Incentives for Green Energy

The Renewable Energy Certification (REC)

The Renewable Energy Certification (REC) announced renewable energy certificate (REC) norms in a bid to promote clean power generation in the country. The REC scheme aims at increasing power generation capacity from renewable sources by allowing utilities from green energy-deficient states to buy renewable energy certificates to offset their lag. The Electricity Act of 2003 mandates state distribution utilities to purchase electricity from renewable energy sources, as a certain minimum percentage of the total consumption of power in the state.

The value of an REC will be equal to 1 MW-hour of electricity injected into the grid from renewable energy sources. These certificates will be exchanged at the power exchanges within a price band that will determined by CERC. The uneven distribution of renewable energy potential in India discourages states with lesser renewable energy generation sources from committing higher RPOs. In New Delhi, for example, the state regulator has specified an RPO of merely 1 percent to the three distribution utilities, as the capital lacks potential for green energy generation.

Generation-Based Incentive Scheme (GBI)

The fiscal incentives provided by the government emphasised on capacity addition rather than power generation from wind energy. Consequently, power generation from wind, as a percentage of total power generation, remained low compared with the percentage of installed capacity. The total installed capacity of wind power, as of December 2009, accounted for 7 percent of the total installed power capacity in India. However, CRISIL research estimates its contribution to the total power generation to be at 2.7-3 percent.

To promote efficiency in power generation from wind energy, the Ministry of New and Renewable Energy (MNRE) announced the generation-based incentive scheme for grid interactive wind power projects. The following are the main objectives of the scheme:

   To encourage higher incentives with the help of generation-based incentive
   To facilitate entry of large independent power producers (IPP)
   To broaden the investor base and create a level playing field between various classes of investors

Under this scheme, the Ministry announced an incentive of Rs. 0.50 per unit of electricity fed into the grid for a period not less than four years and not more than 10 years. A total maximum incentive of Rs. 6.2 million per MW would be available as GBI with the total disbursement in a year not exceeding one fourth of the maximum limit i.e. Rs. 1.5 million per MW.

Clean Development Mechanism (CDM)

Techno Electric moved towards CDM (clean development mechanism) project registration process with UNFCCC (United Nations Framework Convention on Climate Change) that will help in the development of the project on one hand and sale of CERs (certified emission reduction) on the other.