Assessing the Impact of Karnataka Electricity Regulatory Commission’s Open Access Order for Solar Power Generators in Karnataka

On 18 August 2014, the Karnataka Electricity Regulatory Commission (KERC) passed order number S/03/01 called ‘Wheeling Charges, Banking Charges & Cross Subsidy Surcharge for Solar Power Generators’, whereby all solar power generators in the state who achieved Commercial Operation Date (COD) before 31 March 2018 were exempted from payment of wheeling and banking charges and cross subsidy surcharge for a period of ten years from the date of commissioning.

This landmark order provided long term clarity for solar project developers and consumers. For certain categories of consumers (commercial), the exemption meant that solar energy became more viable while planning their energy mix.

From KERC’s perspective, the main drivers for passing this order was the low rate of growth of solar energy installations in Karnataka and the prevalent trend of a reducing solar tariff seen against rising utility tariffs. The Commission hoped that this measure would facilitate greater and rapid growth of solar energy through third party open access and captive routes.

Given the importance of this order, WRI is keen to track its on-ground impact to serve as a feedback mechanism to KERC and as a learning for other state regulators who may be looking for solutions to increase the quantum of solar energy in their states

Hence, this working paper examines the impact of this order one year after its enforcement. It also tries to highlight other factors that are hindering the large scale adoption of solar energy through the open access route.

The research activity for this working paper triangulated relevant data (capacity, time lines, and possible location of solar projects) from Karnataka Renewable Energy Development Limited (KREDL)-the state nodal agency for renewable energy; Bangalore Electricity Supply Company Limited (BESCOM)-the utility for Bangalore city and few surrounding areas; solar project developers and consumers who contract solar energy.

Evidence was gathered to understand the impact of the KERC order on the ground. The data put out by the KREDL regarding solar installations in the state as well as data issued by BESCOM concerning open access applications were studied. BESCOM’s data-set was sifted through to extract the relevant data for open access applications by solar generators. A few solar plant developers and consumers (both from the industrial and commercial category) were interviewed to understand their perception regarding this order and plans to procure solar energy.

The main finding of this paper is that buyers and sellers of solar energy welcome the order. However, if one were to consider the time involved in understanding the possible implications of the order and other important factors associated with setting up a solar power plant such as land and power evacuation, the on-ground impact (measured in MWs commissioned or MUs wheeled) will only be seen from the fourth quarter of Financial Year (FY) 2016 onwards.

Hence, this working paper should be seen as the first step in tracking the on-ground impact of the new solar policy, and to start collecting the data and help develop insights that BESCOM, KERC, KREDL and other stakeholders (including regulators from other states) can use to improve their decisions over time.

Some of the possible outcomes of this paper are as follows.

• KERC understands the impact of its regulation and uses this analysis while framing future decisions.

• BESCOM and KREDL track upcoming and commissioned solar projects (through the open access route) accurately to help in their planning process as well as informed policy making.

• Green Power Market Development Group (GPMDG) member companies such as Infosys, Bangalore International Airport Limited, Coca Cola, Cognizant and other companies use this analysis in their internal and external conversations (with state planners / administration) and are influenced to set up/contract solar energy under the third party open access route.

• Other state utilities/regulators use this as a guideline while framing regulations to encourage the growth of solar energy in their respective states.

• National policy makers gain insights on the design of effective national policy that achieves the 100 GW solar target by 2022.

The paper concludes with a call for establishing an open database which can help track solar capacity set up for consumption through the open access route. We hope that this will facilitate a transparent and data-driven policy formulating mechanism.