WEGs move to Court against RRF Mechanism

Wind energy generators (WEGs) of our nation have recently moved Delhi High Court against the central regulator (CERC) for implementation of RRF mechanism; under which the generators are required to participate in scheduling and forecasting of their power generation on a day-ahead basis. Under the renewable regulatory fund (RRF) mechanism, a generator whose schedule deviates from the forecast over the range of -30 % to +30 % will have to face financial penalties based on system frequency. The schedule to be submitted will be for every 15 minutes i.e. for a total of 96 time blocks during a particular day. For more information on the RRF mechanism, click here.

The Hon’ble CERC in an effort to improve grid operation and to enhance integration of renewable power in the grid, had finally mandated the mechanism to be effective from 15th July 2013; followed by prior deferments on two occasions. WEGs assert and fear that being in a range +- 30 % will be a daunting task and will mulct close to 12-15 % of their profits as reported in an article of  The Hindu. The petition is filled by Wind Independent Power Producers Association (WIPPA) and the association has asked for more time. Although they agree to submit the forecasts and schedules on a daily basis, devoid of any penalty mechanism in place.

With RRF mechanism already in effect since 15th July 2013, with a hand-full of participants only, it will be interesting to analyse the after-effects once the Regional Power Committees (RPCs) come out with energy accounting statements for the very first week.

For more details on the mechanism and relevant services provided by us, you may refer to our monthly newsletter “OPEN ACCESS Vol. 32″.

TN’s APPC for FY14

Hon’ble TNERC has increased APPC for FY 2013-14 to Rs.3.11/kWh from Rs.2.54/kWh last year. This represents a formidable hike of 22.45%. The tariff is effective from 01.04.2013.

While the APPC has been revised to Rs 3.11, the tariff payable is restricted to 75% of the preferential tariff of the NCES category.

In the case of wind, this will translate to Rs 2.63 (75% of Rs 3.51), resulting in an effective increase of only 3.6%.

In our opinion, there are several potential issues with this:

1) At the outset, the definition used for calculating APPC in TN differs from the one used in other states and one suggested by CERC. By excluding power purchased from liquid fuel sources and short-term power, the APPC determined is lower.

2) The recent amendment by CERC in REC regulations says that a project receiving tariff ‘at APPC’ shall be eligible for RECs. The artificial restriction of 75% of preferential tariff may cause REC eligibility issues as it deviates from the CERC regulation.

Earlier, hon’ble KERC and APERC too revised their APPCs to Rs.3.07/kWh and Rs.2.69/kWh respectively.

The copy of the order can be assessed here.

Kerala defers applicability of Solar RPO

In a KSERC order dated  – April 4 2013, KSERC has mandated that solar renewable purchase obligation will be applicable on KSEB from FY14 and for other licensees from FY15.

Solar RPO of the state is set as– 0.25 %  for FY14 and is to increase by 10% every year.

Previously, in a 2010 order KSERC had mandated solar RPO to be effective from 2010 itself, but owing to sluggishness in developing solar generation and REC market, the same is made effective from FY14 for KSEB. This particular move can be seen as daunting for solar developers planning to invest in the state, given the fact the state is on the verge of finalizing its own solar policy 2013.

For copy of the order Click Here.

CERC’s 2nd amendment to REC Regulations

Hon’ble CERC through a notification dated 10th July 2013 has come up with its 2nd amendment to its principal REC regulations of 2010. The following are the main highlights:

On the issue of RE contracted though competitive bidding, the commission has mandated as -

“(b) it does not have any power purchase agreement for the capacity related to such generation to sell electricity, with the obligated entity for the purpose of meeting its renewable purchase obligation, at a tariff determined under section 62 or adopted under section 63 of the Act by the Appropriate Commission.”

If a DISCOM is procuring power from a RE generator at a tariff determined by “competitive bidding” method then the particular RE generator will be eligible to participate in REC scheme provided DISCOM doesn’t account the same quantum of energy towards its RPO compliance. This provision is mainly mooted to abrogate the ambiguity where in double accounting was manifested. Moreover the term “preferential tariff” has been substituted by “tariff, for sale of electricity including the environmental attributes, determined under section 62 or adopted under section 63 of the Act by the Appropriate Commission”.

