I
Policies for Promotion of Renewable Energy
Sources for Restructured Power Sector
Randhir Singh,
Abstract-Global electricity demand is expected to increase
considerably during the next decade at the same time
environmental pollution is also increasing with the development
of conventional energy source. Every country intends to meet the
additional demand of energy in part by renewable energy
sources (RES). To meet the global energy demand various
support schemes and policies for promotion of renewable energy
sources in restructured power sector are discussed in this paper.
These Support policies for renewable energies encourage the
economic viability of electrical power generation from renewable
energy sources. These policies reduce one or more key barriers
in the development path of renewable energy. The paper takes a
closer look at the regulatory policies for the promotion of
electricity generation from renewable energy sources, which are
currentiy at the center of global discussion
Index Terms-Congestion management, Electricity, renewable
policy, renewable energy sources (RES), restructured power
sector.
I. INTRODUCTION
and
D U RING the nineties decade, many electric utilities
power network companies world-wide have been forced
to change their way of operation and business, from vertically
integrated mechanisms to open market systems [1]. The goal
of this change is to enhance competition and bring consumer's
new choices and economic benefits. Under Deregulation, the
formal vertically integrated utility, which performed all the
functions involved in power generation, transmission, and
distribution, is disintegrated [2]. Congestion is a term that has
come to power systems from economics in conjunction with
deregulation. Line outages or higher load demands are the
cause of congestion in the transmission network [3].
Increasing demand of electricity in spite of fix generation is
also the cause of congestion in power market. So to meet this
increase demand of electricity and to short congestion
problem in general we have to consider various renewable
energy sources as distributed generation [4]. For inclusion of
these renewable energy sources in competitive electricity
market various countries have to adopt various support
schemes and policies to promote renewable energy sources in
their restructured power sector.Among these policies
Randhir Singh is Research Scholar in Electrical Engineering Department
at NIT, Hamirpur (India) (e-mail: randhirsoni~gmnail.com).
Dr. Yog Raj Sood is Professor in Electrical Engineering Department at
NIT, Hamnirpur (India) (e-mail: yrsood~gmail.com).
Y.R.Sood
Renewable Portfolio Standards (RPS) are state policies
mandating a state to generate a percent of its electricity from
renewable source. Each state has a choice of how to fulfill this
mandate using a combination of renewable energy sources,
including wind, solar, biomass, geothermal, or other
renewable sources [5]. The Green Electricity Pricing within
policy Supply Company and utility, offer electricity from
renewable sources at special tariffs. Generally these are at
enhanced price to cover increase generation cost by giving
customers the opportunity to choose the "brand" of electricity
according to willingness to pay. Feed- in Laws is also the
most important method for determining where, when, and how
much renewable generating capacity will be installed [8].
Investment support policy involves direct financial subsidies
for building renewable energy generating capacity [10].
Similarly various other policies such as fiscal and financial
measure, competitive bid renewable resources obligation, cost
reduction policy and emission trading policy is also the key
driver for promotion of renewable energy sources in
restructured power sector [ 11- 14]. Renewable energy targets,
transport biofuels, emissions trading, market infrastructure
policies are also including in renewable energy development
policies [15-17] under restructured power sector.
II. CONGESTION MANAGEMENT
When the producers and consumers of electric energy
desire to produce and consume in amounts that would cause
the transmission system to operate at or beyond one or more
transfer limits, the system is said to be congested.
Transmission congestion occurs when there is insufficient
transmission capacity to simultaneously accommodate all
requests for transmission service within a region. Congestion
is a consequence of network constraints characterizing a finite
network capacity that precludes the simultaneous delivery of
power from an associated set of power transaction. Line
outages or higher load demands are the cause of congestion in
the transmission network. Congestion is a term that has come
to power systems from economics in conjunction with
deregulation, although congestion was present on power
systems before deregulation. Then, vertically integrated
utilities managed this condition by constraining the economic
dispatch of generators with the objective of ensuring security
and reliability of their own and/or neighboring systems in
terms of steady-state security, and the basic objective was to
control generator output so that the system remained secure

(no limits were violated) at the lowest cost. When dealing
with power flow within its operating area the vertically
integrated utility, controlled both generation and transmission,
gained economically from lower generation costs, and was
responsible for the consequences and expected costs, when
less secure operation resulted in power outages. In the pre
deregulation power system, most energy sales were between
adjacent utilities. The transaction would not go forward unless
each utility agreed that it was in their best interests for both
economy and security [1]. In the deregulated power system,
the challenge of congestion management for the transmission
system operator is to create a set of rules that ensure sufficient
control over producers and consumers (generators and loads)
to maintain an acceptable level of power system security and
reliability in both the short term (real-time operations) and the
long term (transmission and generation construction) while
maximizing market efficiency. The rules must be robust,
because there will be many aggressive entities seeking to
exploit congestion to create market power and increased
profits for themselves at the expense of market efficiency so
that rules should also be fair, transparent and clear to all
participants in power market. The form of congestion
management is dependent on the form of the energy market,
and congestion management itself cannot be separated from
market considerations. Congestion management schemes used
today have negative impacts on energy markets, such as
disruptions and monetary penalties, under some conditions.
