based

regulation (PBR), where incentives are tied to improvements in utility

performance, price reduction and service quality improvement. There

is less reliance on costs and less relationship to earning, with more

emphasis on prices. PBR is also more reliant on external performance

standards and less sensitive to company specific actions. The

advantages of PBR are that it may help improve plant utilization,

reduce operation and maintenance (O&M) costs and improve systemreliability. It also sets specific goals for utility management to focus on,

can promote demand-side management (DSM) and simulates

competition where real competition may not be practical.

In general, PBR is also regarded as giving greater flexibility to utilities

to make their own choices on how to respond to regulation. The

disadvantages of PBR are that by placing emphasis on reducing costs,

it may lead to inadequate O&M in an effort to save money. Incentives

on certain items and not on others may divert attention to those areas

where an incentive is offered to the detriment of other areas which

may be equally important. It is also very important to set the rules

correctly from the outset. If benchmarks and targets are wrong they

could benefit the utility or the customer to the disadvantage of the

other party. However, overall, PBR aims to promote sharing of benefit

between the utility and the customers. The utility benefits throughincentives and lower costs, leading to higher profits and better return

on investments for its shareholders. The customers benefit from lower

prices and improved service.



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Strengths Weaknesses

Low regulatory discretionRules may be complex andinflexible

Allows choice for regulatorsAssumes economic rationalitynot always the case

Low enforcement costs Difficult to predict impactEncourages technologicalinnovation

May reward polluters



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4.2 Analysis of various Regulatory

approaches/practices & Policy mechanisms

adopted by Rest of the world

Development of renewable energy supplies promises improvements in

the security of supply due to a lower dependence on foreign primary-

energy supplies and reduction in the price volatility of electricity.

Renewable energies also reduce air pollution and greenhouse gas

emissions, while facilitating improvements in the economic and social

prospects of rural and isolated regions. The cumulative effect of all

these benefits makes a robust case for renewables support.

4.2.1 RE promotion in EU

Renewable generation (excluding hydro) in general is still not

economically feasible and requires appropriate state support in order

to meet EU goals for the development of renewable generation

supplies. Consequently, all CEE EU member states have implemented

supportive policies to encourage renewable generation; the design of

each is decided at a national level and consequently varies by country.

The level of development of renewable energy supplies varies widely

throughout the EU region depending upon the local natural resources

and the implementation of policies to support renewable generation.

Some countries have rich hydro potential; these include Albania,

Bosnia and Herzegovina, Croatia, Lithuania, Romania, Serbia andMontenegro, Slovakia and Slovenia. As a result, their renewable

generation goals have been set accordingly high. Other member states

such as Hungary and Estonia must rely on more expensive technology,

such as wind and biomass, with their renewable generation goals being

set accordingly lower. The renewable electricity directive has been a



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historical step, and a major driving force, in the development of

renewable electricity in EU region.



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4.2.2 RE promotion in Germany

In Germany, largest share of renewable energy is from wind (47.9%)

followed by biomass (28.6%).The Country has Feed in law for

Renewable Energy promotion. The Renewable Energy sources act,

2000, has a different provision for solar generated electricity, wind

power, biomass power & other renewable base power. The feed-in-law

provides greater flexibility & low transaction costs for implementation.

4.2.3 RE promotion in UK

In the UK, 2.67% of the Power is produced by Renewables whereas gas

is the main source of power generation. The country has specified a RO

(Renewable Obligation), primarily to ensure that licensed suppliers

procure a certain percentage of power from renewable sources. For

Renewable energy based generation contracts, competitive bidding

system is employed & the contract is awarded for up to 15 years.

4.2.4 RE promotion in Texas

In Texas, USA, the contribution of RE is 1% of the total power

generated, gas being predominant resource (49%).Under the RPS

(Renewable Portfolio Standard) year wise target are set & all electricity

retailers have to meet this obligation, besides renewable energy

credits (green certificates)are given for the electricity produced

through renewable energy. The regulatory body establishes the RPS

regulations & enforces penalties for power production lesser than the

stipulated quantum from renewable energy sources. The RPS also

facilitates competition, lower cost, provides flexible procurement



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options, & reduces uncertainty of eventual electricity prices borne by

consumer. A tracking system is also in place for monitoring the status

of the Green Certificates.



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4.2.5 RE promotion in Thailand

In Thailand, there are power purchase regulations for promotion of RE.

It allows energy generator to export electricity up equivalent to 1 MW

capacity & has a provision for aggregate net metering along with time

of the day metering.

