Regulatory Constraints Hinder Open Access Renewable Energy Projects, Energy News, ET EnergyWorld

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Regulatory constraints are obstacles for renewable energy (RE) projects based on open access, ICRA said Thursday. Independent power producers (IPPs) in the renewable energy sector selling electricity in the open access route (third party or group captive mode) are facing increasing regulatory constraints such as the upward revision of open access tariffs, denial of open access approvals and tougher energy banking standards, ICRA said in a statement.

In addition, he said that with the improvement in the price competitiveness of renewables, especially in the solar and wind power segments, renewable energy policies in several states have been changed over the years. Last 3-4 years.

States have either completely withdrawn or reduced concessions or incentives on open access charges, with respect to the energy supply of solar and wind energy projects under the open access road, he added.

CIFAR Senior Vice President and Group Co-Head (Corporate Ratings) Girishkumar Kadam said in the statement: “The overall open access fees for third-party PPIs vary widely from state to state. the other, ranging from Rs 2 to 5 per unit, and showed an increasing trend during the period.

He added that limited progress has been made in the tariff rationalization of network tariffs set by the national electricity regulatory commissions for state-owned distribution companies (discoms).

In addition, state-owned nightclubs in most cases show passive resistance, due to fears of losing commercial and industrial (C&I) customers to cross-subsidize or pay high tariffs, Kadam added.

This poses regulatory hurdles for adding capacity in the open access segment for renewables in the medium term, Kadam said.

However, the demand for such PPAs with C&I customers is favorable, supported by tariff attractiveness, given the extent of discounts offered in these PPAs compared to the applicable network tariffs as well as increasing voluntary sustainability initiatives. corporate clients, as we have seen recently, he said.

According to the ICRA, the price competitiveness for captive group projects is relatively higher due to the non-applicability of the cross-subsidy surcharge and the additional surcharge (except in Maharashtra) compared to selling to third parties in free access.

However, political clarity on the proposed changes in the eligibility criterion of the ownership and capital structure for captive group projects is still expected and, therefore, the same remains controllable, he explained.

ICRA (Corporate Ratings) Vice President and Sector Head Vikram V said: “Despite these challenges, the credit profile of renewable energy projects in the open access segment remains strong. by a set of factors, such as relatively better tariff expectations of around Rs. 1.5 per unit compared to the discovered tariff in the utility segment and their ability to ensure price competitiveness for C&I customers. ”

He added that the presence of diversified and creditworthy C&I clients remains another supporting factor for the credit profile of most open access based PPIs in the ICRA rated portfolio.

Despite regulatory hurdles in the open access segment, the outlook for the renewable energy sector remains stable, he said.

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