This policy was prepared by the Ministry of Water and Power to mainstream renewable energy in the development plans of the country. The policy comprised of three phases: short, medium and long term. The short term policy of 2006 was supposed to be updated by a longer term policy by 2008; however, it was finally updated by the medium term policy (Alternative and Renewable Energy Policy 2011).
The short term policy:
i. Invites investment from the private sector for Independent Power Projects (IPPs), grid connected self-supply power projects, off-grid power projects.
ii. Obligates the Central Power Purchasing Agency (CPPA) to purchase the electricity from qualifying RE projects.
iii. Permits an investor to generate renewable electricity at one location and receive an equivalent elsewhere on the grid. The investor bears the cost of generation and transmission charges are applied.
iv. Allows net metering and billing with settlement on net basis.
v. Deregulates small scale power production from renewables (up to 5 MW for hydro and 1 MW for net metered sales) to reduce the transaction costs
vi. Lays down simplified and transparent principles of tariff determination.
vii. Protects the investors from resource variability risk, which is allocated to the power purchaser.
viii. Facilitates projects in obtaining carbon credits for avoided greenhouse gas emissions.
The Alternative and Renewable Energies covered by this policy include wind, solar and hydro (up to 50 MW). Biomass, biofuels and non-power related renewables are not covered by this policy.