To mitigate these concerns various congestion management
methods exist in literature, including re-dispatch and
curtailment of scheduled energy transmission. In the
restructured electric energy industry environment, new
congestion management approaches are being to be
developed, that strive to achieve the desired degree of
reliability while taking the consideration of renewable energy
sources in the bulk power market [1] [2]. Increasing demand
of electricity in spite of fix generation is also the cause of
congestion in power market. So to meet this increase demand
of electricity and to short congestion problem in general we
have to consider various renewable energy sources as
distributed generation.
III. NEED OF RENEWABLE ENERGY SOURCE IN CompEmrrIVE
ELECTRIicrY MARKET
Renewable energy sources include water, wind, solar,
geothermal, and some combustible materials, such as landfill
gas, municipal solid waste (MSW), and other forms of
2
electric power industry will encourage utilities to become
more efficient and reduce costs in order to lower electricity
prices. There will be a premium on short-term cost
minimlization. In this environment, renewable energy sources
will be challenged to continue to penetrate electric power
markets because they are generally higher-cost options for
producing electricity.
Restructuring of the all-electric power industry has
refocused attention on renewable energy and the policies that
affect it in competitive electricity markets. Public policies
favoring renewable energy are nothing new. Policies
including tax and financial incentives and guaranteed
purchase power contracts, among others have supported the
development of renewable energy in the past also. Such
policies have sought to develop a sustainable energy future,
reduce dependence on fissile fuel, and reduce the
environmental impacts of fossil-fueled electricity generation.
The development of renewable energy, which reduces
dependence on fossil fuels, does not need to be imported, and
generally produces fewer and less toxic pollutants than fossil
fuels [3].
IV. ISSUES OF TRANSMISSIO TARIFFS FOR RENEWABLE
ENERGY TECHNOLOGY IN COMPEmiTvE ELECTRIiTrY
MARKET
The issues of tariffs for transmission access and services
are coming when the power industries changes from regulated
to competitive environment. The structure of the transmission
tariff will determine the allocation of transmission costs to the
users of the transmission system, and ultimately, to the
respective consumers. The structure of the transmission tariff
can impact the prices of transmission for different generation
technologies and energy sources, which could affect the
economics of these technologies. The transmission tariff is so
designed to recover both the marginal and fixed costs of the
transmission system. The marginal cost of transmission for
completing any given power transfer, including losses,
ancillary services (i.e., capacity reserves) and any congestion
cost, is typically a small fraction of the embedded cost is
included in transmission tariffs. The transmission tariff also
sets prices well above the marginal cost to recover the fixed
cost of the transmission system. The methodology used to
recover fixed costs (in excess of marginal cost) can impact the
price of electricity, thereby potentially affecting competition
among generation suppliers, which will include the renewable
energy technology now [4].

plans that can enhance opportunities for various renewable
energy technologies.
These policy tools are discussed briefly as restructuring
programs in some states include, Renewable Energy Trust
Funds (RETs) to be used for renewable energy programs
desired by the public. These funds are financed through a
System Benefit Charge, which is a small extra charge for
electricity used that is collected from all energy customers. In
addition to this measures which promote the development of
renewable technologies, several other legislative tools have
been used by various state governments to make renewable
energy affordable to consumers. Some states have instituted
Tax Incentives which include exemption from sales taxes on
expensive renewable energy systems. The other various
policies worldwide to promote the development of renewable
energy technologies in restructured power sector are also
discussed below.
A. Renewabke Portfolio Standard
The Renewable Portfolio Standard (RPS) is a market-
driven policy that ensures a minimum amount of renewable
energy is included in the portfolio of electricity resources of
the licensed electricity suppliers serving a state or country
.One mechanism for using competitive markets to attain an
appropriate reliance on renewable resources in the fuel-mix,
used to generate electricity is called the "Renewables
Portfolio Standard" (RPS). The RPS approach applies a
resource diversity standard to all retail electric service
suppliers. It relies on flexible, market implementation of this
standard to obtain compliance at least cost. Specifically, all
retail suppliers are required to possess a minimum percentage
of renewable energy resources within their overall resource
portfolio. A government or a grid system determines the
percentage after considering its environmental and resource
diversity goals and the availability and cost of renewable
resources. Suppliers could meet the standard by owning
renewable energy projects, or purchasing renewable energy
on the wholesale market. [5]
B. Net Metering Policy
Several states have instituted net metering policies to
promote renewable energy sources in competitive electricity
market which require a utility to purchase any excess
electricity produced by small generators, such as a PV system,
at retail cost rather than wholesale cost. By net metering the
customer will only be billed for the net amount of electricity
used .Net metering programs serve as an important incentive
3
"bank" their energy and use it a different time than it is
produced giving customers more flexibility and allowing them
to maximize the value of their production. Providers may also
benefit from net metering because when customers are
producing electricity during peak periods, the system load
factor is improved [6].
