Introduction

India is the third largest energy consuming country in the world and stands fourth globally in installed capacity of renewable power[1]. The country has made significant efforts in developing the infrastructure for renewable energy with a current installed capacity of over 150 gigawatts. The Government has been proactively involved in achieving energy transition goals, net zero objectives, and energy security, as evidenced by their commitments outlined in the Union Budget.

In a traditional set-up, a consumer had no option but to purchase electricity through the distribution licensee in the area. To decrease this dependence and to provide more options to a consumer, open access was introduced under Electricity Act, 2003 (“Act”). Open access enabled generating companies to sell electricity to consumers directly across the country by entering into an agreement on agreed terms and conditions, including tariff.[2] This promoted competition among the generating companies and increased the availability of cheaper power.

However, with the increase in the usage of renewable energy and lack of detailed guidelines under any legislation, a dedicated legislative framework for renewable energy open access was the need of the hour. The Government of India’s Ministry of Power, thereby, notified the Electricity (Promoting Renewable Energy Through Green Energy Open Access) Rules, 2022 (“Rules”) on June 6, 2022. The Rules aim to promote the generation, purchase, and consumption of green energy and to cut emissions by 45% in line with India’s updated Nationally Determined Contributions (NDC) target for 2030. The Rules are applicable to the generation, purchase, and use of green energy, including energy from facilities that convert waste into energy. Moreover, these Rules will help speed up the renewable energy programs and ensure access to affordable, sustainable, reliable, and green energy.

After the implementation of Rules, various hurdles were encountered. To remediate the situation, the Rules were amended by Electricity (Promoting Renewable Energy Through Green Energy Open Access) Amendment Rules, 2023 (“First Amendment Rules”) and Electricity (Promoting Renewable Energy Through Green Energy Open Access) (Second Amendment) Rules, 2023  (“Second Amendment Rules”), which has been discussed in our note below.

Salient Features of the Rules

1. Reduction in the load limit to participate in open access
In order to enable smaller consumers to purchase renewable power, the cap to avail open access which was earlier 1 MW (megawatt)[3] has now been reduced to 100 kW (kilowatt).[4] As per the Second Amendment Rules, this threshold can be met through a single connection of 100 kW or through multiple connections aggregating to 100 kW or more located in the same electricity division of a distribution licensee. Additionally, there is no minimum requirement for open access to green energy for consumers of captive electricity (electricity generated from plants set up for self-use). This will encourage smaller consumers to progressively switch to alternate energy and procure electricity through open access.

2. Establishment of nodal agency
A consumer seeking to purchase electricity through open access is required to file an application to a nodal agency. In order to simplify and streamline this process, the Rules proposed to set up a central nodal agency for creating and operating a comprehensive single window platform for renewable energy-specific open access that is accessible to all power sector stakeholders, including open access sellers and buyers.[5] In furtherance to such proposal, Ministry of Power notified Power System Operation Corporation Limited (POSOCO) [Now known as Grid Controller of India Ltd. (Grid-India)] as the nodal agency.

According to the Rules, all green energy open access applications are required to be filed online in a standard format that is prepared and issued by Grid India in consultation with the forum of regulators.[6] Since the Rules did not detail out the procedural aspect, Grid India came up with a Procedure for Grant of Green Energy Open Access (“Procedure”). As per the Procedure, the applications will be processed by the following bodies:

• Regional Load Despatch Centre for short-term open access requests at the interstate level;
• State Load Despatch Centre for short-term open access requests at the intrastate level;
• State Transmission Utility for medium and long-term open access at the intrastate level; and
• Central Transmission Utility for medium and long-term open access at the interstate level, as the case may be.[7]

Furthermore, in order to avail green energy open access through the portal, an entity must first be registered in the portal which would be valid for a period of three years and can be renewed thereafter for three years.[8] Once registered, the entity can apply for availing green energy open access and the application must be approved by the concerned nodal agency within fifteen days. Upon failure to do so within the specified time, the application would be deemed to have been approved subject to fulfilment of prescribed technical requirements by the relevant commission.[9] Also, the nodal agency can reject the application only after providing an opportunity to the applicant to be heard and passing speaking orders denying the application.[10]

