Sriprakash Jaiswal, minister of state for coal

The coal ministry is expected to finalize rules and regulations for allotment of isolated coal patches by December 2010, to boost coal production in the short term. The coal ministry has identified 20 isolated patches across the country, each of which is estimated to have reserves of about 10 million tonnes.
According to ministry officials, isolated coal patches, unlike coal blocks, have remained unexplored because of the small, uneconomic size of reserves, making them unviable for development by large user industries. However, against the backdrop of a rising demand-supply gap of coal in the country, the ministry has taken the view that these patches of coal reserves could be allotted for use by local industries that fall in the small- and medium-scale operators.
“We will soon make a decision on development of isolated coal patches to increase production that will be beneficial to local industries in the vicinity of the coal patch,” said coal minister Sriprakash Jaiswal. “We will have to decide the basis of allotment. In my view, auction is the only equitable basis for allotment of the coal patches to user industries, and we will frame rules accordingly, which will then be implemented by governments of the states under which the coal patches fall.”
Jaiswal also said that the ministry will soon float global tenders for the development of abandoned mines across the country. Unlike isolated coal patches under the authority of the state governments, abandoned mines fall within the purview of the central government. The ministry of coal has identified 27 abandoned mines estimated to have reserves of 500 million tonnes, and has proposed reviving and developing these through joint ventures with global investors.
Isolated coal patches are under the purview of the Coal Mines Nationalization Act, 1973, under which the authority to allot such reserves falls to the state governments and that coal extracted from such patches cannot be transported by rail and can be utilized only by local industries in the vicinity. Isolated coal patches also have been left out of the purview of the National Mineral (Development and Regulation) Bill 2010, which will be passed into a law in the next session of Parliament, starting in November. Under this proposed law, coal blocks will be put up for auction for captive users, scrapping the present system of allotment. Ministry officials said that since coal patches did not fall within the purview of the new law, separate rules and regulations will have to be framed for the auctioning of these patches.
The coal ministry’s decisions on coal patches and abandoned mines are aimed at bridging the demand-supply gap in the short term. Total production of coal this fiscal year will be 572.73 million tons, against the current demand of 654 million tons, leaving a shortfall of 82 million tons. According to the coal minister, application for coal supplies for 100,000 MW is pending with the power ministry. India is facing an acute shortage, and no coal is available for the 28,000-MW power generating capacity for which linkages were granted until November 2008.
Given such an acute shortage scenario, the coal ministry has issued notices to 93 companies threatening cancellation of coal blocks allotted to them for failure to develop them within a specific time frame. “We will not tolerate lessees of coal blocks to idle on their allotted blocks,” Jaiswal said. “We cannot allow the situation to continue. If lessees cannot develop the blocks, we shall cancel their allotment and put them up for auction, so that coal production can be boosted within a reasonable time.” – EB Bureau

The aim of MNRE, the nodal ministry for new and renewable energy is to develop and deploy new and renewable energy supplementing the energy requirements. It is also responsible for formulating policies, implementation, development and intensifying R&D in the sector.

What are the drivers for the REC mechanism in India?

Though blessed with huge potential for renewable energy, all states in India are not equally gifted. While some states have very high potential, some states have very little potential. The unit cost of RE based non-firm power is higher than conventional power sources. Hence, the RE abundant states have no motivation to produce RE based power more than is required to satisfy the RPO mandate.

What is RPO and why would an entity purchase REC?

RPO is Renewable Purchase Obligation and is defined by the Central Electricity Regulatory Commission (CERC) as:

“Renewable Purchase Obligation means the requirement specified by the State Commissions under clause (e) of sub-section (1) of section 86 of the Act, for the obligated entity to purchase electricity from renewable energy sources.”

RPO is specified by the state commissions in terms of percentage of total annual electricity consumed by obligated entities. Being a mandate from the state commissions, obligated entities would be required to either purchase electricity generated from renewable energy sources or purchase RECs in lieu.