4.2.6 RE promotion in Vietnam

Vietnam produces 59% of RE from Hydro resources. The country has

set a renewable energy action program to support an acceleration of

renewable electricity production to meet the needs of sustainable

development.



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4.3 Way Forward for RE Promotion in India

At one stage, we are promoting renewable by specifying RPO's and

penalty mechanisms but it is also important to address transmission

and UI issues-

The Regulators should appreciate the intermittent nature

of wind and hydro resources and exempt them from UI

charges and scheduling.

To avoid state level open access constraints, CERC should

promote inter-state open access at retail levels and exempt

wind and hydro from the scheduling and imbalance charges.

There should be clear monitoring mechanism to assess if

there is really no progress on renewable supply or is it on

account of the bottlenecks created by the utilities.

More transparency and accountability in enforcing RPO

obligations should be ensured. Are the companies (especially

SLDC) operating independently?

How can we enforce RPO penalties? What is the status and

progress on the penalties? Are the Regulators seriously

imposing these penalties on the utilities for not complying

RPO obligations?

How are we enforcing RPO on open access and captive

consumers? Who is monitoring them? How are we accounting

their consumption and monitoring compliance?



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CHAPTER 5: KEY FINDINGS & SUGGESTIONS

5.1 Key findings

The Effectiveness of any policy/regulation depends on

country specific traditions & conditions, apart from resource

potentials & policies.

The main success factor for any mechanisms are-

Stable support systems

And low overall barriers

Effectiveness of the promotion of innovative technologies

like wind energy, biomass & photovoltaics have been the

highest in countries with feed-in-tariff.

Effectiveness of the promotion of low cost options like

sewage gas has been high in countries with non-technology

specific RE promotion schemes like tax incentives & quota

obligations based on tradable Green Certificates.

Key factor for effective mechanisms are-

Long term institutional commitment that provides

investor security & long term certainty.

The administrative simplicity of the procedures to

reduce delays for investors.

Following are the main prerequisite of policy/mechanism

for the promotion of RE in any country-



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Ensure effectiveness

Reduce risk to investors

Minimize cost for consumers

Set Long term (Sufficiently ambitious) realistic

targets. This is of particularly importance in quota

systems.

Policy stability, no stop & go policy.

Existing capacities & new capacities should not be

mixed.

Support for new capacities should be for specific

time duration.

Remove non economic barriers like administrative,

legal & grid connectivity.

Compatibility with other policies e.g. with climate

policy, agriculture policy & demand side management

measures



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5.2 Suggestions

1. Design criteria for quota mechanism is as below

Set correct penalty

Higher than marginal production costs at quota level.

Ensure sufficient market size in order to guarantee liquidity

& to increase competition

Try to form an international system

Ensure minimal administration & transaction costs.

In case of an ambitious quota, windfall profits can be

reduced through-

Additional technology specific support e.g. tax relief,

investment incentives, soft loan.

Or by technology dependent length of certification

period e.g. 8 years for on shore wind or 12 years for off

shore wind.

Guaranteed minimum tariff to be implemented in immature

market.

2. Design criteria for feed in tariff mechanism is as below

The level of tariff should be guaranteed for a sufficient

duration in order to minimize investment risk.

Use technology specific tariffs.



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Apply a stepwise tariff scheme (where appropriate) in order

to reduce producers profits & therefore consumer costs.

Tariff should decrease in time for new installations in order

to account for technology learning effects.

Options to participate in liberalized power markets could

facilitate the integration into market.

3. Tradable Renewable Energy Certificates (TREC)

TRECs can be used for harmonization in RE markets across

the countries like harmonization in EU & certificate market in

US.

TRECs can be used as a proof of RE

generation/labeling/disclosure obligations, for

statistics/monitoring, & as a proof of import/export of

renewable energy.

TRECs facilitates international trade of RE

TRECs provides robust mechanism for tracking &

verification of RE trade.



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5.3 Assessment of major RE support mechanism

based on above study

Increase inInstalledPower

Administration

Efforts

EconomicEfficiency

EnhanceCompetiti

on

Investmentsubsidies

H M M N

Feed-in tariffs H L M N

Renewablecertificates

L/M M/H H Y

Competitivebidding

L H H Y

Environmentalpricing (e.g.

