Karnataka APPC for FY14

Hon’ble commission through a gazette copy dated 21.06.2013 has come up with a new Average Pooled Purchase Cost (APPC) rate of 3.07 Rs. per unit. This APPC rate is for a period starting from 01.04.2013 – 31.03.2014.  An interim  APPC rate for FY13 previously determined was Rs. 2.60 per unit, which stands ineffective post 30th June 2013 ( for previous relevant blog-post, click here).

The new APPC rate is Rs. 0.47 per unit more and has been worked out taking into consideration the power purchase quantum data furnished by respective ESCOMs of the state. All the payments with respect to the difference of Rs. 0.47 per unit will be made to RE generators in three instalments as per the energy generated post 01.04.2013 till the date of this order.

The new APPC rate which is 18.07 % more poses lucrative options for RE projects. The APPC + REC model will now fetch minimum Rs.4.57 per unit to RE generators of the state. As far as REC mechanism is concerned the state still needs to revamp relevant regulations in line with those of CERC.

Gazette copy can be assessed here.

Relevant media article – The Hindu

India slips to eighth spot in RE attractive index

India’s overall ranking slipped from previously fourth position to eighth position recently in the world renewable energy attractive index as per Ernst & Young survey. This survey was for first quarter of 2013. The reason for such a decline in overall ranking of India is the antagonistic policy regime, weak enforcement of RPO and high cost of finance.

However India is said to be a “Hot Spot” as it aims to double its renewable energy capacity and is only next to Belgium in terms of priority this sector receives. The wind energy sector after with-drawl of Accelerated depreciation has evidently enervated the sector. All recent wind energy related developments can be assessed in our previous blogs – Blog1Blog2.

In a similar development with regards to wind energy generation MNRE inks to resume a break for depreciation on wind farms and boost a subsidy for alternative generation, though the same is pending for cabinet approval. The proposal is also put up for increasing the amount of GBI. For detailed article on this development by Bloomberg Click Here.

Relevant media article click here.

REC Trading Report – June 2013

“Precarious” is the word which best defines the REC trading sessions in India hitherto. June 2013 trading session continued its genealogy. Weak enforcement of RPO and falling demand for solar RECs has resulted in trading of both credits i.e Non Solar and Solar at floor price (Solar – Rs. 9300, Non-Solar  - 1500). Worth-mentioning that Solar RECs too have touched floor just over a period of one year ,which started trading in May 2012.

Non Solar RECs - 

Non Solar RECs continued its sedated mode of operation, where clearing ratios at both exchanges were very low. Although as compared to May 2013 trade session the cleared volume increased by 36.8 % governed by upside in buy bids with the same percentage. Rise in demand can be partly attributed to the fact that June’13 marks the end of first quarter of FY14. Detailed analysis can be found in the self explanatory charts as below -

 Fig 1 : Non-Solar REC Trading Stats – June 2013

REC trading for Q1 (FY 2013-14) contributed clearance of about 1,75,000 RECs (solar & non-solar). This number may look abysmal especially when the REC inventory stands at about 24,00,000 RECs (solar & non-solar) and many more RECs are expected to get issued with wind and hydro generation season already knocking the door.

 Fig 2 : Non-Solar REC Market Clearing Price – June 2013

Solar RECs - 

Solar REC market nose dived directly to floor price for the first time since the trade began in May’12. Like non-solar RECs, even at floor price there were not enough demand to meet Solar REC supply available at floor price. This resulted into pro-rata clearance at both the power exchanges. To achieve clarity on price and volume trends in the previous months refer charts as under:

 Fig 3 : Solar REC Trading Stats – June 2013

Fig 4: Solar REC Market Clearing Price – June 2013

The new compliance year has just began and we may expect better demand emerging in Q3/Q4 of FY14. Better late than never.

For previous months trading report click here.

Bloomberg’s article on REC Trading can be assessed here.

HPERC finalizes its APPC for FY14

Himachal Pradesh State Electricity Commission has approved the average pooled purchase cost (APPC) for FY 2013-14 toRs 2.17 per unit. HPSEBL proposed to reduce the price from 2.20 per unit to 1.98 per unit for the FY 2013-14 (for relevant blogpost on HPSEBL’s proposition, Click Here), while demanding the new methodology and requested that forward/contra banking to be included as purchase of power.

As per our analysis the premise of calculation used by HPSEBL is logically inconsistent. Banking of power with other Discom’s for use later on is not equivalent to purchase and sale, it is equivalent to loan given to other Discom and taken back later. Thus including this power as “purchased” is incorrect.

HPERC in previous APPC order had considered only the forward banking purchase and had not considered contra-banking. According to HPSEBL, banking purchase by means of any kind of banking is definitely is a source of power which evidently must be considered for calculation of APPC.

