INDUSTRIES WILL BE ABLE TO TRADE EMISSION PERMITS OF PM 2.5 VERY SOON

For a developed country, the one debate that always remains when considering emission control is the impact it will have on the economic development. To solve this problem in a country like India where industrial development is unavoidable, Niti Ayog is planning to put a cap on PM 2.5 emissions from industries. Under this scenarios there may be industries which which will find it easier to comply with the limits and ones for which it will be challenging. Therefore, they are proposing a trade of emission permits of PM 2.5.

 

Those industries which will be able to reduce more than the desired limit will be able to trade their emission permits to those industries which will not be able to reduce emission to the desired limit. This is going to be a way of ensuring continued economic growth along with emission reduction. It is being proposed that the Central Pollution Board of India (CPCB) will be able to keep a track of the emissions by implementing continuous emission monitoring systems. China has also started carbon trading recently for the same reason.

 

Cap and trade has been used for other GHGs and in other countries to reduce harmful emissions. This seams to be a great way to encourage emission reduction since it involves trade and therefore, competition among industries of various kinds without hampering their growth.

 

Our previous analysis which talks about climate change mitigation and industrial development can be accessed here. The article covering the news about the same can be accessed here

FINANCIAL LOSSES FOR DISCOMS FALLING UNDER UDAY SCHEME DECREASE

In a recent analysis in the Financial Express, those discoms which are a part of the Ujjwal Discom Assurance Yojna (UDAY) scheme have seen a reduction in their financial losses by 21.5%.  This amounts to a saving of Rs 40,295 Cr for FY 2017. Even the states which were earlier burdened due to huge financial losses have witnessed a drop in the losses by a significant percentage. For example, Tamil Nadu saw a decrease of Rs 3,783 Cr in its losses which is a decrease of about 35%. The liquidity profile of the discoms has also improved, as per the ICRA.

 

The power ministry opined on this matter saying that “with more projects being awarded, there should be a palpable difference on the metering front – a vital area which helps to reduce technical losses and minimize outages”.  As of now, the number of distribution transformers being metered are just 45% of the target to be met by December 2017. Therefore, they are hoping that the situation will improve further.

 

Our previous analysis on the completion of one year of the UDAY scheme can be accessed here.

DERC DETERMINES TERMS AND CONDITIONS FOR DETERMINATION OF OPEN ACCESS POLICY:

DERC has released an order determining the terms and conditions for open access charges for FY 2017-18. Following are the salient features of the order:

 

  • Eligibility: Short Term Open Access (STOA) is applicable to consumers having a contract demand of 1 MW and above connected at 11 kV or above.

  • Metering Arrangements: The distribution licensee shall provide check meters of the same specifications as the check meters. The distribution licensee shall provide ABT compliant special energy meters at the point of drawal. The formats for availing open access approvals have also been notified

  • The 60 day timeline has also been defined for the procurement, testing and installation of ABT meters.

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The previous open access policy was announced in 2005. As of now, there are close to 60 clients in Delhi in Open Access which are trading power. As per the last policy, the quantum of energy traded had to be constant which is not the case anymore.

Earlier, an undertaking used to be taken in case of a mixed feeder which is still the case. Also, the SNAs asked for Bank Guarentee which included open accessed charges which is also still the case.

The order can be accessed here.

REC TRADE RESULT JULY 2017

Supreme Court allowed conditional trading of Non-solar RECs on July 14, 2017 (our blog on the same can be accessed here). Demand was expected to be low for two reasons – 1) obligated entities are required to pay at old RECs rate (Rs 1500/ REC); and 2) compliance is required to be done by March to obligated entities have enough time to comply even after the final order of Aptel is received.

However, demand for Non-solar RECs was robust. In total 4.95 lakh RECs were bought (110.76 % higher than July 2016), and clearing ratios on IEX and PXIL were 4.31% and 3.52% respectively. Higher demand was primarily driven by demand for some utilities where state regulators had given RPO enforcement orders in recent months.

Solar RECs were not traded as the stay imposed by the Supreme Court remains in force in the case of Solar RECs.

THE NATIONAL CLEAN ENERGY FUND GETS DIVERTED TO COMPENSATE FOR GST

The government of India assigns dedicated funds which is linked to specific cess. This kind of cess One such fund is the National Clean Energy and Environment Fund. In a recent move, there was a diversion of the funds collected as tax for the National Clean Energy and Environment Fund to the states that lost revenue because of GST. Through this move, the unspent funds which were to be used by MNRE have been diverted. This means that from next year, India will not have a National Clean Energy and Environment Fund. Some individuals working in the sustainability sector argued that this amount could have been used in the development of clean coal technologies.

This action is also going to pose a risk to the MNRE as 98% of its budget of which comes from this fund. Not only that, this fund has also aided India in meeting its commitment towards the Paris Agreement. Now that the United States has withdrawn from the Paris Agreement, the Clean Energy fund was the only aid which India had to meet its obligations by 2020. Since it does not exist anymore, out fight to protect the environment has become an even bigger challenge.

