The government might ask RBI to classify renewable energy projects under priority sector lending

The Ministry of New and Renewable Energy (MNRE) is expected to write to RBI seeking to bring renewable energy projects under the priority sector lending. The development comes to light post there is stress seen in the conventional power sector which is negatively affecting the renewable energy sector and questions are raised by renewable energy project developers over lack of funds by banks.

At recent stakeholders meet, the Power Minister R.K. Singh talked about the matter.

“We are committed to remove the obstacles in the financing of renewable energy projects. We have taken inputs from different stakeholders. One suggestion was that priority lending should be done for renewable energy projects and without any limit.”

Currently, the rooftop solar projects are under the priority sector lending category, but the funding quantum is only 15 crores.

In the current scenario, the Non-performing assets (NPAs) in the thermal power sector are impacting investments in the renewable energy projects, disrupting the lending situation for the power sector completely including renewable projects.

Along with this, RE developers also face financial drawback with added cost due to safeguard duty implementation in the country and conflicting to that competitive tariffs with each auction announced. Developers at the meeting also raised issues regarding payment delays by distribution companies and their demand for 2-3% rebates on delayed payments.

HPPC asks SECI to allot solar capacity at fixed rate to fulfill its RPO target

HPPC petitioned to seek in-principle approval of the commission to purchase 250 MW of solar power from SECI under 2000 MW ISTS scheme. HPPC wished to purchase 250 MW of power from SECI at INR 2.93/kWh (excluding trading margin)  fixed rate for 25 years in order to meet the state’s solar RPO targets. The commission approved the petition and asked HPPC to deposit a filing fee of INR 2 Lakh. SECI has agreed to allot 100 MW solar project capacity to HPPC at 2.54/kWh (excluding the trading margin of INR 0.07 kWh) against the requisite of 250 MW.

The solar Power Purchase Obligation target till FY 2022 is as below:

Financial Year

Solar RPO (as a percentage of total consumption)
2013-14 0.10
2014-15 0.25
20 15-16 0.75
2016-17 1.00
20 17-18 1.25
20 18-19 1.50
20 19-20 2.00
2020-21 2.50
2021-22 3.00

The existing solar power capacity available with Haryana Discoms is 125.8 MW. As per the current contracted capacity, the potential energy consumption for FY 2018-19 is supposed to be 41906 MUs and similarly, the availability of solar power projects in the coming years along with the shortfall situation is as below:

Read the order here.

Andhra Pradesh Government asks the state discoms to accept full power from the wind developers

Andhra Pradesh Government has asked the state DISCOMs to take all the power the wind developers produce and further pay for it, irrespective of the Capacity Utilization Factor (CUF) of the developer’s project. In one of the state’s order regarding the feed-in-tariff for wind energy, the CUF was discovered at 23.5% for an average wind project. Post this, the state DISCOMs interpreted it as a directive to accept only the quantity of power a wind plant would generate it is was 23.5% and reject any additional power supplied. If the plant, produced more power by adopting efficiencies that led to a higher CUF, the DISCOMs would reject it.

After this development, the MNRE Secretary had written to the Principal Secretary in Andhra Pradesh’s Energy Ministry in December 2017 that “the generic tariff determined by the Andhra Pradesh Electricity Regulatory Commission (APERC) may have taken 23.5% CUF as average CUF in the state for wind power projects and therefore, it is likely that there may be certain sites where CUF is more than the average CUF”. Recently Mr.Jain (MNRE) wrote to the Andhra Pradesh Electricity Regulatory Commission (APERC), as well as all state discoms, that “in the view of Secretary, MNRE’s letter, discoms have to treat wind power as must-run stations and take the entire power from them without curtailment.”

Due to the previous announcement from the APERC, the developers had assumed that about 2,000 MW of projects which had been turned down by the state’s discoms would have turned into Non-Performing Assets.

Despite the letter, some people in the industry feel that the bigger problem is of ‘backdown’ – discoms’ refusal to take wind power at times citing non-availability of grid capacity which has gone unaddressed and the MNREs letter won’t be of much help to the developers.

Industry reacts to the 25% duty as the Supreme Court allows to impose the safeguard duty on imports.

It has been a roller-coaster ride for the Indian Solar Industry and developers when it comes to the safeguard duty implementation. Recently the Supreme Court of India in the matter of the safeguard duty to be levied on imported solar cells has allowed the Central Government to levy 25% safeguard duty on imported solar cells and follow the previously announced order accordingly. This announcement nullifies the earlier stay from the Orissa High Court on the duty.

