HIMACHAL PRADESH ELECTRICITY REGULATORY COMMISSION (RENEWABLE POWER PURCHASE OBLIGATION AND ITS COMPLIANCE) REGULATION

HPERC has notified Renewable Purchase Obligation and its compliance, 3rd amendment 2017 on 24th March 2017.

 

Quantum of Renewable Power Purchase Obligation (RPPO)

 

Since Himachal Pradesh mostly thrives on the energy produced through Hydropower, the state will be a beneficiary since RPO is excluded from RPO obligation as per the regulation.

The graph below shows the total and type of energy consumption by the state of Himachal Pradesh. The data has been derived from CEA Report.

 

Almost 3/4th energy of the total consumption comes from the Hydro Power. Its an added advantage for the state that RPO is exempted from the power consumed through Hydro sources, thus this in turn will reduce the cost of power from the state.

The graph below gives a comparison between the MoP recent RPO Trajectory and HPERC’s earlier RPO Trajectory:

HPERC for computing Renewable purchase obligation for a year of obligated has included  the transmission and distribution losses within the state in the following manner:

  • In case the electricity is purchased by such obligated entity from sources outside state , the electricity at state periphery shall be considered as the consumption of obligated entity

  • In case the electricity is purchased or generated from generating sources located within the state the electricity injected at the generating bus bar shall be considered as its consumption

The above given clauses are against the law of Electricity Act 2003 as for computing renewable purchase obligation total consumption has to taken under consideration excluding the transmission and distribution losses.

The Supreme Court order on RPO dated 13th May 2015 has taken into consideration the word “ Total Consumption” which also has been used in Electricity Act 2003. One can find below the reference from the act Section 86 (e):

promote cogeneration and generation of electricity from renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any person, and also specify, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licence;

 The regulation can be accessed here.

SOLAR TARIFF PRICES HIT A NEW LOW:

The solar tariff prices have hit a new low of Rs 3.15 per unit in an auction on Wednesday . The previous low in tariff was Rs 3.30 per unit in an auction which took place in the month of February.

 Source: Livemint (Dated: 13 Apr 2017)
In an article by Livemint, Mercom Capital Group has the following observations: This decrease in tariffs is causing the states to rethink and they are demanding a new power purchase agreement (PPA). This is causing the process of tendering and auctioning to slow down. An example of a state where such a thing has happened is Jharkhand. It is yet to sign its PPA for the 1000 MW solar capacity it had auctioned last year. The reason behind this is the subdued demand and poor financial condition of the discoms. The discoms which had signed their PPAs at a higher tariff are now going to find them unpalatable as they would lean towards cheaper tariff. Therefore, projects locked at higher tariffs will face delays in payments or power offtake curtailments. This might not only affect renewable energy power but also have an impact on renewable energy contracts.

APERC RELEASES RETAIL TARIFF ORDER FOR FY 2017-18:

The Andhra Pradesh Electricity Regulatory Commission has released an order dated 31st March, 2017 regarding the Tariff for Retail Sale of Electricity during 2017-18.

 

The below table gives the comparison between the new tariff determined from FY 2017-18 and FY 2016-17 and % change in the tariff from  FY 2016-17 and FY 2017-18 for different categories:

 

Wheeling Charges:

The tariff included the wheeling charges for FY 2017-18 and they are given as follows:


No information about wheeling loss has been given in this order.

 

Cross Subsidy Surcharge:

The Cross Subsidy Surcharge (CSS) for FY 2017-18 has been given below for different categories:

The regulation can be accessed here

MPERC RELEASES TARIFF ORDER FOR LV, HV AND EHV CONSUMERS:

Madhya Pradesh Electricity Regulatory Commission (MPERC) in its order dated 1st April 2016 has determined the tariff for Low Voltage (LV), High Voltage (HV) and Extra High Voltage (EHV). A summary of the tariff for HV3 consumers which includes Industrial, Non-industrial and Shopping Malls has been given in the table below:

The order can be accessed here

REC TRADE RESULTS MARCH 2017:

March trading results were far better than anticipated considering the recent CERC order on revised floor and forbearance prices. The March trade session remained a robust one. Total Non-solar demand was 8.88 lakhs (vs 10.4 L demand in February), and clearing ratios on IEX and PXIL were 6.11% and 9.6% respectively. For the full year FY 16-17, total RECs sold were 59.3 lakh as compared to 43 lakhs last year – an increase of almost 37.7%. This was the last trading session of FY 16-17.

 

Total solar demand was 1.43 lakhs, and the clearing ratio in IEX and PXIL were 2.90% and 2.74% respectively (Feb 2017 demand was 49,544). For the full year FY 16-17, total RECs sold were 5.5 lakh as compared to 6.4 lakhs last year – a decrease of almost 14.06%.

Non Solar – The clearing ratio stood at 6.11% and 9.6% in both IEX and PXIL respectively.

Solar – Clearing ratio stood at 2.90% and 2.74% in IEX and PXIL respectively.

 

NEW FORBEARANCE AND FLOOR PRICE FOR REC FRAMEWORK:

Summary:

  • The Honorable CERC published the final order on revised price bands for RECs which will be valid from April 1, 2017 onwards.