On the issue of issue of procurement of power at APPC, the commission retains the proposed amendment and mandated as -

In sub-clause (c) of clause (1) of Regulation 5 of Principal Regulations, the words “at price not exceeding the pooled cost of the power purchase of such distribution licensee” shall be substituted with the words “at the pooled cost of power purchase of such distribution licensee as determined by the Appropriate Commission”.

Hon’ble CERC also made it amply clear that previous PPAs entered at negotiated rates (i.e at price less than APPC) will not be affected and would continue to avail benefits under REC mechanism.

On the Seasonality issue on self consumption of a bagasse based co-generation project, the commission made the following modification to the proposed amendment -

“Provided that in case of renewable energy sources based co-generation plants, the connected load capacity as assessed / sanctioned by the concerned distribution licensee, shall be considered as the capacity for captive consumption for the purpose of issue of certificates, irrespective of 
the capacity of such plants covered under the Power Purchase Agreement”.

Hon’ble CERC replaced “bagasse” based co-generation by ” renewable energy sources based co-gen plants” to put the wide variety of RE based technologies under the benefits of the mechanism as it also provides that the benefits of the amendment will not be limited to “bagasse” based co-gen plants only.

On the issue of removal of Electricity Duty waiver benefit as one of the disqualification criteria for eligibility for issuance of certificate on self consumption of a Captive generating Plant (CGP) under REC scheme, the commission sticks to the proposed amendment.

Electricity duty waiver in case of self consumption will no more be a deterrent for the CGPs to access the REC regime. This comes in the wake of a case where the state government by itself had relaxed E-Duty for all CGPs in the state. Since the same was the mandate extended by state govt. ,SERC or the CERC (for that matter) had limited jurisdiction. For more details on the case follow ourNewsletter Vol. 29.

On the issue of Eligibility conditions for qualifying self consumption of a CGP and a non CGP, for issuance of Certificates, the commission retains the proposed amendments. i.e to avail participation in REC regime for entire energy generated for self consumption, a RE based CGP has to forgo all promotional benefits in terms of promotional transmission/wheeling charges or promotional banking benefits. The same applies to RE generator who is not a CGP i.e. when it consumes less than 51 percent of energy for self consumption (as per Electricity Rules 2005).

On the issue of extension of time period for applying for issuance of Certificate, the commission has put in place the following -

“(1) the eligible entity shall apply to the Central Agency for certificates within six months from the corresponding generation from eligible renewable energy project: Provided that the application for issuance of certificates may be made on 10th , 20th and last day of the month.”

The issuance application can now be made within a period of 6 months of the corresponding generation from eligible RE projects, instead of previously envisaged 3 months, implying that Generators will now get more time to take care of any unintentional procedural delays from NLDC/SLDCs end, by filling the applications early.

On the issue of sale of electricity to an obligated entity for compliance of its Renewable Purchase obligation (RPO), the commission took the recommendation of the RERC which points a possible case of an involvement of a trade to be included the clause. The clause reads as -

“(d) it does not sell electricity generated from the plant, either directly or through trader, to an obligated entity for compliance of the renewable purchase obligation by such entity.”

Regarding retention of RECs for off setting of RPO by a CGP, the commission has made the following final amendment -

“”(3) A renewable energy generator including captive generating plant shall be permitted to retain the certificates for offsetting its renewable purchase obligation as a consumer subject to certification and verification by the concerned State Agency: 
Provided that the renewable energy generator including captive generating plant shall inform the Central Agency regarding the details of the certificates retained by it for meeting its renewable purchase obligations. 
Provided further that renewable energy generator shall not be permitted to retain the certificates for offsetting renewable purchase obligation of its group companies as a consumer.”

Asserting clearly that the scope extends to non CGP too for its self consumption portion. The RE generator can also retain RECs to meet RPOs of units located in different states.

The commission retains the proposed amendment with regards to extending clarity regarding the date from which the certificates issued to an entity after registration. 

The final clause in place is as -

“(1) Clause (1) of the Regulation 10 of the Principal Regulations shall be substituted as under: After registration, the renewable energy generation plant shall be eligible for issuance of Certificates under these Regulations from the date of commercial operation or from the date of registration of such plant by the Central Agency whichever is later:”

 The “Statement of Reasons” for the regulation can be found here.

