“Transition away from fossil fuels”, COP-28’s biggest achievement has been to bring nations to this consensus in its declaration. (UNFCC, 2024) With the economic development of the two Asian giants, China and India, energy demand has reached unprecedented levels. In 2021, fossil fuels continued to be the dominant resource of energy supplied (80%), with oil at 30% followed by coal and natural gas at 27% and 24% respectively (International Energy Agency, 2022). Renewable energy is the only solution that caters to both objectives by Ensuring unhindered economic development and fulfilling the Nationally Determined Contributions (NDCs) under the Paris Agreement.

India aims to become a net-zero nation by 2070 and as a transitionary goal wants to install 500GW of renewable energy by 2030 (Ministry of New and Renewable Energy, 2022). The nation recently surpassed its annual milestone by out 51GW of renewable energy projects against the target of 50GW in FY2024. It added 18GW a 21% Y-O-Y increase in FY 2024 (Baruah, 2024).  From a generation point of view, India looks strong to achieve its intended targets.

Evacuation and consumption on the other hand is a contrasting story, according to World Bank data renewable energy in total energy consumption accounted for about 53% but this has decreased to 36% in 2020. The ‘must run’ sources are not being efficiently utilised, while grid infrastructure could be considered a major reason behind this phenomenon, apart from renewable purchase obligations of the DISCOMs, the government push towards renewable consumption has been a limited effort. The Green Energy Open Access Rules 2022, attempts to rectify this situation. On June 6, 2022, the Ministry of Power notified the GEOA Rules, 2022 amending the open access regulations, reducing the sanctioned load capacity from 1MW to 100KW for eligible consumers given that the energy procurement is from green sources.

The policy has broadened the scope of eligible consumers and is an intervention in the right direction as the Indian energy market has very few consumers with a sanctioned load of 1MW & above. The amendment opens the avenue for the MSME sector to access energy from sources apart from their DISCOM. The sector is an integral part of the nation’s economy contributing more than 29% of GDP and about 49% in total exports, it also employs more than 110 million people (Ministry of Micro, Small and Medium Enterprises, 2023). As an emitter MSME sector alone generates 110 million tonnes of CO2 annually as per a CSTEP report of 2018 (Divyansh Upadhyay, 2022). MSME transition to greener sources of energy is central to India’s net-zero goals.

Solarisation has been a key instrument pushed by the authorities to reduce the sector’s emissions but it comes with its own set of challenges. Solarisation is a capital-intensive exercise, the majority of the MSME (99%) (Gupta, 2020) operates in an unorganised manner making access to credit complex and expensive. The operations location of MSMEs is not usually strategised with solar rooftops as part of the plan, therefore, leading to inefficient resource utilisation, due to the unorganised and uncertain nature of business, limited entities have operations in a facility they own, and a leased facility disincentivises the entity to adopt solar as a source. Achieving economy of scale with individual entity’s solarisation becomes difficult and developers often find such projects unviable adding to the challenges MSMEs solarisation face.

Green Energy Open Access acts as a bridge to these challenges, the relative costs for MSMEs against setting up solar rooftops are minimal, and the final costs of supply of energy are lower than DISCOMs tariff (the cost of supply varies due to varied charges collected by DISCOMs) and the entities have the flexibility to change their suppliers in the event of shifting of operations. As part of larger organisations’ supply value chain, MSMEs are constantly pushed by their clients to green their production processes as a part of fulfilling their larger greening mandates, becoming essential to stay in the competition. In such a scenario GEOA is the choice of instrument for MSMEs as either a permanent or transitionary way for greening their processes.