For the import-dependent solar power developers, the Supreme Court order which will be effective retrospectively from July 30th, 2018 might cost approximately an extra INR 500 crore ($ 72 Million) for some 1,000 MW of solar modules imported between July 30 & now. The financial burden will slow down the aggregate 16,000 MW projects in the pipeline. However, the announcement is being appreciated by the domestic manufacturers who believe that this step will help the industry which is currently facing competition with Chinese & Malaysian modules which are 8-10% cheaper.

However, not all domestic manufacturers stand to gain from the order. It will hurt the local manufacturers based in special economic zones (SEZs), which currently accommodate 40% of 10 GW of solar module manufacturing units and 60% of the 3 GW cell production base.

“The aggressive bid tariffs from July 30 up to now, are a clear indication that the industry has already factored in the 25% safeguard duty. The new projects will not be gravely impacted; the big worry lies with the aggregate 16 GW solar projects in the pipeline”, Mr. Pranav Mehta, Founder Chairman, National Solar Energy Federation of India (NSEFI) and Chairman-elect Global Solar Council (GSC).

Post the order from the Supreme Court, safeguard duty on the above-mentioned goods for a period of two years.

25% safeguard duty 30th July 2018 to 29th July 2019 (both days inclusive)
20% safeguard duty 30th July 2019 to 29th January 2020 (both days inclusive)
15% safeguard duty 30th January 2020 to 29th July 2020 (both days inclusive)

The notification which came into effect post a complaint from Indian Solar Manufacturers Association (ISMA) in Dec. 2017 after self-investigation. The investigation concluded that locally manufactured cells and panels, which constituted only 10% of the Indian solar projects in 2014-2015 and had reduced more in the subsequent years. 

Read the document here.

India to introduce a cap on solar tariff and reduces tender size for manufacturing unit

In a major development, the MNRE has directed the Solar Energy Corporation of India(SECI) to fix the upper permissible solar tariff at INR 2.50/kWh and INR 2.68/kWh for developers using domestic cells & modules (without safeguard duties) and imported products (with safeguard duties), respectively. SECI has reduced its solar manufacturing tender size from 5 GW to 3 GW and curtailed minimum bid capacity from 1 GW to 600 MW. However, the size of the PPA remains the same at 10 GW. This comes to post an announcement by the Power  Minister – that all the future renewable energy projects bid would have to cover at least a 50% of a project’s components with domestic manufacturing. Regarding the PPA, it must be executed within a maximum time frame of 90 days from the date of award and a minimum of 40% of commissioned within 21 months from the date of PPA signing. The remaining 60% of the capacity will have to be commissioned within 36 months from the date of the bid award letter. SECI has also revised the time allowed to set up manufacturing capacity to two years from the earlier three-year time period.

  • For silicon-based facilities, the module manufacturing unit has to be set up in India whereas polysilicon can be imported.
  • For non-silicon-based technologies, the primary functional raw material can be imported.

To support this development SECI has announced a 5 MW solar manufacturing tender linked to a 10 GW PPA, also in June. It was the first solar tender where developers were required to locally produce equipment in order to win projects.

Solar installations in India drop down in the second quarter : Report

According to a report, solar installations have gone down by 52% in the second quarter of 2018, primarily due to the uncertainties related to trade duty & module price fluctuations. The Q2 installations were at the lowest since Q1 2017 with 1599 MW, compared to 3,344 MW in 2018. The plant installations were also down by approximately 21% year-on-year compared to 2.025 MW installed in Q2, 2017.

The downfall in the installations was an expected one, pertaining to PPA negotiations post the all-time low bids which led to a slowdown in the tender auctions in 2017 resulting in weaker project pipeline in 2018.

The large-scale installations totaled at 1,184 MW compared to 2954 MW in Q1, 2018. In case of rooftop installations, 415 MW was installed (6% higher than 390 MW in the previous year.)

Cumulative solar installed capacity summed to be at 24.6 MW at the end of the second quarter of 2018 with large-scale projects accounting for 90% & rooftop solar making up the remaining 10%.

It is expected that the installations will be close to 8.3 GW in 2018 if the schedule remains on time.

REC trade results – August 2018

Non-Solar: Non-solar RECs prices continue to rise with robust demand but the clearance volume is constrained due to limited supply availability. This session the RECs were traded at the price of INR 1101 at PXIL (10.1% above the floor price) and INR 1200 at IEX (20% above the floor price). The non-solar REC inventory completely exhausted in August 2018 with a clearing ratio of 100% at PXIL & IEX both respectively. A total of 3,33,479 RECs were traded in this session.

