The Gujarat Electricity Regulatory Commission (GERC) has ruled that wind power developers must share benefits from the sale of all types of carbon credits with Gujarat Urja Vikas Nigam (GUVNL) and not just credits from the Clean Development Mechanism (CDM).

Background

The case arose from power purchase agreements (PPA) signed in 2008 between Vayu (Project 1), (erstwhile BPL Vayu (Project I), a generating company, and GUVNL. The PPAs required the developer to share 25% of gross CDM benefits with GUVNL.

Initially, the developer’s projects were registered under the CDM, and it shared benefits as required. In 2019, the projects switched to the Verra voluntary carbon credit program.

The developer then argued it was no longer obligated to share these new carbon credit revenues, as the PPA only specified CDM benefits.

GUVNL contended that the intent was for generators to share benefits from all carbon credits, which reduce their costs. It noted the developer had previously shared voluntary credit unit (VCU) revenues before contesting the obligation.

Commission’s Analysis

The Commission rejected the developer’s argument that CDM and voluntary carbon credits like VCUs are distinct and should be treated differently.

The regulator directed the developer to continue sharing 25% of revenues from all credit sales with GUVNL per the PPA terms.

The Commission said the PPAs and tariff order intended to share benefits from all carbon credits, not just CDM.

While the PPAs specifically mention CDM, this should be interpreted to include benefits from all carbon credit mechanisms. All such mechanisms are essentially similar in providing environmental benefits through tradable credits.

The Commission also noted that the developer could not switch mechanisms to avoid sharing benefits intended to be passed on to consumers.

The regulatory body clarified that utilities could claim a share of revenues from newer voluntary carbon markets, not just the UN’s dominant CDM program when many wind PPAs were signed.

It emphasized that carbon credit revenues should benefit developers and consumers through tariff reductions, regardless of the specific crediting mechanism used.

Earlier, GERC allowed net metering for rooftop solar systems with a capacity of 1 kW and up to 1 MW. Gross metering was permitted for rooftop solar systems with 10 kW and up to 1 MW capacity.

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