What is an REC and why do we require REC?

A renewable energy certificate (REC) is a market-based instrument which provides evidence that a generator has produced a certain amount of electricity from a RE resource.

Electricity produced from renewable energy sources are notionally distinguished into two parts: The first being the electricity component and the second being the environmental attribute of the electricity produced from renewable energy. An REC signifies the second component.

RECs can be traded in the market to meet renewable purchase obligation (RPO).

REC is required in India because:

Distribution of RE resources is not uniform across the country, which results in non uniform RPO.

States with higher RE potential pay more for RE electricity since RE generation is more capital intensive.

RE electricity generation costs are not uniform across the RE technologies.

DISCOMs are reluctant to purchase RE electricity by paying extra.

What are the legal and policy framework for renewable energy in India?

Acts and Regulations which have boosted renewable energy in India are:

Electricity Act 2003 (EA 2003)

Section 86 of the EA 2003 promotes Renewable Energy by ensuring grid connectivity and sale of renewable electricity. Also creates a demand for renewable energy by requiring SERCs to specify RPOs for the distribution utilities in the State.

National Electricity Policy (NEP)

Section 5.2.20 promotes private participation in renewable energy. Section 5.12.1 targets the reduction in capital costs of renewable energy technologies through competition. Section 5.12.2 states SERCs should specify appropriate tariffs to promote Renewable Energy. Also specifies percentages that progressively increase the share of electricity generated from renewable sources. Section 5.12.3 promotes the benefits of cogeneration.

National Tariff Policy

Section 6.4 requires all SERCs to specify minimum percentages for electricity to be purchased from renewable energy sources by April 1, 2006.

National Action Plan for Climate Change

NAPCC has set the target of 5 per cent renewable energy purchase for FY 2009-10 envisaging that such target would increase by 1 per cent for the next 10 years, i.e., to constitute about 15 per cent  of the energy mix of India by 2015. One policy instrument prescribed in NAPCC is Renewable Energy Certificate (REC) mechanism which would enable large number of stakeholders to purchase renewable energy in a cost effective manner.

CERC (Terms for Issuance and Recognition of Renewable Energy Certificate for Renewable Energy Generation) Regulations, 2010

CERC’s regulation has been the latest and most important regulation which has set the tone for REC trading in India.

What are the salient features of the CERC (REC) Regulations, 2010?

REC is not an incentive scheme; it enables sale and purchase of renewable component and would co-exist with other incentive based schemes in the country.

The salient features of CERC (REC) Regulations, 2010 are:

Two types of entities are defined in regulations:

Eligible Entities (EE) – Generators who can only sell RECs

Obligated Entities (OE) – Entities having RPO from SERC who can only buy

NLDC is the central agency responsible for registration, issuance, redemption, settlement, and repository. It would be supported by state level agencies

 Mw/h of Electricity injected would be eligible for 1 REC

Eligible Entity will undergo an accreditation process with the state agency and a registration process with central agency.

REC would be traded only once – through a power exchange.

Generators already in long term PPAs or selling electricity to utilities above the “pooled cost of power” would not be eligible for RECs.

Renewable energy source would be declared by MNRE.

Although REC represents the environment attribute, it is not related to carbon credits, which is independent of the REC mechanism.

Are there any categories of certificates that can be traded?

There shall be two categories of certificates, viz., solar certificates based on solar power; and non-solar certificates based on renewable energy sources other than solar.

Can any generator producing electricity from renewable energy sources participate in REC?

Only those renewable energy based generators complying with the following conditions would be eligible to participate in the REC mechanism:

It has obtained accreditation. It does not have a PPA for sale at preferential tariff; and

It sells the electricity generated to distribution licensee of the area at a price not exceeding the pooled cost of power, or

To any other licensee / OA consumer at a mutually agreed price, or

Through a power exchange at market determined price

How can the Obligated and Eligible Entities participate in REC mechanism?

