Transmission free in India?

The Indian power sector has seen some peculiar situations in the last one year with many states turning power surplus for the first time in their history. This has caused some unique problems with distribution utilities in these states refusing to buy power from the renewable energy power plants set up in their states. The green developers find it tough to sell the power in other states, given the plethora of charges and regulations that they have to navigate to sell power form one state to the other. The Indian power sector also has the problem of imposing cross subsidy charges if you sell power without involving the distribution utility directly to a power buyer. These charges are so high that they make it uneconomical to sell the green power even though the costs are much lower for solar and wind energy than directly buying power from utilities for industrial and commercial segment buyers.

Another problem that has cropped up is that some resource rich states are already power surplus and in no situation to buy more power. Rajasthan which has a huge area of low cost desert land is ideal for generation of solar power but companies are finding it difficult to build power plants because the utility there is not ready to buy power. Selling to other states would lead to high charges. There are many states in India which are deficient in both wind and solar resources such as Bihar, West Bengal and the NE States. These states could buy cheap green power from other states if there was an option. But in the current scenario they cannot do so because of the complex regulations.

The Indian central government has found a solution by deciding to make the transport of renewable energy through its inter state transmission electricity system free. This national electricity grid normally charges users for the transport of power, however for solar and wind power their government will make an exception. They will not have to pay for transmission or losses and can easily move the power from one state to the other. This will create a seamless movement of green power from high generation states to high consumption states. It will also allow efficiency, as green power plants are built in states with the least costs such as Rajasthan and not in high population density states such as Punjab where land prices are high making RE power very costly.

It remains to be seen who will bear the costs of the RE power being made free. If the costs are passed onto other users of the transmission systems, then it will overburden those utilities and their customers. The government has made the right move in making transport of RE power free, now it needs to make sure that the costs are passed on in a balanced way.