  • The new floor and forbearance prices are given below

 

  • This represents a drastic reduction of 71% for Solar RECs, and 33% for non-solar RECs

  • Existing inventory of RECs will not be given vintage multiplier

  • RECs that were at the verge of expiry have been given an extension
Impact on the market:

Immediate impact:

  • Overall, existing RECs projects will take a loss of Rs 1,866 crore due to reduction in the value of existing REC inventory. This represents roughly 50% of the total value of RECs. With such a significant loss, it is likely that several projects will become NPAs.

  • Reduced trading in March 31 trade session – generally, the March trading session sees high trading volumes as it is the last trading session of the compliance period. However, with the prospect of significant saving by trading in April, many obligated entities are likely to postpone trading to the next month.

Infact, this has been acknowledged and even allowed by a state regulator. See relevant order for allowing postponing of trading to an obligated entity here – http://www.mercindia.org.in/pdf/Order%2058%2042/DO-35%20of%202017-16032017.pdf

 

Long-term impact:

  • Potential (marginal) higher demand going forward – RECs prices have come down to such an extent that most captive and open access based consumers are likely to find buying RECs cheaper way of meeting RPO than buying green power. This may also apply in the case of several Discom’s, particularly in states that are power surplus. These low prices may therefore result in increase in demand of RECs.

However, it must be kept in mind that REC price reduction is always beneficial to the Obligated entities which are non-compliant as they will have an option to purchase RECs and fulfill their RPO compliance at lower prices whereas Obligated Entities who have been regularly meeting their RPO compliance will have incurred significantly higher cost. Therefore, a regularly reducing floor price actually incentivises postponing purchase of RECs, rather than meeting RPO.

Without strict enforcement and any risk of penalty, Obligated entities still have no incentive to comply. We believe that RECs demand will increase, but only to a very limited extent, as most obligated entities still don’t face any reason to comply with RPO at all.

The previous order can be accessed here and our analysis of the same can be found here.

DETERMINATION OF FEE AND CHARGES PAYABLE UNDER REGULATION 12 OF THE CENTRAL ELECTRICITY REGULATORY COMMISSION (TERMS AND CONDITIONS FOR DEALING IN ENERGY SAVINGS CERTIFICATES) REGULATIONS, 2016:

In a recent order dated 24.03.2017, the apex electricity regulator CERC has finalised the fees and charges payable by the Designated consumers to the registry for the purpose of meeting the cost and expenses towards the management of registry and software platform.


The fees and charges determined through this order may be applicable upto Financial Year 2019-20  or as may be determined by the CERC in consultation with Registry and the Administrator


The Fees & charges applicable are tabled below:

 

With this, the only thing remaining to be approved are the exchange rules and charges for trading. Once that is done, all the procedural aspects to enable ESCerts trading will be completed. We expect trading to start sometime in the second half of April.


The link to the order can be found here.

FOR THE FIRST TIME, INDIA BECOMES A NET EXPORTER OF ELECTRICITY, SAYS POWER MINISTRY:

As per an article in the Times of India, the power ministry on 29th March, 2017 declared that India has now become a net exporter of power. Power export of about 5,498 million units was seen from April ’16 – February ’17 and this value was 4% higher than the power India imported from Bhutan. New electricity lines to neighboring countries such as Nepal, Myanmar and Bangladesh will only aid in the sale of electricity from the country.

This is an interesting prospect for India since it has always been a power deficit country. Though there are many villages as mentioned in the  Economic Times article within India which do not receive electricity all day round, India has been able to gain the status of being a net exporter. This is mostly because of the poor financial health of DISCOMS in the country.

 

CEA’S DRAFT NATIONAL ELECTRICITY PLAN

Central Electricity Authority  (CEA) published the Draft National Electricity Plan (NEP). Following are some of the main features of the report:

  • For the 12th plan (2013-2018), target capacity addition from renewable energy was set at 30,000 MW. However, in view of the revised target of adding 1,75,000 MW capacity of renewable energy sources by the year 2022, the capacity addition for every year has been revised. A target of 16,825 MW has been set for capacity addition in 2016-2017. As per the review, capacity addition from conventional sources is going to exceed its target by 115% and private players will play a big role in capacity addition. Coal based plants are likely to contribute around 39% of capacity addition.

  • Projections for peak demand and energy requirement has been done for utilities for which two scenarios have been considered in the report for the years 2021-22 and 2026-27. One is with the consideration of DSM, energy efficiency and conservation measures. As per calculations, both peak demand and energy requirement values reduce significantly in the scenario where DSM, energy efficiency and conservation measures are being considered.

 

  • The installed capacity from renewable energy sources was 42,849 MW as on 31.03.2016. The share of renewable energy sources in the same is about 13%. However, the share of renewables is estimated to increase as the government is giving a major thrust to renewable energy. India, as a country has vast solar and wind potential. It also has potential for biomass and small hydro projects.

