Concerns Regarding Fossil-Fuel-Based Power Trading

Background:

Under evolving regulatory norms, Gujarat has begun leveraging its surplus generation capacity to trade power via national electricity exchanges. This mechanism allows states to cater to energy-deficit regions, encouraging market-based electricity allocation. While this offers economic and operational efficiency, there is a growing concern regarding its environmental and climate implications—particularly in the context of India’s Nationally Determined Contributions (NDCs) under the Paris Agreement.

Concerns:

1. It has been observed that the excess power being sold via exchanges is predominantly from fossil-fuel-based (coal & gas based) power plants. This raises a critical concern:

2. Are we inadvertently increasing national Green House Gas emissions by supporting fossil-heavy power exports through the exchange platform?

3. While Gujarat’s capacity addition and grid strength are commendable, the practice of maximizing generation from thermal/ gas based plants for the sole purpose of trade may conflict with national climate objectives.

India’s NDC Commitments – A Brief Overview

As per India’s updated NDC (August 2022), the country has committed to:

• Reduce emissions intensity of GDP by 45% (from 2005 levels) by 2030.
• Achieve 50% cumulative electric power capacity from non-fossil fuel sources by 2030.

India has already met its earlier target of 40% non-fossil installed capacity and has commendably revised the target upwards to 50%. However, the emissions intensity target remains a critical metric that can be jeopardized if unregulated fossil-fuel-based generation continues to grow.

Key Risks Identified:

1. Increased GHG Emissions:

Fossil-based power trading, if unchecked, will result in higher absolute emissions—especially if surplus generation is not capped or differentiated based on carbon intensity.

2. Deviation from NDC Goals:

Despite capacity milestones, the emissions trajectory could become incompatible with India’s stated climate path.

Recommendations for Consideration:

To ensure our state’s leadership in sustainability aligns with national objectives, the following regulatory or operational safeguards may be proposed:

1. Carbon-Intensity Based Regulation for Exchange-Eligible Power

Introduce mandatory tagging of power traded on exchanges based on carbon intensity and prioritize low-emission sources.

2. Cap on Fossil-Based Power Trading for Export

Set a threshold for surplus thermal power eligible for trading, encouraging optimal use of renewables for market-based sales.

3. Alignment with Carbon Market Framework

Prepare for integration with India's upcoming carbon credit trading system, ensuring fossil-based exports reflect true environmental costs.

4. Periodic GHG Impact Assessment

Institutionalize quarterly carbon accounting of traded electricity to assess the impact on emissions and guide corrective action.

Conclusion:

1. As we embrace market-led mechanisms in the energy sector, we must ensure that short-term commercial benefits do not come at the cost of long-term climate goals. A well-structured regulatory framework—aligned with India’s NDC—is essential to maintain Gujarat’s role as a progressive and responsible energy leader.
2. A dialogue with the State Energy Department, GERC, and CERC may be initiated to explore the above safeguards and promote carbon-conscious power trading.