Regulatory Hurdles and Financial Challenges in Wind Energy Development in Kerala

Posted On - 6 July, 2024 • By - King Stubb & Kasiva

Summary

The case of M/s Aluva Plastic Consortium Private Limited vs. Kerala State Electricity Board Limited (KSEBL) and others highlights the regulatory and financial challenges faced by wind energy developers in Kerala, India.[1] The petitioner, M/s Aluva Plastic Consortium Private Limited, sought to establish a 250kW wind turbine generator (WTG) for captive use and applied for connectivity with KSEBL. However, the company was met with a demand for infrastructure development charges (IDC) that it deemed excessive and contradictory to the state government’s policy on wind power development.

Case Timeline

  • 26.08.2019: The petitioner submitted an application for connectivity with KSEBL.
  • 16.12.2020: KSEBL demanded ₹52,53,505/- as IDC from the petitioner.
  • 14.12.2022: The petitioner filed a petition with the Kerala State Electricity Regulatory Commission (KSERC) seeking amendments to the KSERC (Connectivity and Intra-State Open Access) Regulations, 2013, and adherence to the state government’s policy on IDC.
  • 22.02.2023: A hearing was held in hybrid mode at the Commission’s Court Hall.
  • 05.06.2024: KSERC issued its order.

Issues Raised

The core issue revolved around the discrepancy between the KSERC regulations and the state government’s policy on IDC for wind power projects. The petitioner argued that KSEBL’s IDC demand was exorbitant and contravened the government’s policy, which capped IDC at ₹20 lakhs per MW or the actual expenditure, whichever was less. The petitioner also raised concerns about the lack of clarity and consistency in the regulatory framework for wind energy development in Kerala.

Appellant’s Arguments

  • The petitioner argued that KSEBL’s IDC demand was unjustified and did not align with the state government’s policy aimed at promoting wind power development.
  • The petitioner contended that the high IDC would discourage private investment in wind energy projects in Kerala.
  • The petitioner requested the KSERC to amend its regulations to harmonize them with the government’s policy and provide clarity to wind energy developers.

Respondent’s Arguments

  • KSEBL argued that its IDC calculation was in accordance with the existing KSERC regulations and that any deviation from these regulations would require a formal amendment process.
  • KSEBL asserted that limiting IDC to ₹20 lakhs per MW, as per the government’s policy, would shift the financial burden of infrastructure development onto ordinary consumers.
  • KSEBL contended that the petitioner’s request for amending the regulations through a petition was not legally tenable.

Order

The KSERC, in its order, acknowledged the discrepancy between its regulations and the state government’s policy on IDC. However, it rejected the petitioner’s request for an immediate amendment to the regulations, citing the need for a formal amendment process involving stakeholder consultations and public hearings. The Commission also directed a committee constituted by the state government to examine the issue of IDC recovery from wind power developers and propose a solution that balances the interests of developers and consumers.

Analysis

The case underscores the regulatory and financial hurdles faced by wind energy developers in Kerala. The lack of clarity and consistency in the regulatory framework, coupled with high IDC charges, can deter private investment in the sector. The KSERC’s decision, while legally sound, highlights the need for greater coordination between the regulatory body and the government to create a more conducive environment for wind energy development. The involvement of the committee to address the IDC issue is a positive step towards resolving this conflict and promoting a more sustainable and investor-friendly regulatory framework for wind energy in Kerala.

The case also raises broader questions about the balance between promoting renewable energy and protecting consumer interests. While incentivizing wind power development is crucial for achieving sustainability goals, it is equally important to ensure that the financial burden of infrastructure development is not unfairly passed on to consumers. The resolution of this case will likely have significant implications for the future of wind energy in Kerala and could serve as a precedent for similar regulatory challenges in other states.

[1] https://dev.erckerala.org/api/storage/orders/lZ484oiL3V3OgNswxngCtUbfLpx7aBzx5JouVDGO.pdf