Eligible entities would have to undergo the following process to participate in the REC mechanism:

Accreditation with state agency

Registration with central agency

Obligated entities would have to register with the central agency in order to participate in the REC mechanism

Who are the other entities involved in the REC mechanism?

The following entities would be involved in national and state level for the REC mechanism

Power Exchange India Limited

CERC has mandated that only power exchanges approved by CERC can trade in RECs. The salient features of trading REC through exchanges are as below:

Only a registered member or client of the exchange can trade RECs.

Trading would happen once in a month on the last Wednesday of each month.

Trading of two categories of RECs viz., solar and non-solar, would be undertaken on the power exchanges.

Each category of REC would have maximum (forbearance) and minimum (floor) price prescribed by CERC.

Exchanges will match trades subject to the number of RECs being bid for sale being confirmed by the central agency.

All those certificates that get matched would be extinguished by the central agency.

 Power Exchange India Limited

The report, by the Global Wind Energy Council (GWEC) and environmental group Greenpeace, also said nations in Latin America and Africa were shifting to wind alongside established markets in Europe, North America, China and India.

It said wind turbines accounted for about 2.3 per cent of world electricity demand in 2010. Growth in China had outpaced previous projections by GWEC and Greenpeace but the United States had lagged, partly because of the economic downturn.

“We are still very optimistic, but grid issues are becoming more and more important for the wind industry,” Sven Teske, senior energy expert at Greenpeace said. Grid capacity was lacking in many nations.
The study said wind would rise to 5 per cent of world electricity demand by 2030, or 1,400 terawatt hours (Tw/h), assuming 2009 reference scenarios by the International Energy Agency, which foresees a slowdown in wind growth in coming years.
In the most positive investment scenario, GWEC and Greenpeace said wind could generate up to 22 per cent of global power by 2030, or 5,400 Tw/h, if the world took strong action to promote renewables.
GWEC’s corporate members include Vestas, Siemens, GE Energy, Gamesa and Sinovel.
The report said there were big uncertainties about the future of stalled UN talks on a new treaty to slow global warming that would promote investments in renewables in a shift from fossil fuels.
Teske said that the wind industry was erecting one new wind turbine every 30 minutes, with one in three in China. He said Greenpeace and GWEC wanted a new turbine every 7 minutes to reach the highest goal.
He said Germany was likely to be among the first nations to face problems of grid capacity with new offshore wind turbines coming on stream. He said the country lacked power transmission lines to take electricity south from the coast.

“It’s not a limiting factor now but it could be within the next five years or so,” he said.
The report also said that China was among nations that needed to do more.
“In China … the grid infrastructure is proving to be a serious issue, especially in areas with high wind speeds, such as the Northwest, the North and the Northeast,” it said.
Teske said that wind was getting more investments in some developing nations. “We see that there is movement both in Latin America and in Africa, in some every unexpected places like Kenya, Egypt or Eritrea,” he said. – Agencies

Two major elements of the Copenhagen Accord – which emerged from last year’s COP in Copenhagen – have been in the spotlight of the climate negotiations throughout 2010 and in Tianjin: climate finance and the procedures that will be used to check whether countries fulfill their obligations with regards to cutting greenhouse gas emissions.

In the Copenhagen Accord, developed countries promised to make US $30 billion of “fast start” financing available from 2010 to 2012 to support developing countries’ plans to mitigate and adapt to climate change. By 2020, the amount of climate finance should reach US $100 billion annually. Besides concerns over whether these funds would be additional to existing Official Development Assistance (ODA), it has been difficult to agree on the mechanism through which the money should be distributed.

Climate fund begins to take shape

In Tianjin, the contours of a global climate fund were discussed.  Current options include establishing some form of a financial board and advisory panel that would then also put the architecture in place. The United States proposed to gather finance ministers and have them work on the details.

