The Energy Regulation and Markets Review - Stikeman Elliott

India
Natural Commodity and Derivatives Exchange for the joint working of developing a spot
market for natural gas, but this arrangement for spot market trading is yet to materialise.
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RENEWABLE ENERGY AND CONSERVATION
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Development of renewable energy
The regulatory environment increasingly seeks to incentivise renewable energy, with
favourable tariff regimes established by SERCs. The Electricity Act, the National Electricity
Policy and the Tariff Policy encourage private sector participation in renewable energy
through various measures such as providing for feed-in tariffs and fixing minimum RPOs
for distribution utilities and captive power users. In addition, a renewable energy project
developer is also entitled to receive RECs if they do not opt for preferential feed-in tariffs,
for which there is increasing demand.
Several states have put in place specific policies to promote renewable energy
development; however, incentives and policies are not always consistent between states
often developers shop around based on the policy that best suits their financial model and
operational expertise. Some states have established nodal agencies to promote renewable
energy generation and to assist developers with project development. 6 These agencies are
responsible for implementing measures and providing incentives under the respective
state policies.
Some of the key incentives (which may vary depending on energy source type)
offered to renewable energy power producers include:
a accelerated depreciation schemes;
b excise duty exemptions or concessions as well as reduced customs duty on
renewable energy equipment;
c
d
low-interest loans from Indian Renewable Energy Development Agency; and
loan guarantees from various government as well as multilateral financial
institutions.
Sharing of CDM benefits (established under the Kyoto Protocol of the United Nations
Framework Convention on Climate Change), a significant financial incentive for
developing renewable energy projects, is fairly similar across states with most state
regulators adopting the CERC regulations that provide for sharing of CDM benefits on
a gross basis, starting from 100 per cent to the account of the developer in the first year
and reducing by 10 per cent every year until sharing stands at 50:50 between developer
and consumer (usually a state-owned distribution utility) by the sixth year.
6 Tamil Nadu Energy Development Agency (TEDA), Maharashtra Energy Development Agency
(MEDA), Gujarat Energy Development Agency (GEDA), Karnataka Renewable Energy
Development Limited (KREDL), Rajasthan Renewable Energy Corporation Limited (RREC).
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