GEOA looks like a lucrative idea to catalyse the renewable revolution in India, however, it has its own set of challenges and trade-offs. For instance, electricity being a concurrent subject needs state legislation for on-ground implementation which has been limited to certain states. Seven states are yet to release their GEOA rules draft, and three are yet to notify them making the MSME of these states currently ineligible for GEOA Access (Author’s analysis). Electricity’s essentiality is imperative yet without affirmative intervention it is unaffordable to a lot of Indians, therefore the sector survives on the concept of cross-subsidy, charging more to industrial and commercial consumers to subsidize residential and agricultural consumers, GEOA’s implementation would disrupt this model when rich consumers would move away from DISCOMs. To avoid such mishappenings in the long run making DISCOMs unviable, it is observed that they hinder the GEAO applicants or are inattentive towards their maintenance needs causing failure in the power supply. DISCOMs in the light of no visible alternates are forced to take such measures for survival.

While it is understood that GEOA would bring savings in terms of energy costs to the consumer, the landing costs have seen an incremental trend in past years (JMK Research and Analytics, 2022). Our discussion with experts in the sector revealed that after all the DISCOM charges are added to the energy costs the savings/unit are minuscule disincentivising the consumers to apply for the access.

Climate change action at a global and local level calls for a just transition to renewable sources of energy. To improve our habitat, it needs to stay and occupy the central stage in the energy sector. The unlimited potential of sources like solar also meets the future potential needs of human civilisation. With that being said, a multi-stakeholder approach is a must to achieve desired targets; electricity is a multi-faceted sector with both social and economic layers intertwined. The balance is to transit in a just and equitable manner. While generation has been making strides, the complementary infrastructure and conducive policy environment to land this generated capacity is behind demanding continuous fiscal interventions. Coordination among authorities at the central and state levels is a must for a smooth transition. Policy measures aiding the adoption of Green energy open access by both DISCOMs and eligible consumers is the need of the hour. In the long run, a contingency plan to ensure the financial viability of DISCOMs balanced with affordable energy rates is key for the nation’s sustainable economic development.

References

1. Baruah, R. (2024, April 9). No more extension for solar project timelines, Centre exceeds bid target for FY24: Bhalla | Mint. Mint. Retrieved April 11, 2024, from https://www.livemint.com/news/india/no-more-extension-for-solar-project-timelines-centre-exceeds-bid-target-for-fy24-bhalla-11712664408861.html#:~:text=In%20an%20interview%2C%20Bhupinder%20Singh,further%20from%20FY26%2C%20he%20said.

2. Divyansh Upadhyay. (2022, June 21). India’s MSMEs must pare emissions and climate finance may be the nudge they need. Down to Earth. Retrieved May 26, 2024, from https://www.downtoearth.org.in/energy/india-s-msmes-must-pare-emissions-and-climate-finance-may-be-the-nudge-they-need-83359#:~:text=But%20at%20the%20same%20time,(CSTEP)%20published%20in%202018.

3. Gupta, S. (2020, October 4). Greening MSMEs. The Indian Express. Retrieved April 16, 2024, from https://indianexpress.com/article/opinion/columns/economy-micro-small-and-medium-enterprises-unemployement-6702817/ 

4. International Energy Agency. (2022, March 1). Global Energy Review: CO2 emissions in 2021 – analysis - IEA. IEA. https://www.iea.org/reports/global-energy-review-co2-emissions-in-2021-2

5. JMK Research and Analytics. (2022). India’s Renewable energy Open Access market: Trends and outlook. In JMK Research and Analytics. JML Research and Analytics. Retrieved May 26, 2024, from https://jmkresearch.com/wp-content/uploads/2022/11/Indias-Renewable-Energy-Open-Access-Market_JMK.pdf

6. Ministry of Micro, Small and Medium Enterprises. (2023, August 7). Role of MSME Sector in the Country. Press Information Bureau. Retrieved May 26, 2024, from https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1946375

7. Ministry of New and Renewable Energy. (2022, September 9). Renewable Energy in India. Press Information Bureau of India. Retrieved April 11, 2024, from https://pib.gov.in/FeaturesDeatils.aspx?NoteId=151141&ModuleId%20=%202

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