In turn, developing countries – and especially the largest among them – promised in Copenhagen that their efforts to cut greenhouse gas emissions will be subject to measurement, reporting and verification (MRV). In other words, developing countries will put a set of processes and procedures in place through which factual information is provided, assessed and checked to determine whether, when, and how effectively they are able meet their climate change mitigation obligations. The BASIC countries (Brazil, South Africa, India and China) meanwhile are reluctant to provide the level of information that is being demanded of them.

This balance between funding from developed countries and accountability from developing countries was at the heart of the climate negotiations last week in Tianjin. But by the end of the week, countries seemed further apart though on these and other issues than they were in Copenhagen. The high global expectations or political pressure that was palpable before Copenhagen seems to have eased off. Even the UNFCCC Executive Secretary, Christiana Figueres, had to admit that “Mexico will not deliver a comprehensive agreement on climate change this year.” Instead, hopes are turned to the South Africa COP, which will take place at the end of 2011.

Background
The Electricity Act, 2003 (EA 2003) requires that while specifying the Terms and Conditions for determination of tariff the State Electricity Regulatory Commissions should be guided by Multi-Year Tariff (MYT) principles. Subsequent to the notification of the present MERC Tariff Regulations, 2005 certain developments have taken place, viz., CERC Tariff Regulations for the Control Period from April 1, 2009 to March 31, 2014 have been notified, and the National Electricity Policy and the Tariff Policy have been notified by the Ministry of Power, Government of India, which provide the guidelines for determination of the Revenue Requirement and tariff. The MERC also desired to incorporate the learnings of the first Control Period in the revised MYT Regulations. Hence, MERC decided to formulate the MERC MYT Regulations.

Salient Features
The MYT Regulations are Performance Based Regulations, with due reward being given to operational efficiency, and replace the present method of annual tariff determination with a multi-year tariff framework, wherein the tariffs will be allowed to change only due to change in the values of selected parameters in a pre-determined manner. One of the major problems faced by the Utility Companies, is the lack of long-term planning discipline. The MYT Regulations require the submission of a 5-year Business Plan, which will inter-alia require the Utilities to project the demand-supply scenario, the power procurement plan, and capital investments required to achieve the desired operational efficiency and meet load growth requirements over the 5-year period, rather than operating with a short-term outlook. The next Control Period of five years will commence on April 1, 2011 and continue upto March 31, 2016.
Unless the distribution licensees enter into long-term or medium-term contracts at optimum rates for the required quantum of power, there will always be a trade-off between shedding load or procuring costly power to mitigate the load shedding, which will result in higher tariffs. The objective of having a long-term plan is to ensure that load shedding is avoided to the extent practicable, and the distribution licensees ensure that adequate capacity is contracted under long-term/medium-term/short-term contracts as appropriate at optimum prices, to ensure that the consumers are supplied electricity on 24 x 7 basis, and the tariffs are also reasonable. The Investment Plan shall be a least cost plan for undertaking investments for strengthening and augmentation of the operations of the Utility, as applicable for Generation Companies, Transmission Licensees, and Distribution Licensees.
Under the MYT framework, the controllable factors and uncontrollable factors and their treatment has been stipulated. The impact of uncontrollable factors are a pass-through element in tariffs, while the impact – gain or loss – on account of controllable factors, has to be shared between the Utility and the consumers in a specified manner.
The MYT framework is based on the following elements, for calculation of Aggregate Revenue Requirement (ARR):
(i) Submission of a detailed Business Plan;
(ii) Submission of the forecast of ARR and expected revenue from existing tariffs and charges, based on the approved Business Plan, along with indexed parameters for each year of the Control Period;
(iii) The trajectory for specific variables shall be stipulated by the Commission, where the performance of the Applicant is sought to be improved through incentives and disincentives;
(iv) Mid-term review of performance vis-à-vis the approved forecast and categorization of performance variations as controllable factors and uncontrollable factors, shall be undertaken by MERC;
(v) The mechanism for pass-through of approved gains or losses on account of uncontrollable factors as specified by MERC;
(vi) The mechanism for sharing of approved gains or losses arising out of controllable factors as specified by the Commission.
(vii) Tariff will be determined for the entire Control Period at the beginning of the Control Period.
(viii) The gain or loss to the Generating Company/Licensee on account of uncontrollable factors shall be passed through as an adjustment in the tariff of the Generating Company/Licensee on a half yearly basis through the ‘Z’ factor.