HPERC states that outward banking (banking sale) is from out of power purchased from energy suppliers (long term and short term) during the year and its cost is already paid.  Therefore, if the same quantum is received as inward banking (contra banking purchase), such quantum and price should not be included over and above the quantum or price already taken into account, out of which such power has been banked. Since there is no criterion for determination of rate and as a prudent practice the Commission had taken such banking sale and purchase at zero cost, this quantum of energy shall be treated as additional purchase at zero cost. The Commission, therefore, decided not to accept the new methodology proposed by the HPSEB Limited, to consider the contra-banking quantum at zero cost during the year for determination of the APPC rates.

GoHP rate of free & equity power are kept different and are not included in the computation of APPC. GoHP Free & Equity Power rate is Rs.2.90 per unit.

HPERC has excluded the UI and transmission charges to calculate APPC as these are the integral part of its purchase cost.

Contributed by – Chetan Singh Adhikari

75% local content in JNNSM 2nd Phase – MNRE

Against the backdrop of the recent episode in which the United States dragged India in World Trade Organization (WTO) for local content requirement in JNNSM Ist phase, the ministry of new and renewable energy has come out with a bold step to incorporate 75 % local content in phase 2 of its solar scheme. Mr. Farooq Abdullah said – “We want to encourage domestic industry also. The bidding would start in the coming month”, giving signs that India is still keen in developing local green manufacturing market and expecting that WTO will turn US’s allegation in its favor.

Another important statement given with respect to the fledgling wind energy market in India was to reinstate the withdrawn accelerated depreciation mechanism. Hon’ble minister was spotted saying that the proposal for reinstatement would be taken up to the cabinet and the same will be pushed. He also asserted that MNRE has taken cognizance of the predicament of investments in wind energy and how the same is affecting the small and medium scale enterprises, which house a high capacity of captive wind power in the nation. Our blog-post on petition filed by IWPA recently can be assessed here.

Relevant media articles -

The Hindu 

EFY Times

Wind majors selling assets to avert indebtedness

Wind power majors of the likes of Suzlon, DLF etc. are now looking for buyers who can buy their wind portfolios which will provide an opportunity for the former to raise capital and abrogate a situation of indebtedness.  Regulatory failure has left operating a wind farm a costly affair. On the other hand, the buyers are usually cash rich companies planning an expansion of  their green portfolios. For these buyers, owning an operating farm poses less risk and higher returns in terms of already established performance.

According to a study by Bloomberg, DLF (a property developer company) agreed to sell 217 MWs of projects for 5.23 billion rupees. Ushdev Power Holdings Limited has plans to boost its wing generation capacity and is in talks with Suzlon Energy Limited to acquire 400 MWs over the next 15 months. A detailed article by Bloomberg, can be assessed by clicking here.

In the past few days there have been various petitions filed by wind bodies like IWPA requesting to reinstate the accelerated depreciation scheme (Click Here). WEGs are looking for an urgent regulatory push from the government to regain the sector’s sheen.

India drafts Offshore wind energy policy

India recently unveiled a draft policy, for offshore wind energy development in the nation.

Offshore wind farms are preferred because of the non-availability of land in densely populated coastal areas with high wind potential. The added efficiency of offshore wind power is another advantage over onshore wind turbines. Govt. of India on the basis of preliminary assessments has identified deployment along the coastal belt of Karnataka, Kerala, Goa and Gujarat as feasible, with a potential of 1 GW offshore wind capacity installation along the coastline of Rameshwaram and Kanayakumari in TN.  According to an article published  in Hindu, ANERT is preparing to initiate a wind monitoring study to identify potential offshore sites with the assistance of dutch government (a pioneer nation in harnessing wind energy as renewable resource).

Govt. of India in its draft recognizes the growth of offshore wind energy in EU zone and in highlighting the global status of this particular technology, quoted that European Union has an aggressive target to avail 40 GW of offshore wind power by 2020 and 150 GW by 2030.

Maritime zones spotted by the Govt. in which offshore wind farms can be built are Indian territorial waters (within 12nm from coastline) and between 12 nm to 200 nm where India has right to construct structures such as wind farm installations as per international laws.

Govt. of India proposed to establish a designated agency named – National Offshore Wind Energy Authority (NOWA) which will be a single window agency and will co-ordinate with concerned ministries for necessary clearances. Offer of blocks will be made through an open international competition process. For power evacuation, state electricity boards (SEBs) are entrusted to provide necessary onshore infrastructure where as offshore power evacuation upto first onshore substation shall be developed by wind farm developer.

Incentives such as tax holiday for ten years and concession in customs and excise duties for procurement of technology and equipment shall be made available to the manufacturers of offshore wind turbine. Besides this service tax on services conducted by indulging third party shall be exempted.

The draft policy can be accessed here.

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