Solar: Total number of solar RECs traded in this session was 4,86,129 (184% decrease from the last trade). The clearing ratio was 29.06% at PXIL & 15.42% at IEX respectively. RECs traded at the floor price, i.e. INR 1000 at PXIL and IEX both respectively.

The overall trade volume of (8,19,608) decreased almost by 50% from the last trade (16,18,069).

Lowest ever tariff of Rs.1.58 discovered at RESCO model tender in Madhya Pradesh

The latest tariff discovered for rooftop solar at Power Grid Corporation in Madhya Pradesh is INR 1.58 kWh/unit. This is the lowest tariff discovered so far in the country. AMPSOLAR, a New-Delhi based company bid for the lowest tariff for putting rooftop solar plants on the 10 government buildings. The highest tariff of INR 4.3 kWh/unit was by Renew solar for a private company. The tender auctioned under the RESCO model attracted 31 international as well as domestic developers who oversubscribed the 35 MWp tender capacity by 630%. The project will get a subsidy from MNRE of 20% and 25% from the state government.

In a RESCO model, the Bidders intend to use a Premise owned/used by the Procurer and enters into the PPA with Procurer for the supply of solar power as per RFP.

List of bidders and tariff is as below:

Establishments Tariff  (KwH/unit)
Municipal buildings Rs 1.69
Medical colleges Rs 1.74
Police establishments Rs 2.33
Government engineering colleges, ITIs, and polytechnics Rs 2.35
private institutions Rs 2.28

“The solar rooftop sector has been struggling with issues like the significant upfront cost for individual consumers and lack of enabling the framework for Independent Power Producers (IPPs) to develop a scalable business model. The bid results for 35 MWp Solar Rooftop tender are testimony to numerous policy, contractual and procedural innovations deployed in the RESCO programme to find solutions to these gaps,” said Manu Srivastava, principal secretary, renewable energy, in the Madhya Pradesh government.

Read the corrigendum document and detail list of bidders here.

MNRE proposes a draft schedule for solar tender activities to avoid clashes between agencies

The Ministry of New and Renewable Energy (MNRE) has approached all the central & state governments as well as public sectors implementing agencies for tendering of solar PV capacities to follow a timeline for implementing renewable energy projects. According to the letter “It has been seen that sometimes bids of two organizations clash with each other, thus distorting the market.” It is being assumed that by following a timetable for bidding, these organizations can evenly distribute their tender and auction activity throughout the year.

According to the timetable, SECI will have the months of Dec, Mar, Jun & Sept for its tender and auction activity. NTPC and other public sector units will utilize Jan, Apr, Jul, and Oct for tender & auction activity. Further, the state implementing agencies will use Feb, May, Aug, and Nov for the activities.

MNRE has requested implementing agencies to follow this timetable in light of the tender trajectory that was announced earlier. As per the trajectory, 30 GW of solar will be tendered and auctioned in the current and the next Financial years. The timeline is to be followed by the large-scale projects tenders only and not the rooftop solar tenders.

The manufacturers are in acceptance of the proposed plan and believe, that now they will be able to plan their activities in an efficient manner. However, people in the industry are skeptical if the state will follow this timetable, since MNRE is an organization providing guidelines and it is up to the state to decide whether to follow it or not.

Major wind project acquisition gets cancelled following an APERC order

A recent order of Andhra Pradesh Electricity Regulatory Commission (APERC) was stayed by the Andhra Pradesh High Court related to the reduced tariff of electricity supplied by the wind projects that received Generation-based Incentive (GBI) from the center.

A recently proposed acquisition between Greenko and Orange went into shambles due to the significant order. The central government had devised the GBI scheme only to encourage investments in the wind sector by providing an additional incentive of 0.50 for every unit of energy actually generated by a generator over and above the tariff granted by the regulator.

The  APERC order in question was challenged by Orange renewables and  HERO group and requested suspension of the order at a primary level. Apparently, APERC does not have the jurisdiction to alter its own order.

The APERC had passed the order modifying its earlier tariff orders on the ground that it had earlier failed to give effect to its regulations that require incentives to be deducted from the tariff. “Prima facie, the 1st respondent- Commission has no jurisdiction to exercise the power of review in the manner it did,” the court said in its order.

Andhra Pradesh has approximately 2,000 MW wind capacity installed and the order had an impact of more than INR 2,000 Cr, for the wind generators in the state who had factored in the GBI while working ou their finances for the projects.

As of now, the Greenko-Orange deal has been called off to the delay of payments related to GBI. Wind generators have been denied GBI in Andhra Pradesh for over two years now and this development might bring some clarity for them.

 

 

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