Home Electricity Act, 2003 Solar legislation in India : an overview

Solar legislation in India : an overview

September 23, 2021

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This article is written by Aditya Anand, a student at Symbiosis Law School, Noida. In this article, the author has tried to give a brief description of the solar sector and its legislation.

Table of Contents

Introduction

Solar energy is a clean form of energy that hardly has any negative impact on the environment and is a form of renewable energy. As per a report of 2018, India is the third-largest solar power after China and Japan. India has produced 27 GW and it aims to produce 100 GW by the end of the year 2022. Several policies of the government were formulated over the few decades which indicates the intense dedication to have a sustainable and economical form of energy.

Background

India has rich sources for maximum utilization of solar energy and other types of renewable energies. India is third in Asia and fourth in the world in terms of solar power production. The foundation for the production and utilization of solar energy was laid down by establishing an organization called the Commission of Alternate Sources (CASE) in the year 1981 headed by the Department of Science and Technology. It became an independent department named as Department of New Energy Sources (DNES) in 1982 and a full-fledged ministry in 1992.

The current ministry for enforcing the laws of solar energy is the Ministry of New and Renewable Energy (MNRE). The main aim of the ministry is to develop and deploy new and renewable energy for enhancing the solar and other renewable sources of the country. In order to promote the use of renewable energy, the government has provided exemptions in indirect taxes such as sales tax, excise duty, and customs duty.

As per the report of the Ministry of New and Renewable Energy, India receives about 5,000 trillion kWh of solar energy over its land. India has very few sources of fossil fuels which compels the country to be highly dependent on gulf countries that would be required to fulfill the capacity. Solar energy can be the most secure source as it is abundantly available. India is currently using 38% of the total solar capacity. Effective capture of a fraction of total solar energy can meet the entire country’s requirements.

The first initiative towards the development and use of solar energy was the National Solar Mission that was started in the year 2010 that is also known as Jawaharlal Nehru National Solar Mission (JNNSM) that was part of the India National Plan on Climate Change(NAPCC). NAPCC is a mission mode action for sustainable growth started by the Government of India in the year 2008. Its primary objective was to intensify the solar mission plans. The aim was to promote the solar mission and to make this source of energy competitive with fossil fuel. It also included the establishment of the solar research center, development of solar technology with international collaboration on technology development to gain maximum government funding and international support.

The establishment of Solar Energy Corporation of India Ltd (SECI), which comes under the administrative control of the MNRE, was set up on September 20, 2011, to facilitate the implementation of JNNSM and achievement of targets set therein. It was originally incorporated as a Section 25 (not for profit) company under the Companies Act, 1956.

Government initiatives

India has a huge demand for energy as a developing country as a result of rapid industrialization and urbanization. Currently, electricity is the primary source of energy and that too is mostly generated from fossil fuels. India is the fifth-largest producer and consumer of energy. India is currently producing 53% electricity from coal and as per a study, this cannot last for a longer period, since it is a non-renewable source of energy. The increasing demand for energy due to the increasing population has become a matter of concern for energy conservation and maximizing the usage of never-ending sources of energy. The Government of India has introduced some major plans and laws to increase the usage of solar energy. Since India is a tropical country and most of the states receive direct sunlight throughout the year, it has a tremendous scope of solar energy.

The major initiative that was launched was to fulfill the primary objective of producing solar energy of 20GW by the end of 2020 and this has been achieved long back as there has been heavy development in this sector. The Government of India further aims to extend the utilization of solar energy up to 100 GW by 2022. The two major producing solar energy-producing states are Karnataka, producing around 7,100 MW, and Telangana, producing around 5,000 MW.

In August 2020, PM announced the mega initiative program named “one sun, one world, one grid” to distribute solar power to the whole world including the areas where the sun does not always shine to create a trans-national electricity grid.

International approach

The International Solar Alliance, an initiative to promote solar energy, was jointly undertaken by the Honorable Prime Minister of India Narendra Modi and former Prime Minister of France Francis Holland at the 21st session of the United Nations Climate Change Conference of the Parties (COP 25) in 2019 held in Paris, France. The basic objective was to mobilize the investment in the solar sector and create funds of 1,000 million USD by 2030 and address key challenges for better utilization of sources.

The Government of India has also invited investments by non-resident Indians. The basic aim is to promote foreign direct investment in the solar sector. Indian entities (Non-Resident Entities) in an Indian Company are governed by the Foreign Exchange Management Act, 1999, and the rules and regulations thereunder (FEMA). Investments by Non-Resident Entities can be made on a repatriation basis that is the investment (net of applicable taxes) can be remitted outside India.

