Mr. Piyush
Goyal, Minister for New and Renewable Energy, announced last week that the
government plans to waive interstate transmission charges for electricity
generated by renewable sources . This waiver was earlier included in the
proposed amendments to the country’s existing tariff policy of 2005 ,
but the amendments are yet to be approved. However, for speedy promotion of
renewable energy projects, the central government is actively moving to
implement amendments such as the waiver of interstate transmission charges that
are under its control.
To meet the
60 GW of utility scale solar target, interstate power transmission is essential
and needs to be encouraged.
Waiver of
interstate transmission charges will allow developers to install solar projects
in states with cheaper land and higher irradiation.
The grid
infrastructure will need to be strengthened to evacuate power. Waiver of
transmission charges is a positive short term support for the sector but it is
more important to make the necessary investment commercially viable for
sustainable growth of the sector.
At present,
solar projects are usually developed close to consumption centres within the
same state. If the interstate transmission charges are waived, greater number
of solar projects will be installed in states which are providing better
economics to project developers, leading to higher concentration of solar
projects in those select states in India, for example, Rajasthan, Gujarat, Madhya
Pradesh, Andhra Pradesh and Telangana.
However, these states cannot necessarily
absorb the higher capacity of intermittent power in local load centres. The
role of interstate transmission of power will thus become crucial as the
penetration increases. The incentive in the form of free transmission of power
will therefore provide a major boost to the solar sector.
A good
example of the benefit of this waiver will be solar power procurement for the
state of Delhi. Land in Delhi is expensive and scarcely available. The power
distribution companies of Delhi plan to buy solar power from projects set up in
states such as Madhya Pradesh and Rajasthan. Waiver of transmission charges
could result in lowering of solar power tariff by up to 10%.
Obviously,
free transmission is a positive move for the sector but this policy should be
seen only as a short term incentive. The inter-state transmission corridors
need massive investment, estimated at INR 430 bn covering the states of Tamil
Nadu, Karnataka, Andhra Pradesh, Gujarat, Maharashtra, Rajasthan, Himachal
Pradesh and Jammu & Kashmir (refer). This investment needs to be
commercially viable to make the long-term prospects of solar energy
sustainable.
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