 

The article covering the same can be accessed here

TSERC DETERMINES TRANSMISSION TARIFF FOR FY 2017-18:

The Telangana State Electricity Regulatory Commission (TSERC) has determined the transmission tariff for the FY 2017-18 and FY 2018-19 in its order dated 1/05/2017. The order states the transmission charge and loss as follow:

 

As per previous years, the transmission charge has followed a trajectory as depicted in the following graph:

The order can be accessed here.

KARNATAKA’S DISCOMS CANCEL PPAS AFTER UP AND AP

After the UPERC cancelled PPAs with Bajaj Power owned units (as reported by TOI), BESCOM (Karnataka based DISCOM) cancelled its PPA signed before 31st March of a 75.6 MW wind power plant. The state’s energy department had already issued a letter to the DISCOMs to not sign anymore PPAs  as the state has sufficient wind projects to fulfill its RPO compliance. More such cancellations from the DISCOMs are expected. The industries which are more affected by this cancellation are Gamesha, Suzlon, Inox Wind, Sembcorp Green Infra and Mytrah.

 

This is going to be a very discouraging development for the wind industry since a number of PPAs were signed at a higher price which is no longer being accepted by the DISCOMs. A similar development was also covered on our blog.

 

The article can be accessed here.

 

COMPETITIVE BIDDING POSES A RISK ON THE FUTURE OF WIND ENERGY

The wind energy sector is in a distressed situation after the Union Government’s ‘tariff-based competitive bidding’ mechanism. Earlier, the SERCs used to fix ‘feed-in tariffs’ based on which, the the wind energy companies would sign PPAs with the distribution companies. Since the time this mechanism has changed (February), the state governments are not ready to sign PPA at the higher FiT rates, neither are they ready to take the competitive bidding route, thereby preventing any wind power installations from happening.

This has left the wind industry in a fix. Experts within the industry are predicting that there won’t be any new installations till March 2018. Specially the turbine manufacturers will suffer losses at least in this financial year and so will the image of the wind energy.

The article can be accessed here.

SUPREME COURT ALLOWS CONDITIONAL TRADING FOR NON SOLAR RECs

The matter of CERC’s order on new RECs pricing and the stay granted by the SC on trading, another  hearing was held in Supreme Court on 14th July 2017.

 

Main highlights of the Order:

 

  • An Intervention appeal was filed  requesting  obligated entities to purchase RECs at previous prices i.e. Rs 1500/ REC (MWH) with the additional amount deposited with the CERC

 

  • The Supreme Court allowed this, and directed that the differential price (Rs 500/REC) i.e. between the earlier floor price (Rs 1500/REC) and the present Floor Price(Rs 1000/REC) to be held by CERC during the pendency of the matter with Appellate Tribunal

 

  • Therefore, stay on the REC Trading (only for Non Solar RECs) have been withdrawn by Supreme Court and trade is likely to start. However, we believe that it will be some time before trading can start as CERC will have to develop modalities to accept such a deposit.

 

  • The stay on Solar RECs trading remains in place, and the hearing on that matter will be held  in due course

 

Today (17/July/17) the Appellate Tribunal was due to hear the above matter, but it has been postponed to a later date.

 

Implications of the SC order:

 

  • Trading will resume in the case of Non-solar RECs, but will remain suspended in the case of Solar RECs. However, we believe that it will be some time before trading can start as CERC will have to develop modalities to accept such a deposit.

 

  • Despite the start of trading, it is very unlikely that any meaningful demand for Non-solar RECs will materialise. Given the lack of any pressure to comply with RPOs, it is unlikely that any obligated entity will spend a higher amount while the matter is still sub-judice in the ApTel.

The SCs order can be accessed here

Our previous analysis of the order on stay of REC trading can be accessed here

 

An article, covering the order was published Business Standard. REConnect was quoted in the article suggesting that ““Trading will resume in the case of Non-solar RECs, but will remain suspended in the case of Solar RECs. However, we believe that it will be some time before trading can start as CERC will have to develop modalities to accept such a deposit”.

MP PROPOSES AMENDMENTS TO RPO REGULATIONS

The MPERC has released the Sixth amendment to Madhya Pradesh Electricity Regulatory Commission (Cogeneration and Generation of Electricity from Renewable Sources of Energy) (Revision-I) Regulations, 2010 [ARG-33(I)(vi) of 2017] on July 1st 2017. In these regulations, it has revised the RPO percentage which will be applicable to the obligated entities within the state of Madhya Pradesh. Comments are invited till 24th July. The graph below gives a comparison of the RPO percentages suggested as compared to the MoP trajectory.

 

The analysis of the previous amendment can be read here.

The regulation can be accessed here

 

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