Inter-Regulatory Collaboration | Key to achieve UN SDGs & a Success story of US & India
- Jan 6, 2021 5:42 am GMT
There is no development without fuelling the engine of growth. Energy is critical and people with no sustainable access to energy are deprived of the opportunity to become part of national and global progress.
The Regulatory Framework is the foundation for how all the decisions that affect utilities are made (including the setting of rates), as well as the predictability and consistency of decision-making provided by that foundation, as Moody’s says in its methodology for the sector.
Countries around the globe are implementing a diverse set of strategies to spur investment and increase renewable generation. According to the United Nations Environment Programme, regulatory levers like specific tariffs and auctions are key to driving progress toward broader targets.
Regulatory reforms can open up new opportunities for businesses, improve the health and safety of a country’s citizens and facilitate greater connections within a region.
At a time when meeting clean energy targets has become critical, cooperation between various electricity regulators has become even more essential to drive meaningful change in their energy sectors.
India & The United States
Energy has always been at the core of the bilateral conversations and the relationship between US and India.
Like India, the U.S. electricity regulatory system has a federalist division of powers that is rooted in law.
The U.S. electricity sector has always been organizationally complex and highly fragmented, with numerous actors and a diverse mix of private and public ownership.
Similarly, India electricity sector has a broad range of central government agencies, state authorities, system operators and utilities and a mix of private and public ownership.
Regulatory Collaboration between India & The Unites States
In India, the Central Electricity Regulatory Commission (CERC) intends to promote competition, efficiency and economy in bulk power markets, improve the quality of supply, promote investments and advise government on the removal of institutional barriers to bridge the demand supply gap and thus foster the interests of consumers.
While in the United States of America, the Federal Energy Regulatory Commission, or FERC, is an independent agency that regulates the interstate transmission of electricity, natural gas, and oil.
The independent regulation has been for long in the United States as compared to India, where it came into force from 1998. The regulatory collaboration between India and the US has a long history of more than two decades starting in 1999. In fact, the Memorandum of Understanding signed between DERC & CERC in 1999 was the first time that FERC has entered into a partnership with any commission in the world.
With the latest cabinet approval from the Indian Government for Central Electricity Regulatory Commission's (CERC) proposal to enter into a Memorandum of Understanding (MoU) with the Federal Energy Regulatory Commission (FERC), USA to exchange information and experiences in the electricity sectors; this sets way ahead to effectively pursue the renewable energy targets, redesigning markets & transforming the energy sector.
The activities under this MoU include, but are not limited, to the following:
1. Identify energy-related issues and develop topics and possible agendas for the exchange of information and regulatory practices in areas of mutual interest;
2. Organize visits by Commissioners and/or staff to participate in activities at each other’s facilities;
3. Participate in seminars, visit, and exchanges;
4. Develop programs of mutual interests and where appropriate hold these programs locally to enhance participation;
5. When practical and of mutual interest, provide speakers on energy issues and other personnel (management or technical).
What it means today for India?
India’s electricity security has improved remarkably through the creation of a single national power system and major investments in renewable capacity. India’s power system is currently experiencing a major shift to higher shares of variable renewable energy, which is making system integration and flexibility priority issues.
The Government of India has supported greater interconnections across the country and now requires the existing coal fleet to operate more flexibly. It is also promoting affordable battery storage.
Further, India has been continuously pursuing market opening by allowing private sector investment in energy markets and greater use of market-based solutions through ambitious energy sector reforms. A country-wide wholesale market is very much needed as a backbone for the national grid.
On the other hand, US has two decades of experience with capacity markets, energy markets, markets for ancillary services and have seen the benefits first-hand in the US of competitive markets.
In the United States, for example, the Federal Energy Regulatory Commission (FERC) issued Order 841 in February 2018, which directs independent system operators and regional transmission organisations to open wholesale energy, ancillary services and capacity markets to energy storage resources (FERC, 2018)
Recently, the Federal Energy Regulatory Commission (FERC) approved a ruling, Order No. 2222: Participation of Distributed Energy Resource Aggregations in Markets Operated by Regional Transmission Organizations and Independent System Operators, that enables distributed energy resource (DER) aggregators to compete in regional wholesale energy markets.
Integrating aggregated DERs in wholesale energy markets is ultimately intended to reduce consumer costs, increase electric reliability, and pave the way for innovation.
Also, this landmark ruling will create a myriad of new revenue opportunities for owners of solar, batteries, EVs, and other DERs. Their participation in energy markets will, in turn, support a smarter, more dynamic grid that can help utilities keep up with ever-increasing energy demands.
Experience of United States and other parts of the world including Canada, Australia etc., shows that a shift to more liquid and short-term markets with shorter gate closure periods helps foster the optimal dispatch and trading of renewable electricity and allow efficient use of all power system resources. And, India is moving in this direction.
The proposed Memorandum of Understanding (MoU) between FERC & CERC will open up knowledge sharing with its counterpart in US that has already witnessed the first-hand benefits of the competitive markets.
In the words of US FERC’s Chairman Neil Chatterjee, CERC can benefit from the US experience on competitive markets.
“The CERC is our counterpart at the US FERC and they are looking to learn from US about how to set up competitive wholesale electricity markets. We in the US have two decades of experience with capacity markets, energy markets, markets for ancillary services and we are working very closely with our Indian counterparts because we have seen the benefits first-hand in the US of competitive markets and believe that our allies in India can benefit from the US experience,”
They are allies and the US being an alternative market for India is beneficial to both countries geopolitically, and there is also positive environmental benefit.”
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