CO2 tax)L L H Y

H: high, M: Medium, L: Low, Y: Yes, N: No Source: Secondary

research 2010, PWC



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CHAPTER 6: SUMMERY & CONCLUSION

6.1 Different mechanism to promote renewable

generation



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6.2 Pro & cons of Renewable Energy Policy

Mechanisms for the promotion of RE

Mechanism Advantages Disadvantages

RenewablePortfolio

Standards

Diversifies investment risk;Creates continuous pressurefor lower electricity prices;Minimizes governmentintervention; Providesflexibility when coupled witha renewable energy creditmarket

Will not initially supporthigher cost of renewableenergy; Does not supportoff-grid systems;Renewable energy creditprices will fluctuate anddiminish in price

Green PowerPrograms

Allows consumers in areaswithout plentiful renewableresources to support them;Does not impose the cost ofrenewable energy on thosethat do not wish to pay for it

Voluntary nature means noguarantee that newprojects get built; Does notuniformly promoterenewable energy projects;Inflated costs of renewableenergy may create littleincentive to improveefficiency among providers

Research &Development

Easily controlled by

government; Provides supportto specific technologies

Concentrates investment

risk with no guarantee ofsuccess; At risk to decliningpublic and private budgets

System BenefitFunds

Socializes the cost of renewable energy; Can beused to promote other policygoals

Narrow geographic focus;Modest funding;Regulatory uncertainty



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Mechanism Advantages Disadvantages

Investment TaxCredit

Directly promotes R&D;Distributes risk to privatecompanies

Can send false pricesignals; Concentrateswealth in investors, notconsumers; Can inflatevendor prices; May have noeffect on behavior

Production Tax

Credit

Wide in scope; Socializes the

costs of renewable energy

Can be insufficient toattract newinvestment; Significantbudget must be available;Must be known by

producersProducers must havesignificant incomestream; Exclusionary toindividuals and small firms

TenderingSystem

Government can control levelofrenewable penetration;Provides an incentive to keepcosts low; Distributes savings

onto consumers

Fixed price distorts themarket; Reduces investormargins and can hurt R&D; Tends to hurt domesticmanufacturing, as investorsseek least cost international

suppliers

Feed-In Tariffs

Provides stable investmentstream todevelopers; Suppliers receivepaymentsimmediately; Puts pressureon lower equipment prices;More consistent than manyunclear RPS

Little incentive may exist todrive electricity rates downor to innovate withoutdegression;Initially inflates the cost ofelectricity until significantamounts of renewableenergy are deployed.



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6.3 Conclusion

In brief, above analysis about the various mechanisms shows that

following steps can be taken to overcome the impediments facingrenewable energy

Eliminate subsidies

Create accurate electricity prices and encourage feedback

Pass a national feed-in tariff

Enact a systems benefit charge (to fund energy efficiency)

Enact a systems benefit charge (to educate the public and

disseminate information)

Enact a systems benefit charge (to assist low-income

families)

Strengthen appliance standards / product labeling

Increase funding for energy R&D

Offer low-interest loans and/or government financing

Implement stricter building codes

Pass a renewable portfolio standard

Interconnection standards

Green power programs

Offer rebates and/or free energy-efficient equipment



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Extend and bolster tax credits

Net metering

Unbundling of generation, transmission, and distribution

Streamlined permitting and siting

Offer workshops and training seminars

Government sponsored energy audits

Energy-efficient mortgages

Energy efficiency portfolio standards

Government procurement

Create and fund an Advanced Research Projects Agency-

Energy

Force building managers to disclose energy use

Provide leases on government land

Prohibit master-metering in apartment complexes

Ban incandescent light bulbs

Coal moratorium



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Chapter 7: ENERGY EFFICIENCY

7.1 Introduction

Currently efficiency programmes are largely absent in most countries.

With the exception of a few countries in sub-Saharan Africa, energy

efficient systems development is often undertaken within an energy

planning and policy vacuum. As a result, the development of energy

efficiency systems often follows an ad hoc path with no reference to a

coherent vision and plan. For example, in Malawi, the policy vacuum

has meant that the majority of energy efficient system dissemination

efforts have not only been ad hoc in nature, but operated largely as an

informal activity outside the formal Government planning and

budgeting cycle, thus failing to attract significant support from the

national treasury and/or donor agencies (Kafumba, 1994).

Policies that are supportive of energy efficiency should therefore

explicitly set the stage for the implementation of innovative

institutional structures in the form of energy agencies which can help

to promote energy efficiency in the region (Pretorius, B. and Bleyl, W.,

2006). In Kenya, for, example, it is estimated that between 10-30 per

cent of the primary energy input is wasted (IEEN, 2002). In general,

power reform options were not primarily designed to promote energy

efficiency. The main objective of reforms was to increase electricity

generation capacity and to enhance the financial health of the utilities.

