Rajasthan’s electricity regulator has proposed new rules that would make solar installations in the state which supply power to other states provide 10% of their generation to Rajasthan’s state distribution company (Discom) free of charge, according to research firm Mercom Capital.
The Rajasthan Electricity Regulatory Commission (RERC) said that people in the state were paying more for their power than in other areas of the country despite Rajasthan being one of the top four solar states in India, as it urged the state government to notify the proposals.
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The RERC order said state regulators should “notify that interstate solar power projects supplying power outside Rajasthan shall supply 10% of such electricity free of cost to the state government for the use of the state Discoms for supplying it to the consumers of the state”.
But the move has been met with derision by government owned entities in India, such as the NTPC and Solar Energy Corporation of India (SECI), who said the proposals were damaging to the country’s renewables sector as well as renewables developers in the country.
Mercom reported that one inter-state project developer in Rajasthan said the proposed law could “severely damage the momentum of solar installations”.
“Solar projects have continued to grow because of the progressive decline in cost due to technological advancement, but if a 10% generation is hived off without any payment against it, the 90% of the generation will have to be used to recover the lost revenue,” the developer is quoted as saying.
That said, any law set down following the proposal will be wide open for legal challenge, Mercom reported, citing a lawyer as saying the decision had no legal basis as inter-state projects are not within one individual state’s remit and are instead within the purview of national bodies.
“Let’s keep in mind that this is just a proposal,” Raj Prabhu, CEO and co-founder of Mercom Capital told PV Tech. “The proposed policy will scramble project economics in an industry that already operates on razor-thin margins. This is not the way to fix high energy costs in the state.”
The worry is that the idea mooted in the north western state of Rajasthan would gain traction with cash-strapped Discoms across India, which have been “perennially in financial trouble”, and will push up the overall cost of power.
“If this proposal by Rajasthan is implemented in its current form, it will set a dangerous precedent for the rest of the states to follow,” Prabhu said. “Even though this proposed policy may not pass legal muster, it will bog down project development activity. Since most solar projects are based in Rajasthan, such an action could slow down solar installations and investments country-wide.”
There is also the additional concern the law could apply retrospectively to existing projects, although this is not expected and will be revealed when Rajasthan’s state government notifies the proposals.
The state already levies INR200,000-500,000 (US$2,454-6,132) from inter-state developers as part of its Renewable Energy Development Fund (REDF), with funds passed on to consumers or used to develop power infrastructure. But the new proposals could see INR7.88 billion (US$98.7 million) worth of power provided to the state Discoms for free, according to Mercom.