C. Renewable energy (green) certificate
A Green Certificate also known as Renewable Energy
Certificates (RECs) is a tradable commodity proving that
certain electricity is generated using renewable energy
sources. Typically one certificate represents generation of 1
Mega-watt- hour of electricity. This may definied as
"renewable" varies from certificate trading scheme to trading
scheme. Renewable energy certificates (RECs), also known as
green certificates, green tags, or tradable renewable
certificates, represent the environmental attributes of the
power produced from renewable energy projects and are sold
separate from commodity electricity. Renewable energy
(green) certificates are emerging as a way for utilities and
customers to trade renewable energy production and/or
consumption credits in order to meet obligations under RPS
and similar policies. Standardized certificates provide
evidence of renewable energy production, and are coupled
with institutions and rules for trading that separate out
"renewable energy attributes"' from the associated physical
energy. This enables a "paper" market for renewable energy
to be created independent of actual electricity sales and flows.
Green certificate trading is gaining ground in the UK,
Belgium, Denmark, Australia, and the United States. Europe
embarked upon a "test phase" of an EU-wide renewable
energy certificate trading system during 2001 and 2002 [7].
D. Electricityfeed- in law
Electricity Feed-in Laws is also known as Advanced
Renewable Tariffs (ARTs), are the world's most successful
policy mechanism for stimulating the rapid development of
renewable energy. Feed- in Laws is also the most important
method for determining where, when, and how much
renewable generating capacity will be installed. Renewable
Tariffs enable homeowners, farmers, and cooperatives to
participate on an equal footing with large commercial
developers of renewable energy.
Electricity Feed Laws permit the interconnection of
renewable sources of electricity with the electric-utility
network and at the same time specify how much the
renewable generator is paid for their electricity. Advanced

E. Public benefit funds
In the United States, public funds for renewable energy
development are raised through a "system benefits charge,""
which is a per-kWh levy on electric power consumption.
Similar levies exist in some European countries for fossil-
fuel-based generation. The fuinds collected in this manner
serve a variety of purposes, such as subsidizing the cost
difference between renewable and traditional generating
facilities, reducing the cost of loans for renewable facilities,
providing energy efficiency services, funding public energy
education, providing low-income energy assistance, and
supporting research and development.[9]
F. Investment Support
This policy involves direct financial subsidies for building
renewable energy generating capacity. It is a measure that
stimulates the supply side and can easily be tailored to
encourage particular forms of renewable energy in line with
national and regional policies. An important aspect of support
schemes is their treatment of external costs. External costs,
also known as '-externalities', are those financial, social and
economic costs that are not included in the price that
consumer pays, for example the health and environmental
costs of pollution from a fossil-fuel power station. These costs
are not included in the consumer's electricity bill, but they are
real costs and must be paid - usually by society at large
through providing health services, cleaning buildings and
fighting the effects of climate change. The Community
guidelines on State aid for environmental protection allow
Member States to start to internalize these external costs [10].
G. Fiscalandfinancialmeasures
In the fiscal and financial policy the facilities available in
the states include wheeling, banking, attractive buy-back rate
and facility for third party sale among others. In order to
accelerate development of renewable power in the country,
MNES are providing incentives for Tax reductions for green
electricity investments, production or consumption are simple
examples of fiscal measures to stimulate supply or demand.
Often this can take the form of exemption from 'eco-taxes' or
'carbon taxes' that are placed on fossil-fuel energy sources.
Financial measures can also include reduced interest rates on
loans, which lower the cost of investments and encourage new
renewable generating capacity [11 ].
H. Competitively bid renewable resource obligations
Before the introduction of the Renewables Obligation, the
4
fixed quantity of renewable power, with the lowest-price
bidder winning the contact. With each successive bidding
round (there were four total), bidders reduced prices relative
to the last round. The UK abandoned the NFFO approach
after the fourth round of bidding in 1997. Other countries with
similar competitively bid renewable resource mechanisms
have included Ireland, France, and Australia. [12][13]
IL Cost reductionpolicies
A number of policies are designed to provide incentives
for voluntary investments in renewable energy by reducing the
costs of such investments. These policies can be characterized
into five broad categories. Policies can: (1) reduce capital
costs up front (via subsidies and rebates); (2) reduce capital
costs after purchase (via tax relief); (3) offset costs through a
stream of payments based on power production (via
production tax credits); (4) provide concessionary loans and
other financial assistance, and (5) reduce capital and
installation costs through economies of bulk procurement.
