Karnataka Mulls Removal of Banking Facility for Grid-Connected Renewable Projects

The government will write a letter to KERC to remove banking provision for renewable projects


The Government of Karnataka has held a meeting to discuss the banking and wheeling charges for grid-connected renewable projects in the state.

In the meeting, the government decided that for grid-connected captive solar projects, the consumer will be required to enter into an agreement for the wheeling and banking charges. The agreement will be with the Karnataka Power Transmission Corporation Limited (KPTCL) or the concerned electricity supply companies (ESCOMs) as per the state regulations.

Solar generating projects in the existing consumer’s premises for their captive use isolated from the KPTCL or ESCOM grid and which have battery storage will be treated as a standalone and off-grid project. The wheeling and banking agreement for such projects will not be required. It was also decided that the consumer will have to obtain an electric safety clearance certificate from the Department of Electrical Inspectorate. At the time of issuing the electrical safety certificate, the Chief Electrical Inspector will confirm if the generating project is standalone or off-grid. The monthly progress report of such projects needs to be sent to KPTCL, concerned ESCOMs, and Karnataka Renewable Energy Development Limited (KREDL).

In the meeting, banking facility provided to renewable energy projects was also discussed. As per the facility, ESCOMs are required to pay 85% of the generic tariff to renewable independent power producers (IPPs) if they do not sell the power within the prescribed year. This amounts to a deemed PPA, which is neither required by the ESCOMs nor is it permitted by the Karnataka Electricity Regulatory Commission (KERC), as KERC has asked ESCOMs not to sign any PPAs for renewable energy.

As the state has installed more than 14,800 MW, further promotion of renewable energy projects is not required, according to the government. So, the government decided to issue allotment orders only for wheeling facilities without a banking facility. In the meeting, it was decided to write a letter to the KERC to remove the banking provision for grid-connected renewable energy projects.

Speaking to Mercom India, a top executive from SunSource Energy, said, “The content of this notification is contrary to the prevailing regulations. The wheeling and banking charges for rooftop solar projects are completely against the objectives of clean energy, and it is difficult to envisage how it will be implemented. The wheeling charges will be applicable only if KERC amends its regulations. Right now, it’s not tenable until KERC implements it.”

Commenting on the development, Aditya Singh from HSA Advocates, said, “Firstly, I would like to make it very clear that to date, there are no applicable laws or regulations in place. DISCOMs cannot impose any charges (wheeling or any other charges) on the developers. Minutes of the meeting of the Energy Department can be read like a wishlist of the DISCOMs. DISCOMs need to understand that wheeling charges can be imposed only when the distribution system is used for the conveyance of the electricity. Further, the proposal of the Energy Department concerning banking is also worrisome because it is equating the concept of “banking” with “selling electricity,” and discontinuing the payment of 85% is contrary to specific provisions of the KERC Regulation.”

According to Mercom India’s Solar Project Tracker, Karnataka has approximately 7.2 GW of large-scale solar projects in operation and approximately 826.4 MW of projects under the development pipeline.

Previously, Mercom had reported that the Karnataka High Court had quashed an order issued by the KERC relating to an increase in wheeling charges for open access power consumers in the state. The Karnataka High Court order had brought relief to all renewable energy generators trading power through open access in Karnataka. The court, in its order, had reiterated the principle of settled contracts, which lends certainty to power purchase agreements (PPAs) and imposes confidence in investors.

In 2018, KERC had issued an order setting the wheeling, transmission charges to be levied on renewable energy projects in the state. The order has been in effect since April 1, 2018, and will be in effect till March 31, 2020.

Towards the end of May 2018, the vacation bench of the Karnataka High Court imposed an indefinite stay on the KERC order.