An article regarding Karnataka Electricity Regulatory Commission’s guidelines which is not in sync with those of the Central Electricity Regulatory Commission (CERC) was highlighted in The Hindu Business Line.

The KERC guidelines are also not clear in specifying eligibility criteria. “They do specify intra/inter state open access eligibility criteria for the Renewable Energy (RE) Generator when it sells RE power to a consumer,” says Mr. Santosh Kamat, Co-founder of Auromira Energy, a company that produces electricity from renewable sources.

RE producers see a mismatch between the KERC guidelines and those given by the CERC. With regard to eligibility of
captive generators for RECs, while the CERC says that captive generators who avail themselves of other benefits such
as preferential tariff are not eligible, the KERC guidelines say that such parties are eligible, says Mr Vishal Pandya of
REConnect Energy Solutions, a company which provides services in RECs, energy efficiency and electricity portfolio management.

The misalignment between the guidelines of the two regulatory bodies is affecting the process of registration of green
power plants in Karnataka for obtaining renewable energy certificates, notes Mr Pandya. “Karnataka is a very big state
from REC volume perspective; about 400 MW capacity can come directly under REC,” he says.

Pooled purchase cost
Another issue which affects the REC market in Karnataka is ‘average pooled purchase cost‘ (See our analysis on APPC here). One of the eligibility criteria for a renewable energy project to get RECs is that the power it produces should not be sold to the discom (distribution companies) at a price higher than the average cost of power for the discom. The problem in Karnataka (and Tamil Nadu) is that for calculating the average, the state utility excludes high cost power, mainly from liquid fuel sources. As a result, the average comes down, and the green power producers get a lower tariff for their power. This makes it difficult for them to take the ‘REC route’. (The other alternative for them is to sell their power as ‘green power’ – for a higher tariff – but the tampering with ‘average cost calculation’ restricts choice for renewable energy companies.

“This also has a macro impact as the CERC proposes to declare floor and forbearance price (the lowest and highest price at which RECs can be sold) which will be calculated based on the APPC,” Mr Pandya says.

“The CERC may look at a project as viable even if it takes RECs, but it may not be the case.”

The KERC’s delay in formulating final regulations is causing a loss of almost Rs 1 crore a day, even assuming that all
plants run at a PLF (plant load factor, which is a measure of capacity utilization) of 50 per cent, Mr Pandya says.

“Unless these issues are addressed, the scenario for RE investment keeping in mind REC income does not look too good,” Mr Kamat says.

Karnataka has the maximum REC potential, but, it is one of the last few states to come out with the guidelines, he says.