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Green Energy Tariff determination approach

The Ministry of Power (MoP), Government of India, notified the Electricity (Promoting Renewable Energy Through Green Energy Open Access) Rules, 2022 on 6th June 2022, and has notified subsequent amendments to these Rules.

In the context of fulfilment of Renewable Purchase Obligation (RPO), the said Rules have introduced a provision for an Obligated Entity meeting its RPO by placing requisition from the concerned Distribution Licensee. The Rules also provide that the consumer may purchase on a voluntary basis, more renewable energy, than he is obligated to do, which may be in steps of 25% and going up to 100%. 

The Rules stipulate that “The tariff for the green energy shall be determined separately by the Appropriate Commission, which shall comprise of the average pooled power purchase cost of the renewable energy, cross-subsidy charges if any, and service charges covering the prudent cost of the distribution licensee for providing the green energy.”

Quite a few State Electricity Regulatory Commissions (SERCs), viz., MERC, GERC, KERC, etc., have determined the Green Energy Tariff before the notification of the said MoP Rules.

ABPS Infra assisted the Madhya Pradesh ERC (MPERC) to be the first SERC to determine the Green Energy Tariff for the State of Madhya Pradesh, in accordance with the framework stipulated in the MoP Rules, in the Tariff Order for FY 2023-24, issued on 28th March 2023. In the recent Tariff Order for FY 2024-25, issued on 6th March 2024, MPERC has continued with the same approach.

The salient features of the Green Energy Tariff determined by MPERC are as follows:

  1. Green Energy Tariff has been determined for 2 types of Green Energy transactions, viz.,
    1. Consumers availing Green Energy from Distribution Licensee only for the purpose of reducing their carbon footprint and seeking Certification to this effect.
    1. Consumers availing Green Energy from Distribution Licensee as per MPERC RE Regulations.
  2. Framework for consumers availing Green Energy for reducing carbon footprint
    • Procurement of RE power by any consumer for any percentage of their monthly consumption up to 100% of their consumption of electricity during any billing month. ;
    • The RE power supplied by Distribution Licensee to such consumers shall only be considered towards RPO compliance of the Distribution Licensee;
    • Green Energy Tariff equal to 75% of the difference in weighted average rate of RE power and weighted average rate of Energy charge (Variable Charges) of Non-RE sources, which is approved as Rs. 0.56/kWh for FY 2024-25.
  3. Framework for consumers availing Green Energy for meeting RPO targets
    • Green Energy Tariff shall be applicable to consumers over and above the normal tariff of the respective category;
    • The Green Energy purchased by Obligated Entity from Distribution Licensees shall be first considered to meet the RPO of the obligated entity;
    • Any RE purchase in excess of RPO of Obligated Entity shall be considered to meet the RPO of the Distribution Licensee;
    • The Average Pooled Power Purchase Cost (APPC) of RE sources (Wind, HPO and Others,) and its contribution in Average Cost of Supply (ACOS) has been worked out separately considering the normative losses, Intra-State Transmission losses and Inter and Intra State Transmission Charges;
    • Cross Subsidy Charges have been considered equal to the difference between ACoS and Average Billing Rate (ABR) of respective tariff categories have been considered;
    • Service Charges have been considered equal to sum of fixed cost of power purchase and contribution of other components of ARR excluding power purchase cost;
    • Green Energy Tariff approved for FY 2024-25:
RE SourceWindHydroOthers
Green Energy Tariff (Rs/kWh)0.292.530.34

The framework adopted by MPERC for determination of Green Energy Tariff has been appreciated by various stakeholders.