India’s Gujarat Waives Renewable Targets for Utilities

Regulators in India’s Gujarat state waived clean-energy targets for power distribution companies in a blow to the country’s market for trading renewable credits.

State utility Gujarat Urja Vikas Nigam Ltd. and Ahmedabad-based Torrent Power Ltd. (TPW) had petitioned against a rule requiring them last fiscal year to source 7 percent of their power from renewable sources or buy credits over the power exchanges to fulfill the obligation.

Gujarat Electricity Regulatory Commission sided with the companies, saying enforcement of the rule would “unjustifiably burden” consumers with higher electricity prices, according to a copy of the order posted on the regulator’s website.

In 2011, India set up a market to allow power distributors, steelmakers and miners to purchase credits from wind, solar and hydropower plants to meet targets if they can’t source clean power locally. That market has struggled to take off, and credits are languishing at their floor price because authorities are failing to enforce targets, according to the State Bank of India.

“The order will set a bad precedent,” ReConnect Energy Solutions Pvt., an Indore-based trader of the credits, said in an e-mail to clients today. The decision by Gujarat, India’s third-largest state for renewable-power capacity, gives companies a “strong incentive” to ignore their targets in the current financial year, too, it said.

The glut of credits surged to a record last month, driving prices down to the minimum set by regulators of 1,500 rupees ($23) for biomass, hydro and wind allowances and 9,300 rupees for solar. Each credit represents 1 megawatt-hour of electricity fed into the grid.

To contact the reporter on this story: Natalie Obiko Pearson in Mumbai at npearson7@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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