GERC Releases Draft Regulations for RE Procurement in Gujarat

The Gujarat Electricity Regulatory Commission (GERC) has unveiled a comprehensive draft of the 'Gujarat Electricity Regulatory Commission (Procurement of Energy from Renewable Sources) Regulations, 2024', aimed at accelerating the State’s renewable energy transition.

The proposed regulations, once finalised, will provide a robust framework for renewable energy procurement, establishing clear guidelines and obligations for stakeholders across Gujarat to ensure compliance with the State’s green energy goals.

The new draft regulations focus on strengthening Gujarat’s commitment to renewable energy by introducing stricter renewable energy procurement mandates, alongside supporting emerging technologies. One of the key features of these regulations is the imposition of a 'Renewable Purchase Obligation (RPO)' on obligated entities, requiring them to source a specified percentage of their total energy consumption from renewable sources such as solar, wind, biomass, hydro, and waste-to-energy.

Additionally, the draft regulations encourage the adoption of cutting-edge technologies like green hydrogen to further diversify the state’s renewable energy portfolio. The regulations make it clear that the Central Electricity Regulatory Commission (CERC) will oversee the Renewable Energy Certificate (REC) mechanism. RECs will play a critical role in ensuring that obligated entities can fulfil their renewable energy sourcing obligations and comply with the renewable energy targets set out in the regulations.

The new regulations target a broad range of stakeholders involved in energy consumption and generation within Gujarat. Distribution licensees, captive power plants (with capacities exceeding 100 kW), and consumers using conventional power sources through open access will all be obligated to meet renewable energy targets under the RPO framework, Importantly, retail electricity consumers, who receive power through distribution licensees, are exempt from the RPO unless they generate power from conventional sources themselves. This exemption ensures that regular consumers are not burdened by the procurement obligations, which are instead focused on larger entities involved in energy generation and distribution.

The regulations cover both generation and consumption of renewable energy across the state, including energy produced for backup purposes. This comprehensive approach aims to ensure that renewable energy is integrated into all levels of the energy system.

The cornerstone of the regulations is the RPO framework, which mandates that obligated entities must source a certain percentage of their total energy consumption from renewable sources each year. These obligations will gradually increase between 2024 and 2030, with initial renewable energy procurement targets set for the 2024-25 period. The regulations specify that renewable energy sources include wind, solar, hydro, and distributed renewable energy projects (those under 10 MW).

The percentage targets for each source will be detailed for each year, with a gradual ramp-up to ensure that stakeholders have sufficient time to adjust to the changing requirements. A key feature of the regulations is the flexibility provided to entities to meet their RPO targets. If an entity exceeds the target in one category, such as wind energy, it can offset a shortfall in another category, such as hydro energy.

In addition to the renewable energy sourcing mandate, the regulations introduce a new Energy Storage Obligation (ESO). Obligated entities will be required to store a certain percentage of their energy consumption through energy storage systems (ESS), with at least 85 percent of the stored energy derived from renewable energy sources.

The ESO will begin at 1 percent of total energy consumption in 2024–25, progressively increasing to 3.5 percent by 2029–30. This move highlights the importance of energy storage in ensuring grid stability and reliability as more renewable energy is integrated into the State’s power infrastructure.

Further, penalties for Non-Compliance Entities that fail to meet their RPO targets will face significant penalties, as stipulated under the Energy Conservation Act of 2001. The penalty is calculated at INR 3.72 per KWh of unmet obligation, based on the tonne of oil equivalent (TOE) value.

Obligated entities that miss their RPO targets will be required to deposit penalties into a dedicated fund, which will then be used to purchase Renewable Energy Certificates (RECs) and develop the necessary infrastructure for renewable energy generation and transmission.

In cases where an entity is unable to procure sufficient RECs due to a shortage, they can apply for permission to carry forward their unmet obligation to the next compliance period. This offers some flexibility for entities facing challenges in meeting the set targets, but ensures that penalties are still levied for non-compliance.

Renewable Energy Certificate (REC) Mechanism remains a central part of the regulations, allowing entities to meet their RPO obligations through the purchase of renewable energy certificates. These certificates serve as proof of renewable energy generation and can be traded in the open market. Obligated entities can apply for RECs for energy generated or purchased under Power Purchase Agreements (PPAs) executed after January 18, 2010.

However, power sold under these agreements cannot be counted towards both REC issuance and RPO compliance. To track and manage this system, the Gujarat Energy Development Agency (GEDA) will serve as the state agency responsible for overseeing the REC mechanism and ensuring the integrity of the RPO compliance system.

The draft regulations also introduce a detailed compliance and reporting system. Obligated entities must submit their renewable energy usage and compliance data via an online RPPO web portal, which will track consumption, REC purchases, and compliance with RPO targets. Entities with capacities exceeding 1 MW will need to file a petition with the GERC by June 30 each year, providing detailed information on their compliance efforts.

Entities below 1 MW capacity will submit their reports directly to Gujarat Energy Development Agency (GEDA). All compliance data will be made publicly available on the relevant websites, ensuring transparency and accountability in the renewable energy procurement process.

The draft regulations introduce the Hydro Renewable Obligation (HRO), which will apply to all hydroelectric projects commissioned after March 2024. This is the first time that such an obligation has been imposed, underscoring the importance of hydroelectric power in the State’s renewable energy mix.

The regulations also emphasise the role of distributed renewable energy projects, particularly those with capacities under 10 MW. These projects are seen as crucial to expanding Gujarat’s renewable energy capacity at the local level and helping to meet the State’s renewable energy targets in a decentralised and scalable manner.

It may be noted that GERC has invited feedback from stakeholders by October 18, 2024. A public hearing to discuss these regulations is scheduled for October 25, 2024.

The 'GERC Draft Regulations for Renewable Energy Procurement, 2024', are a significant step forward in Gujarat’s effort to become a leader in renewable energy generation. The regulations introduce ambitious targets for renewable energy sourcing, provide flexibility in compliance, and establish penalties to ensure that entities meet their obligations.