3. Renewable Energy Purchase Obligations
The Act as well as Tariff Policy, 2016 provides the framework for Renewable Energy Purchase Obligations (“RPO”). Certain entities such as distribution licensees, captive users, open access consumers, and other entities (as identified by State Regulatory Commissions) are required to procure a percentage of their electricity consumption from renewable sources in order to fulfil their renewable energy purchase obligations. Since the power to fix such percentage for RPO is vested with State Commissions by the Act, they have come up with their separate regulations for the implementation of RPO. For example, Delhi has set its RPO for the financial year 2023-24 as 27%. The Rules, however, aim to establish a uniform RPO for all obligated entities within a distribution licensee’s area[11] and provide the following methods[12] to fulfil such responsibilities:

• By own renewable energy generation: Power plants of any capacity can be installed by entities for their consumption and may be established anywhere in India, and power shall be transmitted via open access;
• By purchasing renewable energy through open access directly from a developer, through a trading licensee, or through power markets;
• By requisition from the distribution licensee: A consumer may opt to purchase more renewable energy than he is required to do and for ease of implementation, this may be done in increments of 25% to 100% of their overall usage. Although a consumer will be permitted to submit separate requests for solar and non-solar energy, any request for green energy from a distribution licensee must be made for at least a year;
• By consuming electricity obtained from captive generation;
• By purchasing renewable energy certificates; and
• By purchasing green hydrogen or green ammonia for which the standards in relation to quantum are yet to be decided.

4. Energy Banking
Energy banking is essential for the sustainability of a renewable energy generator project. Energy banking means depositing surplus energy with distributor licensees and withdrawing it later when required. Electricity generated through renewable resources varies a lot depending on climatic factors. A renewable energy generator may produce excess energy on a given day due to the presence of climatic factors like high wind speed and clear sky. Without the facility of energy banking, the surplus electricity generated by a renewable energy generator would get lost as electricity cannot be stored as a typical commodity. This would lead to a loss of revenue for the renewable energy generator.

The Rules provide for energy banking to open access users. All open access users will be allowed to bank power on a monthly basis, and the distribution licensee is required to offer this service for at least 30% of the consumers’ entire monthly energy consumption from that distribution licensee. The State Electricity Regulatory Commission will choose the banking fees that apply to this service.[13] The Rules earlier stipulated that the banked energy may only be carried forward for a period of one month and that the adjustment for such banked energy must occur during the concerned month. However, the banking settlement period for states was one cycle. Therefore, in order to provide flexibility to state regulators, the First Amendment Rules changed the term ‘month’ to ‘cycle’ but failed to define cycle.

The First Amendment Rules also provided that the un-utilised banked energy be deemed to have lapsed and the renewable energy generator to get renewable energy certificate to the extent of lapsed banked energy which can be sold to the entities who are unable to meet their RPO.[14]

5. Green energy open access charges
Transporting electricity from generating station to the consumer involves the role of multiple agencies like transmission licensee, distribution licensee, and transmission utilities. These agencies charge certain fees to provide their services. According to the Rules, consumers who opt for open access from green energy sources may only be subject to the following fees:

• Transmission fees;
• Wheeling fees;
• Cross subsidy surcharge;
• Standby fees, if necessary;
• Banking charges; and
• Other fees and charges such as load despatch center fees and scheduling charges, deviation settlement charges as per the relevant regulations of the commission.[15]

It has been clarified that no additional open access fees will be imposed for green energy open access. Haryana Electricity Regulatory Commission while addressing the issues of applicability of charges for open access under the state’s existing regulations which do not find a place in the Rules or regulation made thereunder, held that no such charges can be levied.[16]

Additionally, when an open access consumer purchases green energy, the cross-subsidy surcharge will not be raised by more than 50% of the surcharge that was established for the year in which the consumer was granted open access for a period of twelve years from the operation of the producing plant.[17] The Rules exempt users from paying the cross-subsidy charge in cases where the power is produced at waste-to-energy units or is used to produce green ammonia and green hydrogen.[18] However, after the First Amendment Rules only non-fossil fuel based waste-to-energy plants are exempted.

