Clean Energy

Clean Energy: Issue 2 of 2023

S&R Associates presents the second issue of its quarterly roundup series on clean energy. Here, we cover the period between the months of April and June, 2023.
Broadly, this issue comprises regulatory updates on renewable energy and electric vehicles, respectively, including central and state government notifications in this regard, India-related updates and international developments, as well as other miscellaneous items.
In addition, separate analyses with respect to the newly introduced carbon credit trading framework in India provide an overview of the country’s proposed carbon market. Lastly, we discuss the advisability of green hydrogen certification in India.


Navigating BRSR

Navigating BRSR: Concerns and Opportunities  

In February, SEBI released a consultation paper on disclosures, ratings, and investing related to ESG, pursuant to which an assurance-driven reporting regime based on key ESG attributes (“BRSR Core”) may be introduced soon.
BRSR Core is intended to represent a focused subset of the Business Responsibility and Sustainability Reporting (“BRSR”) framework, which SEBI had introduced in May 2021 as a voluntary disclosure regime in lieu of the erstwhile Business Responsibility Reporting (“BRR”) paradigm. The main motivation behind introducing the BRSR framework was to ensure quantitative, standardized disclosures on ESG-linked parameters. While until FY 21-22, the top 1,000 listed companies in India by market capitalization could make disclosures under this framework on a voluntary basis, such disclosures are compulsory from FY 22-23.
This article provides an overview of category-wise BRSR compliance requirements.  Further, it highlights some of the benefits and opportunities, along with potential legal risks, associated with such disclosures. The article also discusses some of the concerns and innovations related to the BRSR Core framework, including in light of SEBI’s proposals with respect to adjusting intensity ratios for country-level purchasing power parity and extending disclosure requirements to corporate supply chains.


Carbon Market

Carbon Market: Certification is the Missing Link in India’s Green Hydrogen Ambitions

Given India’s climate ambitions, a national transition to green hydrogen (“GH”) appears to be a pressing requirement. In August 2021, India announced the launch of its ‘National Hydrogen Mission’ (“NHM”) to scale up GH production. In February 2022, the Ministry of Power (“MoP”) announced the Green Hydrogen Policy (“GHP”) as the first tranche of instruments to bolster efforts in this direction. Among other elements, the GHP included an understanding that the renewable energy (“RE”) consumed for the production of GH will count towards renewable purchase obligations (“RPO”) of the consuming entity. This January, India’s Union Cabinet approved the National Green Hydrogen Mission (“NGHM”). In February, the Budget confirmed an outlay of almost INR 200 billion for NGHM. While the NGHM aims to develop policies for establishing a viable GH ecosystem, a framework of standards and regulations is expected to be formulated soon.
However, given the government’s accelerated focus on transforming India into a global GH hub, it is unfortunate that the country does not yet have a supporting framework with respect to hydrogen certification. The proposed deployment and uptake of Indian GH will depend on the widespread acceptance of instruments which guarantee its origin. In addition, such a framework can facilitate the trading of hydrogen as a commodity on national and international markets. While national certification processes must align with international markets, tracking systems will be necessary to trace attributes across the value chain, including for the purpose of creating transparency and boosting demand. Furthermore, a robust certification framework can increase investments in RE for the purpose of producing low-carbon hydrogen.
The GH value chain includes production, transportation, storage, and end-use. Each of these activities involves several underlying processes, every one of which requires the use of energy – thus leading to emissions. These emissions can vary depending on the material and technology used. Although color schemes are popular to characterize different types of hydrogen, color-coding by itself fails to provide meaningful details about associated emissions. For instance, even post-production, GH can be involved in significant emissions by the time it reaches an end-use facility, especially if the energy required for constituent processes is not fully supplied through renewable sources.
While RE certificates (“RECs”) help consumers identify the renewable attributes of the energy purchased/used, being able to have the origin credibly certified enables them to make claims about a certain volume of RE generated. For the purpose of GH certification, in addition to RECs, India could draw on tracking templates for other energy products (e.g., biofuels). Further, given that hydrogen is not a primary source of energy (only a carrier), creating a proper link between GH certificates and RECs will be important. Such linkage is additionally necessary to avoid double-counting. Nevertheless, since GH markets are still at a nascent stage, a transitional period could be allowed during which the electrolyzers used to produce GH are enabled to utilize power from existing renewable plants, backed by RECs.


