Vol. 4, No. 2&3 (Summer 2017) 23-32   

Link: http://www.jree.ir/Vol4/No23/3.pdf
Downloaded Downloaded: 10   Viewed Viewed: 29

  Should Indians Pay more for Renewable Energy Based Electricity? - The Need for Evidence Based Consumer Tariffs for Electricity in India
Vasundhara Sen
( Received: February 27, 2018 – Accepted: August 14, 2018 )

Abstract    India seeks to achieve 175 Giga-Watt (GW) of Renewable power by 2022. As of December 2017, out of 333 GW of total installed capacity of electricity, close to 62GW come from renewable sources. Meeting the set targets calls for augmentation of renewable energy based capacities as expeditiously as possible. However, the sick financial health of the distribution companies/utilities, who act as the primary purchasing authorities of such power, is posing as a threat to the success of the renewable industry. This paper highlights that while the cost of procurement of renewable power, to the utilities, has gone down significantly in the recent past; the worsening financial health of utilities remains a key concern. Data is presented to substantiate that the said distribution companies/utilities are saddled by high gaps between Average Cost of Supply (ACS) and Average Revenue Requirement (ARR). Revenues to the power supplying utilities are under-recovered due to the long standing practice of cross- subsidization in the Indian power sector – agricultural and residential consumers of electricity consume power at lower tariffs, than commercial and industrial consumers. A case is therefore suggested for implementing evidence based tariff setting by the utilities. Under the suggested framework, electricity tariffs for different consumer categories can be charged with a premium for green power, based on their willingness to pay for such power. Collected funds, then can be used towards purchase of green power, by the said utilities, and consequently help foster the development of green energy in the country. This study also presents limited empirical evidence, recording the willingness to pay for such premiums, across different categories of “paying” consumers.


Keywords    Green energy premium, Willingness to Pay, Renewable Energy.