The MYT Regulations have also addressed the operational norms and financial principles for the Generation, Transmission, Wires and Supply Business, including the method of giving returns (Return on Equity vs. Return on Capital Employed), separation of accounts of Wires and Supply Business, to facilitate Open Access and increase the level of competition, which in turn, will result in improved quality of supply and reduction in tariffs, as well as the distribution loss reduction trajectory, power procurement guidelines, etc.
Benefits to Consumers & Utility Companies
The MYT framework is designed to:
 Provide regulatory certainty to the Utilities, investors and consumers by promoting transparency, consistency and predictability of regulatory approach, thereby minimizing the perception of regulatory risk.
 Address the risk sharing mechanism between Utilities and consumers based on controllable and uncontrollable factors.
 Ensure financial viability of the sector to attract investment, ensure growth and safeguard the interest of the consumers.
 Review operational norms for Generation, Transmission, Distribution and Supply businesses, based on recent developments and actual performance in the first Control Period.
 Promote operational efficiency.
 Reduce tariffs in the long-term.

The copy of the detailed Approach Paper and the draft MERC (MYT) Regulations, 2010, have been uploaded on the Commission’s website, viz., www.mercindia.org.in, for public comments. Interested stakeholders may submit their comments and suggestions in writing to MERC, within

The Energy Conservation Act, 1991 provides the legal framework, institutional arrangement and a regulatory mechanism at the central and state level to embark upon an energy efficiency drive in the country. The energy conservation act empowers the BEE to appoint energy auditors and energy managers to assist consumers, designated agencies to achieve efficient use of energy by means of energy cost optimization, pollution control, safety aspects, suggests the methods to improve the operating and maintenance practices of equipments etc.

The term renewable energy or non conventional energy includes energy from solar, biomass, fuel wood, crop residue, dung, biogas, wood gasifier, wind, wave, tidal and hydro. The attempt here is to explain the renewable energy initiative from a legal perspective as well as the fiscal incentives or subsidies available and the scope for foreign investments.

Central policies
Under the Electricity Act 2003, the state electricity regulatory commissions have been empowered inter-alia to promote cogeneration and generation of electricity from renewables. One of the principal issues that the national electricity policy 2005 seeks to address is co-generation from non-conventional sources. The emphasis is on research, development and commercialization of non-conventional energy. The Policy further states that non-conventional sources of energy could be used for purposes of rural electrification.

Prior to the formulation of the 11th five year plan, the Planning Commission had formed an expert committee to look into various issues relating to energy. Pursuant thereto, the committee headed by Dr Kirit S Parekh had prepared a report titled ‘The Integrated Energy Policy’ in 2006.

The policy recommendations:

• Village Panchayats to decide on the renewable energy source to electrify villages
• Publication of an annual renewable energy report on performance of different renewable technologies at state and national levels
• Setting up of venture capital funds to finance entrepreneurs in the energy sector
• Carving out commission for additional sources of energy (CASE) from the ministry of non-conventional energy and making it responsible for overall development of renewable energy programmes
• Convert Indian Renewable Energy Development Agency (IREDA) into a refinancing institution.
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State policies
Several state regulatory electricity commissions such as Gujarat, Kerala, Tamil Nadu have formulated policies on utilization of renewable sources. For example, Gujarat state’s power procurement from renewable sources regulations 2005, Kerala state’s power procurement from renewable sources by distribution licensee regulations 2006, The power procurement from new and renewable sources of energy regulations 2008. The said regulations primarily deal with sale of power from renewable sources and determination of tariff.