ENERGY NEWSLETTER – MAY 2024

DID YOU KNOW?

India has just overtaken Japan to become the world's third-largest solar power generator! Solar power now accounts for 5.8% of India's total electricity production in 2023, a massive leap from just 0.5% in 2015. On global scale, solar power has retained its crown as the fastest-growing source of electricity for the 19th year in a row. These impressive statistics come from the "Global Electricity Review 2024" by Ember, an independent global energy think tank.

On that note, welcome back to our May 2024 edition of the Energy Newletter. We are excited to bring you the latest updates in India's dynamic energy sector. From policy shifts to court decisions, we've got all the news you need to stay ahead in the energy law landscape. Let us dive in!

REGULATORY UPDATES

• Boosting Solar Power: New Vendor Guidelines from the Ministry of New and Renewable Energy (MNRE) - MNRE has issued new vendor registration guidelines for the PM Surya Ghar: Muft Bijli Yojana. Now vendors need to register on the National Portal, and those previously registered will be seamlessly included in this new initiative. Earlier this year, MNRE committed a ₹750 billion (~$9.04 billion) budget through 2026-27, aiming to ramp up residential solar capacity, as previously featured in our March & April edition.
• Speeding Up Solar Projects: Central PSU Exemptions - In a bid to accelerate renewable energy projects, MNRE has exempted solar and renewable energy parks developed by central PSUs from state government committee approvals for Detailed Project Reports (DPRs). This change facilitates quicker implementation of projects as India races towards its 40 GW solar capacity goal by 2026.
• Clearing the Confusion: ALMM Order for Solar Projects - MNRE has clarified the scope of the Approved Models and Manufacturers of Solar Photovoltaic Modules (ALMM) Order, 2019. Effective for bids submitted post-April 10, 2021, this mandate ensures developers adhere to the correct regulations. Earlier this year, MNRE announced the continuation of ALMM Order, as previously featured in our March & April edition.
• Biomass Co-firing: The Power Ministry Clarifies Cost Pass-Through – The Ministry of Power (MoP) has issued a clarification regarding the revised biomass utilization policy, confirming that the cost of biomass pellets will be a pass-through in energy charge rates, despite PPA terms. The confusion arose because the terms of the PPA allowed compensation only if cost to the power plant on account of change in law is in excess of an amount equivalent to 1% of the letter of credit.
• Innovative Coal Utilization: Coal Ministry’s New Gasification Projects - The Ministry of Coal is inviting applications for coal/lignite gasification projects with a bid due date of September 12, 2024. These projects are categorized to offer financial support across various scales and sectors, and there are three request for proposals circulated – Category I (government PSUs), Category II (private sector and government PSUs), and Category III (demonstration projects and/or small-scale product based plants).
• Streamlined Transmission Licensing: CERC’s New Regulations - Central Electricity Regulatory Commission’s (CERC) latest regulations, CERC (Procedure, Terms and Conditions for grant of Transmission Licence and other related matters) Regulations, 2024, introduced on May 23, 2024, detail the procedures and terms for granting transmission licenses. Key aspects include insurance requirements, project execution guidelines, non-discriminatory access provisions, and conditions for license renewal and assignment in case of debt defaults.