 

  • The CEA carried out EGEAS studies to assess the kind of capacity addition that will be required to meet the projected demand for the year 2021-22. Hydro, gas and nuclear are given maximum priority. CEA has developed three scenarios which consider the different combinations of installed capacity from renewable sources so as to determine the capacity addition from 2017-22. From the study it can be concluded that no additional coal based capacity is required to fulfill the energy demands during the year 2017-22 if the capacity of hydro, gas and nuclear are 15,330 MW, 4,340 MW and 2,800 MW and additional renewable energy sources. However, coal based capacity of 50,025 is under construction in will probably be commissioned during 2017-22.

 

  • As per the report, Electric Power Survey Committee’s 19th report will come out in some time and on the basis of that, changes will be made to the final Electricity Plan. Due to shortage of natural gas in the country, except for the already existing plants, no new natural gas plants have been planned during 2017-22. Also, the coal based capacity of 50,025 MW that is under construction currently will be able to fulfill the capacity requirement for the years 2022-2027. As estimated, in the year 2021-22, generation from RES will be 20.3%. Imports from neighbouring countries is also estimated to increase from 5,100 MW in the years 2021-22 to 21,600 MW in the year 2026-27.

  • The compound annual growth rate of energy demand will grow from 4.42% between the years 2012-13 to 2015-16 to 6.34% from the years 2015-16 to 2021-22. This increase is significantly higher than that in the past considering the increase in demand and the increase due to implementation of PFA and other projects from the government of India between 2017-22. Therefore, as per the report, energy demand of 1611 BU and peak demand of 235 GW in March 2022 under CAGR= 6.34% look realistic and is likely to occur.

 

  • The CEA report has mentioned ambitious targets of achieving an installed capacity of 175 GW by 2022. The breakup of the energy derived by various sources has also been given in the report. The report also mentions the percentage of energy that will be derived from various sources and from different states. As per the report, 9 states will contribute almost 77% of installed capacity by 2022. The report also gives year-wise targets for achieving the desired target.

  • The targets set by the CEA will require strong indigenous manufacturing facility for equipments related to RES. Policy frameworks may be developed to encourage the same and this will also fall in line with the ‘Make in India’ policy.

 

  • At the end of the year 2021-22, the projected peak demand and the energy requirement is 235 GW and 1,611 BU respectively. As per the 18th EPS report, this is around 17% and 16.4% lesser respectively. Similarly for the years 2026-27, these values are 20.7% and 21.3% lower.

 

  • As for the capacity addition predicted from 2017-22, development of hydro, nuclear and gas based project is being given priority. Capacity addition estimated from gas, hydro and nuclear is 4,340 MW, 15,330 MW and 2,800 MW. The capacity addition from RES is predicted to be 1,15,326 MW. For the years 2022-27, similar trends as the previous 5 years will be followed. It is estimated that non-fossil based capacity is bound to increase by 46.8% at the end of 2021-22 and will further increase by 56.5% by the end of 2026-27. For the year 2017-22 and 2022-27, low hydro capacity addition of 11,788 MW and 5,000 MW has been estimated.

 

APPROVAL OF PROCEDURES FOR TRANSACTIONS of ESCERTS:

The trading of ESCerts is going to start soon as CERC has come up with new regulations on ESCerts which facilitates their transition from one eligible entity to another. ESCerts come under the Perform, Achieve and Trade (PAT) scheme which is a market based mechanism where ESCerts are issued on over achieving targets and they have to be purchased by underachievers to meet their compliance.

ESCerts have been issued to many designated consumers in February and the first PAT cycle took place in March 2015.

Registration of designated consumers is as per the instructions written in the CERC report on detailed procedure for registration of designated consumer with registry as Eligible Entity on 14th February 2017.

Procedure:

The procedure is applicable to designated consumers:

ESC registration procedure follows the following steps:

  • Registry through PAT-Net PORTALis the forum at which application of registration takes place. Application shall be in electronic and paper form.

  • Within seven days, the registry shall provide a unique ID and seek clarifications if any.

  • This application shall be accessed on the basis of eight criterions

  • If payment of charges and fees has been done, the registry will issue a certificate of Registration.

The issuance of ESCerts shall be done by the Ministry of Power (MoP) and registry will complete the verification of the same on the basis of Dynamic- Customer Relationship Management.

The following are the features of the ESCerts issued:

  • The ESCerts will be issued in electronic form

  • ESCerts that have been issued in a cycle period shall stay valid till the completion of compliance period of their next PAT cycle unless otherwise revoked prior to such validity period in pursuance of conditions for revocation.

  • In case if ESCerts are purchased by designated consumers, they shall remain valid till the completion of compliance period of next PAT cycle or until the submission to administrators.

  • Bilateral trading within the same corporate group is not permitted and accordingly, inter-sector self retention and transfer of ESCerts is not permitted.

  •  Trading of ESCerts- A separate Dynamic-Customer Relationship management (D-CRM) will be developed and maintained by Administrator.

Fees and Charges:

All designated consumers applying to become “Eligible Entity” shall pay the fees & charges (as

notified by commission from time to time) towards the following:

(i) One Time Registration Fee

(ii) ESCerts Fee to be paid by Designate Consumers to whom ESCerts are issued have

been issued by Ministry of Power.

The regulation can be accessed here.

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