Maharashtra sees faulty Policies and Regulatory capture in Wind Energy Procurement

India’s power industry remains in the woeful, desperate state because of the endemic corruption, vested interests and regulatory capture by powerful corporates. This regulated industry has become a toy for powerful political and business lobbies who use the industry for their own personal advantage. Despite having one of the largest reserves of coal in the world. India is importing millions of tons of coal. The gas policy is a complete mess held hostage by India’s biggest private company, which excels in “managing the environment” than in business. The country has no oil and now even renewable energy has become a hostage to corporate interests.

Maharashtra infamous for the Dabhol disaster, is in the spotlight again after the state distribution utility was forced to buy high priced wind power. The utility wanted to buy wind energy through a tender, but the state electricity regulation has ruled that it has to buy fixed price wind energy. This does not make sense and will lead to increased cost for customers. While there was no dispute that renewable energy needs to be encouraged and the renewable purchase obligations have to be met, still why should the consumers pay unduly high prices when cheaper RE power can be bought.

The wind power developers have managed to influence the regulators to force the state utility to buy high fixed price wind energy using specious arguments. The state utility wanted to buy wind energy using a reverse auction like what is being done for solar power. Note World Bank recently praised India for having the cheapest solar power in the world, thanks to the reverse auction policies which help in finding the true price of solar power. However, despite having a tried and tested mechanism for buying cheap renewable power, MERC has decided in all its wisdom that the utility will have to buy wind power at high tariffs.

Please note that the lack of market based selling of public resources such as telecom spectrum and coal mines had resulted in scandals. The MERC is inviting the same problem by not allowing market forces to determine the true price of procurement. If wind energy developers do not find adequate returns, they will not bid during the tenders. Fixed priced wind power may result in supernormal return for some leading to corruption.

TOI

Even as MSEDCL is facing allegations of irregularities in power purchase, Maharashtra Electricity Regulatory Commission (MERC) has turned down a plea in which MSEDCL was seeking transparency.

MSEDCL wanted to purchase wind power through competitive bidding, but the Commission wants MSEDCL to buy it at rates fixed by it. MSEDCL filed a petition in MERC seeking a review. The Commission agreed that it was a valid point, but referred the matter to a committee headed by principal secretary (energy), with representatives of wind power companies, Maharashtra Energy Development Agency (MEDA) and consumers representatives. Incidentally, principal secretary (energy) Ajoy Mehta is also managing director of MSEDCL.