WORKING PAPERS & DRAFT REGULATIONS

• Enhanced Market Fairness: CERC’s Bidding Behaviour Oversight - CERC invited comments on a staff paper titled “Regulatory Oversight on Bidding Behaviour in Power Exchanges”. The paper reviews the price discovery mechanisms, dwells on the current issues with uniform market clearing price, and suggests measures for enhanced monitoring of market participants, to enhance transparency and fairness in market operations. Comments were due by June 21, 2024.
• Monthly Escalation Rates for Imported Coal: CERC Sought Feedback - CERC also consulted on transitioning from six-monthly to monthly escalation rates for imported coal via paper titled “Methodology for Transition from Six Monthly Escalation Rates to Monthly Escalation Rates for Imported Coal”.  Two proposed options were up for discussion, first proposed following the six-month escalation rates in the current period, while the second proposed adopting rates as notified by CERC and as applicable in future. Comments were due by June 24, 2024.
• Resource Adequacy in Karnataka: KERC’s Draft Regulation - Karnataka Electricity Regulatory Commission sought stakeholder’s inputs on the draft KERC (Framework for Resource Adequacy) Regulations, 2024, which covers aspects such as demand assessment, forecasting, generation resource planning, power procurement, monitoring and compliance. Comments were due by May 30, 2024.
• MERC’s Draft Regulations: Call for Comments - Maharashtra Electricity Regulatory Commission (MERC) sought comments on two draft regulations, namely MERC (Electricity Supply Code and Standards of Performance of Distribution Licensees including Power Quality) (First Amendment) Regulations, 2024 and MERC (Grid Interactive Rooftop Renewable Energy Generating Systems) (Second Amendment) Regulations, 2024. Comments were due by June 14, 2024.
• Renewable Energy Tariff Determination: MPERC’s Draft Regulations - Madhya Pradesh Electricity Regulatory Commission (MPERC) sought stakeholder’s inputs on draft MPERC (Terms and Conditions for Tariff determination of energy from Renewable Energy Sources) Regulations, 2024. Comments were due by June 24, 2024, and the regulations when enforced will be effective until March 31, 2027. The said regulations shall apply in all cases where tariff, for a generating station or a unit thereof based on renewable energy, is to be determined by the MPERC under Section 62 read with Section 86 of the Electricity Act, 2003.
• Transmission Tariff Revisions: MPERC’s Draft Regulations - MPERC also invited feedback from stakeholders on its draft MPERC (Terms and Conditions for determination of Transmission Tariff) (Revision – V), Regulations, 2024. The said regulations mandate that intra-state transmission tariffs under Section 62 of the Electricity Act, 2003, are applicable to transmission licensees charging distribution licensees and open access customers. An important aspect is that it requires projects exceeding Rs. 325 crore to have tariffs determined through transparent bidding necessarily. Comments were due by June 18, 2024.

JUDICIAL UPDATES

• Delhi High Court Backs Solar Plants in MOOWR Scheme - In a significant decision, the Delhi High Court struck down instructions restricting solar power plants from availing benefits under the Manufacture and Other Operations in Warehouse Regulations, 2019 (MOOWR scheme). The aforementioned impugned instruction directed the authorities to review and take action to cancel permissions to solar power generating units, but the Court held that this amounted to impermissible interference with the quasi-judicial discretionary powers conferred on the authorities.
• Supreme Court's Clarification on SEZ Developers - The Supreme Court ruled that Special Economic Zones (SEZ) developers are deemed distribution licensees under the Electricity Act, 2003, but must apply for its recognition. The Court also held that the state electricity regulatory commissions cannot impose additional conditions to meet capital adequacy or creditworthiness for such recognition.
• Appellate Tribunal's Ruling on Natural Gas Tariffs - The Appellate Tribunal for Electricity ruled that the Petroleum and Natural Gas Regulatory Board had no jurisdiction over natural gas pipelines before the relevant Section 16 of the Petroleum and Natural Gas Regulatory Board Act, 2006 came into force, which dealt with the determination of tariffs for natural gas pipelines. The Tribunal held that only the tariffs determined post the date of enforcement of the provision are applicable.
• Bird Diverters: CERC Mandates Compensation - CERC directed Solar Energy Corporation of India Limited and Madhya Pradesh Power Management Company to compensate Azure Power Maple Private Limited for incurring additional expenditure on installing bird diverters on transmission lines. The mandatory requirement to install bird diverters on all existing and future overhead power lines follows a Supreme Court order to protect the endangered Great Indian Bustard, as previously featured in our March & April edition.

DISCLAIMER

The content provided in this newsletter is intended for general awareness and should not be considered as legal advice. Readers are advised to consult with a qualified legal professional regarding any specific issues mentioned herein. If you have any questions about any of these developments or would like to see something different next month, reach out to us at knowledge@sarthaklaw.com.

We will be back next month with another update. Thank you for reading!