Many examples of these policies exist in individual U.S.
states, several countries in Europe, India, and Thailand [14].
J. Market infrastructurepolicies
A variety of market-facilitation policies are used to build
and maintain renewable energy "market infrastructure"%-the
capabilities, institutions and rules which underlie a market-
including design standards, sating and permitting
requirements, equipment standards, and contractor education
and licensing. Policies may also require that market
participants have local on-the ground presence (or joint-
venture type requirements) [15].
K Transportbiofuels policies
Biofuels mandates and tax policies in Brazil, the United
States, and Europe have accelerating development of biofuels.
Biofuels mandates require a certain percentage of all liquid
transport fuels be derived from renewable resources. Tax
policies may provide tax credits or exemptions for production
or purchase of biofuels. Brazil has long mandated blending of
ethanol with all vehicle fuels sold in the country, as well as
the availability of pure ethanol fuels at service stations. India
has recently mandated blending in some states. The United
States has several policies, such as a federal ethanol tax credit
and an Iowa mandate that government vehicles use ethanol-
blended fuel. Many European countries utilize small amounts
of biodiesel blended with conventional diesel, and some, like
France and Italy, also provide tax incentives. Germany
 5

[17] Global Renewable Energy Markets and Policies, Forthcoming in New

guarantees that total C02 emissions within sectors covered
will remain below the targeted amount. ETS has caused an
extra cost to fossil fuels and has therefore improved
substantially the competitiveness of renewable energy sources
in electricity production [17].
M Renewabke energy targets
Several countries have adopted or proposing national
renewable energy targets. The European Union collectively
has adopted a target of 22% of total electricity generation
from renewables by 2010, with individual member states
having individual targets above or below that amount. Japan
has adopted a target of 3% of total primary energy by 2010.
Recent legislative proposals in the United States would
require 10% of electricity generation from renewables by
2020. China and India are the first developing countries to
propose renewable energy targets. India has proposed that by
2012, 10% of annual additions to power generation would be
from renewable energy; China has a similar goal of 5% by
2010. In addition, a group of countries from around the world
placed increased attention on renewable energy targets [ 17].
VI. CONCLUSION
This paper gives the comparative overview of all existing
regulatory policies for the promotion of electricity generation
from renewable energy sources that are either implemented or
in the process of implementation. This will be a great help for
developer as well as researchers in this important field of
power sector.
Academy Review special edition on climate change, Spring 2004,
http://www.martinot.info
VIII.BIOGRAPHIES
Randhir Singh was born in Yamuna Nagar
(Haryana), India. He obtained his B.Tech in
* Electrical Engineering from Kurukshetra University
Kurukshetra and M.Tech in Electrical Engineering
(Power System) from NIT, Kurukshetra Haryana
(India) in 2002 and 2005 respectively. Presently he
is pursuing his Ph.D in Electrical Engineering
Department at NIT, Harnirpur. His interest
~'researches are Energy management, Renewable
energy Sources, Deregulation of power sector.
Dr. Yog Raj Sood obtained his B.Sc degree from
P.U. Chandigarh in 1980. He received his B.E.
degree in Electrical Engineering with "Honours" and
M.E. in Power System from Punjab Engineering
College Chandigarh (U.T.), in 1984 and 1987
respectively. He has obtained his Ph.D. from Indian
Institute of Technology, Roorkee in 2003. He joined
Regional Engineering College Kurukshetra in 1986.
Presently he is Professor in the Electrical
Engineering Department of National Institute of Technology, Hamirpur
(H.P.), India.
He has published a number of research papers. He has been awarded "The
Union Ministry of Energy- department of Power Prize" for publication of
one of his research paper in the journal of the Institution of Engineers
(India). His research interests are in the area of computer applications to
power system, wheeling, deregulation, open access transmission system,
power network optimization, high voltage engineering and non-conventional
sources of energy.

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[3] Challenges of Electric Power Industry Restructuring for Fuel Suppliers
September 1998, http://www.eia.doe.gov
[4] Lanry Prete,,"Transmission Pricing Issues for Electricity Generation
from Renewable Resources", Energy Information Administration!
Renewable Energy Annual 1998 Issues and Trends,
http://tonto.eia.doe.gov.
[5] Renewables portfolio standards, http://www.crest.org/rps/index.html
[6] Net Metering Programs, NREL Topical Issues Brief 1996,
http://www.eere.energy.gov.
[7] Green Certificates, http://en.wikipedia.org/wiki/Green-certificate
[8] Electricity, Electricity Feed Laws, Feed-in Tariffs, and Advanced
Renewable Tariffs, http://www.wind-works.org
[9] Public Benefits Funds for Renewable Energy, http://www.dsireusa.org
[10]Annovaive inancng for renepwable energy development,