Very few countries have included provisions in reforms to secure and

enhance activities and resources for energy efficiency.

In Africa, most reforms measures are generally seen to hinder the

wider use of energy efficiency options (SOURCE:ADB, Promotion of



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Renewable Energy, Energy Efficiency, and Greenhouse Gas Abatement

(PREGA), Project Initiation Workshop Report,

www.adb.org/Documents/Events, retrieved on 22 March 2005).For

example, requiring utilities to reduce consumer demand for electricity

through energy efficiency is, in an ideal setting, expected to promote

competition. However, in the majority of African countries where the

monopoly of national utilities prevails with a static customer base,

reduction in consumer demand might appear to affect profitability of

the utility due to a reduction in sales. On the other hand, energy

efficiency regulations may enable a utility to have more electricity

available for distribution thereby encouraging it to seek more new

customers to absorb the excess energy. However in practice, most

national utilities consider promotion of energy efficiency to reduce

consumer demand only during periods in which there is a shortfall in

generation capacity. As soon as the generation capacity resumes to

normal, promotion of energy efficiency peters out. Other reform

options however, appear to present opportunities and/or barriers to the

promotion of energy efficiency.

This part of thesis discusses how various reform options impact on the

promotion of energy efficiency and it provides examples from African

countries to illustrate these impacts. We will also see the initiatives

taken by the India to promote Energy Efficiency.



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7.2 Impact of Unbundling on Energy Efficiency

The key objective of unbundlingseparation of the core business units

of generation, transmission and distribution into legally and

operationally distinct and independent entitiesis to enhance overall

operational efficiency of the power sector. There are two types of

unbundling: vertical unbundling and horizontal unbundling. Since the

implementation of horizontal unbundling in India is limited, this section

will focus on the impacts of vertical unbundling.

Perhaps the most important positive impact of vertical unbundling isexposing the inefficient sections in the power system. Prior to

unbundling, utilities facing high system lossesan indicator of an

inefficient energy systemwould cover for the losses by using part of

the reserve generation capacity to dispatch higher amounts of

electricity into the system. However, unbundling implies that the

generation, transmission and distribution segments have to minimize

electricity and financial losses to meet committed generation,transmission and distribution levels as well as economic performance.

In each of these cases, the regulatory framework and tariff setting

mechanisms can play an important role in driving utilities towards

increased energy efficiency in all three segments.

Besides the aforementioned potential and desirable positive impact of

vertical unbundling on energy efficiency, there are also some negative

impacts to be considered. One of these is linked to the fact that theseparation of generation and distribution segments means that the

distribution utility is at liberty to obtain electricity from different

sources. The general response by the distribution utilities to increases

in electricity demand appears to be seeking additional suppliers of



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electricity rather than embarking on demand-side energy efficiency

programmes. In this regard appropriate regulation could reconcile the

objective of distribution utilities to increase sales with that of improved

energy/power efficiency. Besides charging distribution companies for

power demanded; a possible way to address low efficiency could be

that of allocating distribution utilities a fixed portion of available

power generating capacity, for a certain period of time (e.g. 1-2 years).

It would be then in the interest of the distribution utilities to attain for

such power capacity the best possible load factor in order to maximize

energy sales. It would also serve as an important incentive for

improved efficiency if a parameter linked to the efficiency of the

distribution was incorporated into tariff calculation formulae.

The need for additional electricity generation appears to have in turn

encouraged a focus on large-scale thermal IPPs. As a result,

opportunities for both energy efficiency through DSM and distributed

generation (offered by renewables such as small hydro, cogeneration

and geothermal) have not been fully exploited. Another negative

impact that power sector reforms seem to have had on energy

efficiency is the fact that integrated resource planning has become less

useful or relevant (IEA, 2000). Prior to unbundling, integrated resource

planning was an important tool in the hands of the one utility, usually

state-owned, mandated to manage and develop all sector-related

activities: generation, transmission and distribution. Within a vertically

unbundled power sector, various established autonomous entities

would likely tend to carry out resource planning largely independently

unless appropriate institutional and coordination mechanisms are put

in place to ensure that integrated resource planning is to be used

effectively. This includes any supply-side management (SSM) and

demand-side management (DSM) programme would need to be

initiated and monitored from outside the utility, i.e. by the independent



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regulator and/or supported by an Energy Efficiency Agency or

Government ministries.