Green buildings

Green Buildings and Energy Efficiency: The India Story  

The global pivot on sustainable development has revitalized preferences among both occupiers and developers for certified green commercial buildings. Given emerging ESG trends, most MNCs looking to lease or set up offices in India are keen to occupy premises with green and/or sustainability ratings. This trend has created significant demand for commercial assets with energy-efficient ratings, which in turn has incentivized developers to upgrade and shift focus towards green buildings. Concomitantly, green financing may be on the rise, as domestic and offshore investors seek high-quality Grade A projects that are sustainable and ESG compliant. As part of their short-term ESG goals, listed developers may want to increase their green portfolio by the end of the decade, along with ramping up renewable energy deployment.
In this situation, it is useful to examine the cost of pursuing such green goals, given the existing housing demand in India in terms of both residential buildings and Grade A commercial/industrial assets.  Emerging evidence suggests that green buildings are a higher-value, lower-risk asset than standard structures. Local developers are increasingly realizing that additional capital expenditure incurred upfront is likely to be offset by significant savings over the long term on operational costs.
The Energy Conservation (Amendment) Act, 2022 (“EC Amendment”) has included large residential buildings under its regulatory regime, along with enhancing the scope of the Energy Conservation Building Code (“ECBC”). Further, the EC Amendment has introduced the idea of sustainability, where a new building code related to energy conservation will provide norms for the use of renewable sources and green buildings. While the ECBC applies to a specified category of commercial buildings only, the new code will apply to office and residential buildings as well. Nevertheless, future digitalization may expand opportunities further. The diffusion of internet-connected devices in the residential and commercial sectors may allow added integration across demand and supply, such as by meeting India’s large-scale tri-generation requirements (cooling, heating, and power) through smart cities and district energy systems involving ‘cooling as a service’ (CaaS).


India’s Debut Sovereign Green Issuance

Building Bonds: The Mechanics of India’s Debut Sovereign Green Issuance

India’s debut issuance of sovereign green bonds by auction provides a significant opportunity to ascertain the current market appetite for such sustainability-linked initiatives, including among institutional investors. Indeed, such bonds have been successful in the past in the context of an eclectic set of sovereign issuances. Among other things, standards established by such issuance may lead to welcome improvements in the Indian bond market in general terms. For instance, Indian companies may want to ride on enhanced credibility standards, as applicable, and seek to better address persistent concerns related to greenwashing. Such broad advantages notwithstanding, in this piece, we look at some of the finer details related to India’s debut sovereign green bond issuance.


Indian Renewables

How Green is Your Money? Capitalizing on Indian Renewables

Consistent with India’s ambitious climate-related targets, significant investments are being made in the domestic renewable energy sector, driven largely by private sector activity. Acquisitions and bonds represent a large portion of this capital, along with foreign equity, traditional loans, and mezzanine financing. Enabled by an encouraging FDI regime as well as locally-targeted regulatory schemes – such as incentives introduced by the government to bolster domestic capacity and manufacturing – self-sufficiency and foreign capital now constitute an integrated ecosystem. Along with conventional means of financing, newer frameworks such as infrastructure investment trusts specifically set up in the renewables space could be better explored in the future, especially in light of the urgency with which India needs to catch up towards its climate targets. Legislative changes in respect of the power markets – such as those related to trading in renewable energy certificates (RECs) – may also be curated by appropriate regulatory bodies to expand upon existing revenue streams.


overseas investment regime in india

New Overseas Investments Regime in India

On August 22, 2022, the Government of India notified the new regime for overseas investments by Indian entities and individuals. The new regime is a mixed bag of liberalizations, new restrictions and clarifications, and signals the revised thinking of the Reserve Bank of India in certain respects, particularly in relation to the scope of overseas investments and round tripping. This note discusses the changes introduced by the new regime and its impact on cross border transactions.


insolvency resolution

Pre-pack Resolution Route Needs Incentives

The recent amendment to the Insolvency and Bankruptcy Code, 2016 (“IBC”) replaces an ordinance promulgated earlier this year, and provides for a pre-packaged insolvency resolution process (“PIRP”) for micro, small and medium enterprises (“MSMEs”). The PIRP comes in the backdrop of the financial stress caused by COVID-19 and aims to cause minimal disruption to business and to ensure job preservation. While the PIRP is well intended, how effective it will be in resolving stress on corporate debtors in the MSME sector will come down to how it is implemented and if required, fine tuning its design.


Does the Prevention of Money Laundering Act, 2002 Safeguard Third-party Rights in the Course of Attachment of Properties?

A key feature of the Prevention of Money Laundering Act, 2002 (the “Act”) is the power of the investigating agency under the Act, i.e., the Directorate of Enforcement (the “ED”), to provisionally attach any property believed to be involved in money laundering for an initial period up to 180 days from the date of such attachment. This provision ensures that proceeds that are obtained directly or indirectly from the offences noted under the Act (“scheduled offences”) are not dealt with in any manner so as to frustrate proceedings relating to the confiscation of such proceeds under the Act. Ex facie, this provision appears to be in direct conflict with the rights of bona fide third-parties such as banks, mortgagees, transferee, and lessee etc. who may otherwise have a lawful interest in a property alleged to be involved in money laundering and had no knowledge of such involvement at the time of acquisition of interest in such property. In light of this apparent conflict, does the Act adequately safeguard the rights of such third-parties who have a lawful interest in a property provisionally attached by the ED?


national company law tribunal

Residuary Jurisdiction of the National Company Law Tribunal under Section 60(5) of the Insolvency and Bankruptcy Code, 2016: A Brief Analysis

Pursuant to Section 60(5) of the Insolvency and Bankruptcy Code, 2016 the National Company Law Tribunal is bestowed with wide jurisdiction to decide: (i) ‘any’ application or proceeding against a corporate debtor; (ii) ‘any’ claim made by or against a corporate debtor including claims by or against its subsidiaries; and (iii) ‘any’ questions of priority or ‘any’ question of law or facts, arising out of or in relation to insolvency resolution or liquidation proceedings of the corporate debtor.  Are there any limits to such jurisdiction of the National Company Law Tribunal?