Coal tax may fund new transmission lines for green energy plants

The government may use money raised from a tax on coal producers to fund new transmission lines that would help distribute power from clean energy projects.

A proposal is being prepared for the finance ministry to distribute the money to States  expecting significant amounts of renewable
energy capacity that don’t have the infrastructure to utilise the power that will  be generated, said Pramod Deo, chairman
of the Central Electricity Regulatory Commission.

“It would provide viability funding to  those states” to extend their transmission  networks to solar power plants, wind farms and other  renewable projects  being built, Deo said on February 18 by telephone from New Delhi.

The lack  of a “robust” nationwide electricity grid is the biggest
problem facing renewable energy projects and could potentially freeze investments starting later this year in some regions, Himraj Dang, director of environmental investments at Olympus Capital Holdings Asia, a Hong Kong private equity firm, told a conference in New Delhi last week.

The coal tax, which took effect on July 1, is expected to raise `2,500 crore in the first year and will be used for clean energy projects, according to environment minister Jairam Ramesh.

Part of the coal fund may also be allocated to states to encourage them to set higher renewable targets for themselves, Deo said.

State regulators require distribution utilities and large industrial companies producing their own power to source 0.8% to 14% of their supplies from renewable sources.

States lacking wind or solar potential should be given financial incentives to make those targets more ambitious, Deo said. Bloomberg