In most European countries the integrated approach including resource

planning and security of supply tend to become responsibilities of

regulators and governments, rather than of (national) utilities. This

approach makes it easier to integrate the priorities of the national

energy policy in the future development of the energy sector, as well

as to make social and environmental corrections in the market. On the

other hand it remains a difficult task as regulators often do not have all

the information about resources and market players strategies, and in

addition the advice from regulators is not necessarily followed by thenational government and parliament. Figure 1 presents the

organization and different roles with regard to energy efficiency in an

unbundled power sector.



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Figure I. Power sector reform and energy efficiency: possible

way forward for Africa



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(G: Generation; T: Transmission; D: Distribution; S: Supply)Source: IT Power



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7.3 Impact of Electricity Law Amendment on

Energy Efficiency

One important contribution of the amended Electricity Acts is that they

stipulate the formation of the regulatory authority. In most countries of

the region there are at the moment, no explicit and effective incentives

or requirements in place for the promotion of energy efficiency or

demand-side management.

In India Energy conservation Act 2001 has some provisions related to

energy efficiency but still it is not mandatory requirement for all except

some designated consumers. Government of India through Ministry ofPower in coordination with Bureau of Energy Efficiency promoting

Energy efficiency in India, also state regulatory authorities (SERCs)

fixing tariffs for distribution utilities based on performance trajectory

basis where utilities gets incentives if they improve their efficiency by

reducing losses & penalized for not doing so or for not meeting

efficiency mandate given by SERCs.



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7.4 Impact of Corporatization on Energy

Efficiency

Corporatization has positive impacts on energy efficiency. The

potential for the stated positive impacts to materialize could be

influenced significantly by the type of regulatory framework/electricity

sector legislation that is in place. For example, it is legitimate to expect

that a utility would pursue efficiency improvements and costs

reduction under a price-cap regulatory system. On the contrary, under

a rate-of-return (ROR) regulatory mechanism, a utility might not have

any financial and economic interest in pursuing efficiency

improvements unless an efficiency factor is accounted for in the ROR

setting calculating formula. These positive impacts are as under:-

Corporatization of state-owned utilities leads to enhancing

the utilities competitiveness by driving them to reduce their

cost of production in order to maximize profitability. This

development encourages utilities to implement energy

efficiency measures that minimize system losses, which in

turn reduces the cost of power production.

Peak load shaving in the power system thereby

minimizing the need for huge investments to meet peak

demand, which lasts for only a few hours in a day. For

example, the peak load experienced in the mornings is often

associated with water heating. Therefore, using energyefficient water heating technologies such as solar water

heaters can shave off a significant amount of the peak load

and also provide attractive returns to the end-user



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7.5 Impact of Independent Power Producers on

Energy Efficiency

The advent of independent power producers (IPPs) has had a positive

impact on the promotion of energy efficiency in several ways. For

example, IPPs have enabled utilities to retire old and inefficient

generation power plants. Some of the inefficient power plants were

kept in service longer than their useful lifetime due to inadequate

electricity generation capacity and, at the same time, lack of capital to

build new power plants. The perceived profitability of IPPs appears to

have convinced some industries whose core business is not electricity

sales to implement energy efficiency measures to enable them

become net electricity exporting entities in two ways. Firstly, some

entities with embedded generation have embarked on in-house

energy efficiency measures thereby consuming less energy. The

resultant excess generation capacity leads to higher electricity sales to

the grid. This is the case of the sugar industry in Mauritius, which

currently contributes to 40 percent of the electricity production in the

country.

Secondly, industrial entities located near attractive small hydropower

sites are developing the sites for captive power as well as for exporting

the excess electricity to the grid. This is the case of the tea industry in

Eastern and Southern Africa. Another positive impact of IPPs on energy

efficiency is that some utilities appear to encourage privately owned

distributed generation in order to enhance energy efficiency and

stability within the grid. A case example is in Zimbabwe where the

national utility entered into an IPP agreement with a sugar mill in the

Chiredzi area to foster energy efficiency and enhance stability of the

grid in that part of the country. The advent of IPPs has also had some

negative impacts on energy efficiency. By definition, an IPP implies a



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certain amount of vertical unbundling, which complicates attempts to

implement integrated resource planning (IRP) a key platform for

promoting demand-side management (DSM).



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7.6 Energy Efficiency Policies in India

The Indian government recognized the importance of energy efficiency

in passing the Energy Conservation Act of 2001. The implementation of

energy efficiency programs, however, has accelerated in the last few

years through the efforts of the BEE under the Ministry of Power (MOP).

