We Cannot Ignore the Carriage Cost of Renewable Energy

Transmission charges being waived had led to distortions that ending this policy should help resolve

- ALOK KUMAR

Should India have extended its transmission-charge waiver for renewable energy (RE) projects? This is perhaps the most debated current issue in our power sector. On one side stand RE developers, arguing that its non-extension will seriously affect investor sentiment in this important field, which in turn might impact the pace at which the country achieves its target of 500 gigawatts (GW) of non-fossil-fuel capacity for electricity generation. On the other side, a number of distribution companies (discoms) have been pleading that repeated extensions to the waiver of these charges for RE projects connected to the inter-state power grid has led to an overall increase in their transmission cost burden, on account of the waiver amount being socialized by such a policy.

I would like to clarify two points upfront. Promoting the expansion of India's RE capacity is of utmost importance from the perspective of energy security as well as environmental sustainability. It will be very difficult to meet increased demand for electricity without expanding solar plus storage capacity, given the sluggish progress in all other generation sources. Equally crucial is the timely expansion of our grid capacity to ensure the reliability of supply, resilience of power systems and development of Indian electricity markets. However, new transmission assets are expensive, which puts upward pressure on consumer tariffs. We also need to consider their environmental footprint in congested corridors. So we need a well-reasoned strategy.