References    [1] Netherlands Environmental Assessment Agency, "Trends in Global CO2 Emissions - 2016 Report," 2016. [2] Central Electricity Authority, "All India installed capacity of power stations," 2017. [3] Conservation Action Trust, "Coal kills- Health impact of air polllution from India's coal power expansion," Mumbai, 2012. [4] Sarath Guttikunda and Puja Jawahar, "Atmospheric emissions and pollution from the coal-fired thermal power plants in India," Atmospheric Environment, pp. 449-460, 2014. [5] Intergovernmental Panel on Climate Change, "Special Report of the Intergovernmental Panel on Climate Change," 2012. [6] Kapil Kumar, Naresh Kaushik, Satyawati Sharma, Saroj Mishra Ashwini Kumar, "Renewable energy in India: Current status and future potentials," Renewable and Sustainable Energy Reviews, pp. 2434-2442, 2010. [7] Ministry of New and Renewable Energy. (2010) Ministry of New and Renewable Energy Solar Mission. [Online]. http://www.mnre.gov.in/solar-mission/jnnsm/mission-document-3/ [8] Ministry of Power. (2017, December) Central Electricity Authority. [Online]. http://www.cea.nic.in/reports/monthly/installedcapacity/2018/installed_capacity-01.pdf [9] Ministry of Finance, "Economic Survey of India," 2015-16. [10] Central Electricity Regulatory Authority. (2003, May) Central Electricity Regulatory Authority. [Online]. http://www.cercind.gov.in/Act-with-amendment.pdf [11] Government of India. (2010, January) Ministry of New and Renewable Energy. [Online]. http://www.mnre.gov.in/solar-mission/jnnsm/resolution-2/ [12] Prayas Energy Group. (2016, December) Renewable Energy Data Portal. [Online]. http://prayaspune.org/peg/re-prices.html [13] Ministry of Power. (2012, October) Ministry of Power, Government of India. [Online]. http://powermin.nic.in/sites/default/files/uploads/Financial_restructuring_of_State_Distribution_Companies_discoms_Oct2012.pdf [14] Power Finance Corporation. (2016, June) Power Finance Corporation Ltd. [Online]. http://www.pfc.gov.in/Default/ViewFile/?id=1490186954263_Report%20on%20Performance%20of%20State%20Power%20Utilities%202012-13%20to%202014-15.pdf&path=Page [15] Government of India - Ministry of Power. (2015, November) Ministry of Power. [Online]. http://powermin.nic.in/pdf/Uday_Ujjawal_Scheme_for_Operational_and_financial_Turnaround_of_power_distribution_companies.pdf [16] Fredric Beck and Eric Matinot, "Renewable Energy Policies and Barriers," Encyclopedia of Energy, vol. 5, pp. 365-383, 2004. [17] Press Information Bureau. (2017, October) Press Information Bureau. [Online]. http://pib.nic.in/newsite/PrintRelease.aspx?relid=171394 [18] Sara Schuman and Alvin Lin, "Chinese Renewable Energy Law and its impact on renewable power in China: Progress, Challenges and recommendation for improving implementation," Energy Policy, pp. 89-109, 2012. [19] Christoph Bohringer, Nicholas J. Rivers, Thomas F. Rutherford, and Randall Wigle, "Green Jobs and Renewable Electricity Policies: Employment Impacts of Ontario's Feed - in - Tariff," The B.E. Journal of Economic Analysis & Policy, vol. 12, no. 1 (Contributions), 2012. [20] Brian Hill. (2016, Decemeber) Global News. [Online]. https://globalnews.ca/news/2839995/what-is-the-global-adjustment-fee-the-mysterious-cost-ontario-hydro-customers-must-pay/ [21] Uwe Busgen and Wolfhart Durrschmidt, "The Expansion of electricity generation from renewable energies in Germany - A review based on Renewable Energy Sources Act Progress Report 2007 and the new german feed - in legislation," Energy Policy, vol. 37, pp. 2536 - 2545, 2009. [22] Sören Amelang. (2015, February) Clean Energy Wire. [Online]. https://www.cleanenergywire.org/factsheets/balancing-books-germanys-green-energy-account [23] Jincy Joy, Divya Joy, and T S Panwar, "People's Perception Study: Renewable energy in India 2014," WWF-India, 2015. [24] Tripta Thakur, S G Deshmukh, SC kaushik, and Mukul Kulshrestha, "Impact assessment of the Electricity Act 2003 on the Indian Power Sector," Energy Policy, pp. 1187-1198, 2005. [25] Government of India, "Powering "One India"," Office of Chief Economic Advisor, Delhi, Economic Survey 2016 2016. [26] Rafiq Dossani and V. Ranganathan, "Farmers willingness to pay for power in India: Conceptual Issues, Survey results and implication for pricing," Energy Economics, pp. 359 - 369, 2004. [27] Johannes Urpelainen and Semee Yoon, "Solar home systems for rural India: Survey evidence on awareness and willingness to pay from Uttar Pradesh," Energy for Sustainable Development, vol. 24, pp. 70 - 78, 2015. [28] D Lahiri and G Acharjee, "Biomass Gasifier Electricity and Study of Willingness to Pay," International Journal of Renewable Energy Resources, pp. 16-18, 2013. [29] Ranjan Kumar Bose and Megha Shukla, "Electricity tariffs in India: an assessment of consumers' ability and willingness to pay in Gujarat," Energy Policy, pp. 465-478, 2001. [30] Bigsna Gill, Sonakshi Saluja, and Debajit Palit, "Charging Power: Understanding Electricity Pricing and Willingness to Pay for Electricity in India," The Energy Resources Institute, Delhi, Technical Report 2017. [31] Kenneth Arrow et al., "Report of the NOAA panel on Contingent Valuation," 1993. [32] Richard Carson and Michale Hanemann, Contingent Valuation, 2nd ed., K G Maler and J R Vincent, Eds. USA: Elsevier, 2005. [33] Dale Whittington, "Administering Contingent Valuation Surveys in Developing Countries," World Development, vol. 26, no. 1, pp. 21-30, 1998. [34] Anna Albernini, "Optimal Designs for Discrete Choice Contingent Valuation Surveys: Single-Bound, Double-Bound and BiVariate Models," Journal of Environmental Economics and Management, pp. 287-306, 1995. [35] Michael Hanemann, John Loomis, and Barbara Kanninen, "Statistical Efficiency of Double-Bounded Dichotomous Choice Contingent Valuation," American Journal of Agricultural Economics, vol. 73, no. 4, pp. 1255-1263, 1991. [36] Maharashtra Electricity Regulatory Commission. (2016, November) MERC India. [Online]. http://www.mercindia.org.in/pdf/Order%2058%2042/Order-48%20of%202016-03112016.pdf

Download PDF