The MOP launched the Standards and Labeling program and the

Energy Conservation Building Code (ECBC) in 2006 and 2007

respectively. Under these regulations, the BEE has launched several

successful programs, and in the process made noteworthy progress in

building an institutional infrastructure to regulate efficiency. Some of

these achievements include:

The manufacturers of four key electrical products

(refrigerators, air conditioners, distribution transformers and

fluorescent tube lights) have adopted labeling for their

models. The BEE will make labeling mandatory from January

2010.

715 large companies are classified as Designated

Consumers and are required to appoint energy managers.

The BEE will soon set efficiency improvement targets for each

of these units.

The BEE conducts National Certification exams, to train

Energy Managers and Energy Auditors.

Furthermore, the BEE has embarked on a number of country-wide

schemes across industries, many of which are recent and therefore

bode well for future reductions in energy intensity. These fall into the

National Mission on Enhanced Energy Efficiency, and include standards



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and labeling, market-based incentives, public procurement regulations,

technology programs and financing assistance. The Prime Ministers

Council on Climate Change approved the NMEEE in principle, and

claimed the mission will help save about 5% of annual energy

consumption and nearly 100 million tons of carbon dioxide every year

by 2015.

Chapter 8: Conclusion & Observations

Energy efficiency in India is generally given a low priority, both at the

industrial and domestic level. The power sector reforms have not

adequately supported the promotion of energy efficiency in the power

sector. However different reform options appear to have different

impacts on energy efficiency i.e. some have neutral impacts while

others have positive and/or negative impacts. Involvement of IPPs and

the unbundling of the power sector generally appear to have

significant benefits on energy efficiency

To promote Energy efficiency in India it required to have strong

support of stringent policy mechanism & regulations along with

awareness creation regarding energy efficiency among the different

stake holders.



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LIST OF REFERENCE

DATABASE

Capital line plus

CERC ( Central Electricity Regulatory Commission )

CEA ( Central Electricity Authority India )

Indiaenergyportal.org

Ministry of Power

MERC ( Maharashtra Electricity Regulatory Commission )

SEARCH ENGINES

Google.com

Askjeeves.com

Soople.com



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WEBSITES

Regulatory Assistance Project (RAP): www.raponline.org

About regulated industry: www.utilityregulation.com

National Association of Regulatory Utility Commissioners

NARUC: www.naruc.org

Centre of Regulation and Competition: www.competition-

regulation.org.uk

The Global Regulatory Network (GRN) strengthens regional

associations and promotes the understanding of complex

regulatory practices: www.globalregulatorynetwork.org

www.greennet-europe.org

www.realise-forum.net

www.newenergyindia.org

www.mnre.gov.in

www.Ibef.org

www.india.gov.in

www.teriin.org

www.coreinternational.com

www.hansuttam.com

www.elsevier.com

http://www.raponline.org/http://www.utilityregulation.com/http://www.naruc.org/http://www.competition-regulation.org.uk/http://www.competition-regulation.org.uk/http://www.globalregulatorynetwork.org/http://www.greennet-europe.org/http://www.realise-forum.net/http://www.newenergyindia.org/http://www.mnre.gov.in/http://www.raponline.org/http://www.utilityregulation.com/http://www.naruc.org/http://www.competition-regulation.org.uk/http://www.competition-regulation.org.uk/http://www.globalregulatorynetwork.org/http://www.greennet-europe.org/http://www.realise-forum.net/http://www.newenergyindia.org/http://www.mnre.gov.in/


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www.sciencedirect.com

www.crisilresearch.com

WEB PAGES

http://www.indexmundi.com/India/electricity_consumption.

html

http://www.indexmundi.com/India/electricity_production.ht

ml

http://www.cea.nic.in

http://www.topnews.in/business-news/power-sector.html

http://www.energywatch.org.in

http://www.bharatbook.com/Market-Research-

Reports/Indian-power-sector-database.html

http://www.marketresearch.com/product/display.asp?

productid=1695991

ARTICLES & MAGAZINES

ADB, Promotion of Renewable Energy, Energy Efficiency,

and Greenhouse Gas abatement (PREGA), Project Initiation

Workshop Report, www.adb.org/Documents/Events,

retrieved on 22 March 2005.

Central and Eastern European Electricity Outlook 2007



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Paper on Public policy mechanisms; Page no 21 article 3.3

by Benjamin K. Sovacool Assistant Professor, Lee Kuan Yew

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