Renewable energy producers upset over Karnataka order raising transmission, wheeling charges

CHENNAI: A recent order of the Karnataka Electricity Regulatory Commission that increased five times certain charges payable by some renewable energy producers with retrospective effect, has caused consternation in the renewable energy industry. Some companies have said they have no option but to approach the courts for redress.

The order is meant for wind, solar, mini-hydel and biomass energy producers who sell their power directly to consumers (called ‘open access’). The Commission has raised concessional transmission charges and wheeling charges from 5 per cent of what is applicable to conventional power units, to 25 per cent. The order applies retrospectively, affecting all projects that have been set up after March 2017.

Since an earlier order of the Commission allowed concessional charges to renewable energy companies till March 2018, developers rushed to put up projects in Karnataka in 2017-18, so as to get their foot in before the concessions expired. Of the state’s fresh installations of 4,980 MW of renewable energy capacity in 2017-18, mostly solar and wind, around 2,000 MW was ‘open access’, or direct sale of power to consumers.

Bengaluru-based solar energy company, CleanMax, alone is estimated to have set up over 270 MW of capacity. ReNew Power and Amplus have set up around 170 MW each. Rays Power, Mahindra Susten and Prestige group are among other developers who have set up projects in the state.

And now, the Commission has said, sorry, no concessions. The logic of the order, passed on May 14, is based on the Commission’s understanding that even though charges have been raised, the projects will be viable. Even after the increase, renewable energy producers will be able to sell power to their consumers at prices that are at least 50 paise less than what consumers would pay if they purchased power from the utilities.

The Commission reasons that an industrial consumer would pay Rs 6.80 a kWhr, and a commercial establishment (such as a shopping mall) Rs 8.35 a kWhr. Quoting an unnamed green energy generator, the order says that a 50 paise discount to such tariffs would be “reasonable”. Therefore, energy producers could sell at Rs 6.30 and Rs 7.85 to industrial and commercial consumers. The raise in concessional would, therefore, leave the developers enough margin for their business. Why 50 paise discount, even if the developers sold their power at prices one rupee lower than the grid tariffs, they would still be profitable, says the Commission.

If not for the raise in concessional charges, “the generators would be making undue profit by selling power under OA/ wheeling, with promotional W&B charges, at the cost of consumers of the state, which is not in the public interest,” the order notes.

Developers, on their part, feel that they made investments on the basis of the prices agreed upon between them and their customers, taking into account the existence of concessional charges. The new order, which they see as going back on a promise, imperils investments. Developers stand to lose Rs 2.50 to Rs 3 a kWhr, said an official of a solar company. He said it was not reasonable that a state should lure investments with concessions and then go back on its word.

Source: thehindubusinessline