Reduction in carbon footprint by sourcing Wind Energy through Open Access

Posted on December 21, 2012 by


Wind energy is the predominant type of renewable energy in India, comprising 70% of the total installed renewable energy capacity in the country (approximately 18,000 MW out of 26,000 MW; source: Government of India, Ministry of New and Renewable Energy). Electricity generated from wind energy sources is sold to State Utilities, consumed for own use by investors or sold to third party consumers. In all these cases, the electricity generated in the remote wind farm is wheeled to the consumption point through the electricity grid owned by the State. In the last two cases, consumers pay “open access” charges i.e. charges for using the State’s grid. This mechanism is allowed in many states of India as per respective Electricity Regulatory Commissions (ERC).

Figure: Wheeling electricity from wind farm to consumption point through Open Access

Figure: Wheeling electricity from wind farm to consumption point through Open Access

The energy generated by the wind farm is therefore indirectly consumed at the Organizations’ premises. The State Utility accounts for it by measuring the amount of electricity injected by the wind farm into its grid and deducting the same from the bill charged by it to the Factory.

Electricity consumed by the factory is considered zero emission for the following reasons –

(1) Electricity generated by wind farms avoids consumption that would otherwise have been produced by power plants that would emit carbon due to use of fossil fuel. This is the basis for the Clean Development Mechanism supervised by the UNFCCC.  There are two broad alternatives for wind farm developers to commercialize electricity generated by their wind farms – these are discussed in the cases below.

Case 1 (Sale to distribution company): In case the wind farm developer sells the electricity to the State Utility and the Factory purchases this electricity from the Utility, there would have been two separate purchase agreements in force. Agreement 1 would be between the Utility and Developer for purchase of wind energy. Agreement 2 would be between organization and Utility for purchase of electricity. In this case Utility gets full credit for the carbon emissions avoided by the wind farm as it has paid preferential tariff directly to the wind farm developer. This credit reduces the overall grid emission factor. Consumers (organization) would benefit only to the extent that the grid emission factor is reduced due to purchase of wind energy by the Utility.

Case 2 (Purchase through open access): The purchase agreement is between the Organization and the Wind Farm developer. Organization directly pays the wind farm developer a mutually agreed price higher than that what is available to grid power.This allows the Factory to take full credit of the electricity generated by the wind farm as well as its green attributes. This is because in this case, distribution company will not be able to claim credit for this energy as it is just acting as a third party providing service of transmitting energy from one point to other.  The wind farm is in effect a captive power plant. The electricity generated by the wind farm does not contribute to reduction in grid emission factor as the grid is used only to wheel the energy from point of generation to point of consumption. The grid in this case, therefore acts only as a transmitting medium and a bank for the electricity generated by the wind farm.

(2) The Central Electricity Regulatory Commission (CERC) and the respective State Electricity Regulatory Commission (ERC) introduced The Renewable Purchase Obligation introduced in India. These Regulations mandate defined categories of consumers to buy part of their electricity from renewable energy sources. The CERC has also introduced the Renewable Energy Certificate (REC) market in India. An REC represents the green attribute of the electricity generated from renewable energy sources. The REC mechanism allows RE generators to sell the electricity and the green attributes separately. The CERC allows such obligated entities to fulfill their obligation by buying RECs from designated power exchanges. The CERC also allows obligated entities to fulfill their obligations by consuming electricity from grid connected captive renewable energy power plants as long as they do not commercialize the green attributes of the electricity so generated in the form of RECs. If the seller of wind energy has agreed to not taking credit for the green attribute of wind energy generated from his wind farm in the form of RECs or any other form of carbon credits, the wheeled energy to the organization will remain green energy. Therefore, the organization will be entitled to take credit for green attributes of all the electricity it purchases from its seller.

Sourcing green energy is the best available option to reduce scope 2 carbon emission. Many companies/organizations in India have started opting renewable energy as a part of their sustainability initiatives and also for secured energy supply.

Interested in sourcing renewable energy for your factory/offices or other purposes, please contact us at shailesh@agneya.in.

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