Maharashtra takes policy lead

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Under plans unveiled by the Maharashtra Energy Development Agency (MEDA), around 750 MW of new wind power could be installed in the state by 2007. Publishing a policy which gives priority to power generation from non-conventional energy sources -- with subsidies to developers and a five year tax break on wind electricity purchases by industrial customers -- MEDA notes the state has a big wind potential of 3650 MW from 28 sites.

A green energy fund is being launched to pay for 50% of the cost of transmission and distribution lines for renewable energy, with interest free loans available for the remaining 50%. Wind project developers who pay for grid infrastructure up front can later claim the money from the state. In addition, local co-operatives set up to own and operate wind plant can claim 11% of needed working capital from the fund.

Complying with the 2003 Electricity Act, MEDA's announcement followed the Maharashtra Electricity Regulatory Commission's order for a levy on all industrial customers to raise money for the green energy fund. Fund proceeds will also go to energy infrastructure projects such as roads to remote sites and sub-stations. The Maharashtra State Electricity Board (MSEB) and MEDA will jointly assess where such infrastructure is required, with the work carried out by MEDA or private wind energy companies under the supervision of MSEB.

The electricity board will buy all wind electricity at a fixed rate of INR 2.25/kWh ($0.05/kWh), escalating 5% year on year for the first ten years of a project's operational life. For the following three years the rate will remain constant after which the 5% annual escalation returns, lasting this time for seven years, effectively guaranteeing purchase rates for 20 years. All of the energy supplied to the MSEB grid from wind farms can be banked for one year if no customer is immediately available for the output. Annual electricity bank balances, however, cannot be carried forward to the next year, although MSEB may buy unsold power at the prevailing power purchase rate. MSEB will carry the cost of wind plant transmission losses for the first three years, but charge 1% of energy delivered to the grid to cover losses after the initial period.

Sale of electricity from private wind plant to third parties is permitted by MSEB to any two industrial/commercial consumers per megawatt of installed capacity. Grid use charges will be levied at 2% of transmitted energy. Sales tax can be deferred for one-sixth of the qualifying amount. To encourage energy intensive industries to invest in renewables, electricity tax is waived on their wind power consumption for the first five years of plant operation.

The policy is still in consultation, but Ramesh Kymal from NEG Micon (India), now part of the Vestas group, foresees no major delays. "We expect to see the policy in action within six months."

Not everyone is content. S.V. Kulkarni of Enercon India, based in Maharashtra, is concerned about the emphasis on a series of subsidies. He would have preferred to see a fixed tariff of INR 3.50/kWh ($0.077/kWh) for 20-year power purchase agreements, with a built-in price increase set at a minimum 5% a year. "The rate should be viable enough so that we do not need any incentives," he says.

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