For uniformity, the Rules, however, require the forum of regulators to prepare a model regulation providing for common methodology for calculation of charges associated with open access.[19]

Overlap between GNA Regulations & Rules

Central Electricity Regulatory Commission (Connectivity and General Network Access to the Inter-State Transmission System) Regulations, 2022 (“GNA Regulations”) was notified to further the concept of one nation-one grid. GNA Regulations provide a framework for utilisation of national grid by enabling entities for connectivity with inter-state transmission system (ISTS) and drawal and transmission of electricity through open access having an installed capacity of 50MW or more. [20] GNA Regulations discontinued the requirement for identifying consumers before availing open access to ISTS.

While GNA Regulations and Rules provide separate frameworks for open access for varied generating capacity, the Rules specifically focus on the generation and transmission of green energy through open access. Upon collective reading of the Rules and GNA Regulations, it may be construed that renewable energy generators of installed capacity of less than 50 MW can still opt for open access under the Rules. Pursuant to Regulation 22.2 of GNA Regulations, deemed open access to ISTS is granted to renewable energy generating stations having installed capacity of 50 MW or more and having connectivity to ISTS. However, the question remains as to whether the renewable energy generating station to whom open access to ISTS is deemed to be granted could prefer open access under Rules, which provide indirect benefit from reduced costs through the elimination of additional surcharge incentives.

In our opinion, as Rules are special legislation providing a framework specifically for open access to green energy, it should prevail over general legislation, i.e., GNA Regulations. Hence, the renewable energy generating station having deemed open access to ISTS may still apply under the Rules for open access and the concerned authority should provide clarification in this regard.

Current View

These Rules are a positive step towards enhancing and incentivising the usage of green energy. Lowering the threshold for consumers from 1MW to 100kW will enable Micro, Small, and Medium Enterprises and smaller consumers to procure green energy through open access. Further, a single window clearance system and deemed approval after fifteen days would streamline the process and resolve the issue of delays in obtaining regulatory approvals. Making energy banking facilities mandatory for renewable power generators would also help the generator to deposit surplus energy produced which would have otherwise been lost. Also, capping the increase of cross subsidy surcharge at 50% of the applicable amount at the time of granting open access and waiving the additional surcharge would make renewable energy cost-effective.

However, for effective implementation of the Rules, the role of state regulators becomes very important. States are required to amend their regulations[21] to be in line with the Rules, however, only a few states like Karnataka, West Bengal, and Haryana have done it so far.

Please reach out to Praveen Raju  or  Janhavi Joshi  for queries

[1] https://www.investindia.gov.in/sector/renewable-energy

[2] Section 49, Electricity Act, 2003.

[3] Section 42, Electricity Act, 2003.

[4] Rule 2(b), Rules.

[5] Rule 6, Rules.

[6] Rule 7, Rules.

[7] Clause 2.1(b), Procedure.

[8] Clause 4, Procedure.

[9] Rule 7(3), Rules.

[10] Rule 7(5), Rules.

[11] Rule 4(1), Rules.

[12] Rule 4(2), Rules.

[13] Rule 8, Rules.

[14] Proviso to Rule 8, Rules.

[15] Rule 9(1), Rules.

[16] HERC Order dated 24^th April, 2023, In the matter of Haryana Electricity Regulatory Commission (Green Energy Open Access) Regulations, 2023 – Suo-Moto.

[17] Rule 9(2), Rules.

[18] Proviso to Rule 9(2), Rules.

[19] Rule 12, Rules.

[20] Regulation 4, GNA Regulations.

[21] Rule 5(1), Rules.