Legal framework relating to solar energy

The solar sector does not have specific laws. The major laws that affect and regulate the solar sectors are as follows:

Electricity Act, 2003

This Act was formulated in the year 2003 to regulate the electricity sector. It provides the framework for the development of the electricity sector. The Act also mentions the preferential tariffs and quotas for opting for renewable energy. The Act deals in the legislation regarding incorporation, generation, transmission, distribution, and also the tariffs in the sale. The distribution of licenses for grid connectivity has also been incorporated. The issue of the license is the mandatory procurement for using renewable energy at a large scale. The Act also mentions the commissions at the central and state level such as electricity regulatory commissions with the appeal provision provided to an Appellate Tribunal for Electricity (APTEL) which has been created under the Electricity Act. However, if the issue is not solved, then one can directly approach the Supreme Court of India. The Act also applies to solar sector-related disputes.

National Renewable Energy Act, 2015

This Act was formulated in 2015 with the purpose to promote the sources of renewable energy. The objective of this Act is to encourage the use of renewable energy, mitigate the dependency on fossil fuel, ensure energy security, and reduce local and global pollutants. It aimed at promoting the initiatives against climate change, creating an eco-friendly environment and pollution-free sources of energy. The use of renewable energy will reduce the emissions of CO2, greenhouse gases, and other toxic pollutants. The Act also contributes to ensuring the fulfillment of national and international objectives of increasing the share of renewable energy sources.

National Electricity Policy, 2005

This policy was formed in the year 2005 in compliance with Section 3 of the Electricity Act 2003. It allows preferential tariffs for power produced from renewable energy sources. It has completed its past objective of producing enough electricity to ensure access to increase the minimum per capita availability to 1,000 kWh per year by 2012.

An adequate amount of electricity is a need in today’s life. The National Electricity Plan formulated under Section 3(4) of the Act requires the Central Electricity Authority (CEA) to frame a National Electricity Plan once every five years and revise them from time to time following the system of National Electricity Policy. Section 73(a) authorizes short-term, prospective plans for the development of an electricity system and coordinates the activities of various planning agencies for the optimum utilization of resources.

Tariff Policy, 2006

This policy is the mechanism of the Renewable Purchase Obligation (RPO) that is to fix a minimum percentage of the purchase of energy consumption by the states from renewable energy sources. It also provides a special tariff for the solar energy sector. The policy was formed in 2006 by the Ministry of Power in continuation of the National Electricity Policy, 2005. The percentages for energy purchases that were made applicable for tariffs were to be determined by the State Electricity Regulatory Commission (SERC) from April 2006.

Integrated Energy Policy, 2006

This policy is an advisory by particular focusing on renewable energy development and setting targets for the addition and advancement of capacity. The policy covers wide aspects of energy such as security, access, affordability, availability, pricing, efficiency, and environment. The major aim of the energy policy has been to provide energy that can be sustainable, efficient, cost-effective, and safe. The policy has been formulated under Section 63 of the Electricity Act for the long-term procurement of electricity from grid-connected solar PV power projects.

Challenges

The pandemic has hindered and adversely affected the growth and development of solar energy. As per the report of Solarify in the year 2019, solar energy was the fastest-growing renewable energy sector that was flourishing with much potential and development. There was increased support of the government as most of the policies were undertaken directly by the Ministry.

The coronavirus outbreak has brought the world to a standstill and deeply impacted the lives of all. The objective has been deeply hit by the deadly disease. There was a decline in the imports of solar equipment by 70% in the year 2020 as compared to imports in January 2019. There was a huge decline in energy demand as it dropped from 163.73 GW to 127.96 GW when the lockdown was declared as most offices and shops were closed and electricity was no longer needed. The supply side had also been greatly affected as 85% of the labor in solar parks were migrants and due to a decrease in demand, the supply also got affected.

However, during the lockdown on 10th July 2020, the Atma Nirbhar Bharat Campaign was launched as Asia’s largest solar project in Rewa, Madhya Pradesh to reduce the dependency on imported solar equipment and to promote the solar sector within the country.

Conclusion

Over the decades, the solar energy sector has seen a rapid increase in the production of solar cells and their usage. However, there are no exclusive laws governing this sector but they are collectively controlled by the existing laws. There has not been any landmark issue regarding this sector as the market and popularity of solar sector energy has not yet been popularized much among the local people. Yet, it is advisable and hopeful that sector-specific laws be formulated and enacted at the earliest to make the system efficient and prevent future conflicts.

References

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