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Appellate Tribunal for Electricity’s ruling, a setback for Renewable Purchase Obligation

According to reports, in confirming that the co-generation plants, even those that generate power by firing coal, are not required to be subject to any ‘renewable purchase obligations’, the Appellate Tribunal for Electricity has created a further setback for companies sitting on ‘renewable energy certificates’ and hoping to sell them.

In its recent decisions on appeals filed by Emami Paper Mills and Vedanta Aluminium, APTEL did not go into the fundamental issue — whether a plant that produces electricity using fossil fuels produces ‘green’ power or not. Instead, the Tribunal went by the legal definition of who are all counted as ‘obligated entities’, and therefore have to buy a specified quantum of (the usually costlier) ‘green’ power or buy ‘renewable energy certificates’ from the market, instead.

Going by this narrow definition, APTEL said that the “definition (of ‘obligated entities’) nowhere provides that a co-generation plant having fossil fuel as its basis would be a conventional captive generating plant, and that therefore, it is an ‘obligated entity’.”

This is not good news for the renewable energy industry. Already, these companies, who generate electricity from wind, solar, biomass and small hydro plants, are finding it impossible to sell their ‘renewable energy certificates’. In the trading session of January — REC trading happens on the last Wednesday of each month on the two power exchanges — 17.41 lakh certificates were offered for sale, but only 1.93 lakh were sold. This shakes the already weak faith that financiers have in the REC regime and renewable energy companies would find it harder to raise debt from banks for their projects.

The Central Electricity Regulatory Commission pleads its inability to enforce the RPO obligations, given that the task is the remit of the state electricity regulatory commissions. It has done what it believes is the most it could do — extend the life of the RECs to two years, from one year now.

The biggest ‘obligated entities’ are the State electricity distribution companies, that are not in the best of financial health. The State regulators seem to take a view that the distribution companies merely buy the certificates and they get no energy for their money and why force them to do so. This, of course, is a specious argument, because if the distribution companies could have bought green power, they would have anyway paid a price for it.

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