The copy of the notification can assessed here.

For our analysis on the draft of second amendment to CERC REC regulations, refer our Newsletter Vol .30.

RRF Mechanism close to be operationalized

The implementation of Renewable Regulatory Fund mechanism which was scheduled on 01.07.2013 has now been deferred by 15 days and hon’ble CERC in its order dated 09.07.2013 has come up with following implementation plan:

  • RRF to be implemented effectively from 15.07.2013.
  • Role of Coordinating Agency (CA) has been defined as follow:
  • Each pooling sub-station need to appoint CA and declare it to SLDC/RLDC
  • CA to provide schedules and revised schedules to SLDC/RLDC as per the Grid Code
  • CA to coordinate metering, data collection & trans-mission, communication to SLDC/RLDC/RPC/DISCOMs and other agencies
  • CA to undertake commercial settlement of all the charges on behalf of generators & settlement of re-gional/state UI pool account through concerned SLDC
  • CA to manage de-pooling of settlement amount among the Generators
  • RRF guidelines also to be made applicable on CA
  • CA to provide data acquisition system to transfer data at SLDC
  • RRF mechanism shall not be made applicable to COLLECTIVE Transactions to be made at Power Ex-changes as PX transactions can’t accommodate revi-sions in schedules.
  • Operational Timelines – Hon’ble commission has also specified operational timelines for effective imple-mentation of RRF.
  • Weekly Reconciliation of account: for a week (W) starting from Monday 00.00 Hrs (Day 1) and ending on Sunday 24.00 Hrs, RLDC by following Tues-day (Day 9) noon shall provide pooling sub-station wise implications due to RRF. CA to validate the data and con-firm the acceptance and coordinate with RLDC if any cor-rections required.
  • Day 16: Regional Power committee to provide state-ment of energy account by Tuesday
  • Day 17-Day 24: Constituents to settle statement of accounts as per the obligation arising out of RRF mecha-nism.
  • Delay in settlement beyond 12 days to attract 0.04% simple interest per day.

What is RRF?

The Renewable Regulatory Fund (RRF) regulations require wind and solar projects that meet certain criteria to forecast and schedule their power on a day-ahead basis. This requirement will have significant operational and financial implications for the projects – the task of forecasting wind and solar power which are essentially variable in nature and dependent on many site-specific weather factors is complex in nature. At the same time, the scheduling, reconciliation and financial settlement requirements will also require on-ground coordination and liaisoning.

For basics on RRF mechanism, see our past newsletter – Newsletter Vol. XIV October 2011

What are the challenges faced by projects in implementing forecasting and scheduling?

As per order from CERC of Jan 2013, projects were required to start forecasting and scheduling their power from July 1, 2013. However, certain challenges remain that need to be ironed out (see last section).

There are several approaches and models for forecasting generation. It will be very important for projects to choose the appropriate one keeping in mind the accuracy required and operational costs (that can go up significantly depending on the level of real-time data needed). Solar projects in general should opt for correlation based models with basic weather data inputs considering the relative stability in day-to-day generation and no financial implications for deviations. Wind projects must choose carefully between very sophisticated real-time forecasts (which are expensive to run) and models that balance past data with periodic generation inputs.

Once fully functional, projects will need to ensure that they forecast and schedule their power, and also have a ‘Coordinating Agency’ appointed to manage the logistical requirements for scheduling, reporting and settlement.

The scheduling and forecasting has to be done on a pooling substation basis, which will often have turbines with multiple owners. The task of ‘de-pooling’ so that the settlement of charges can be done appropriately amongst all the owners within the wind farm will also be a challenging one.  The data flow diagram for a typical forecasting mechanism can be explained below:

 

What is the status of implementing RRF?  

The most recent pronouncement from CERC required RRF to be operational from July 1, 2013. However, based on our on-ground experience several challenges remain:

Project level – the level of accuracy achieved by various projects that have done trials leaves a lot to be desired. In such a scenario, projects may immediately face financial obligations

Infrastructure level – challenges remain in preparedness at all levels – at the coordinating agency and at some SLDCs in terms of preparedness. Various wind farms also have multiple owners, and de-pooling and the relevant reporting and contractual requirements are not yet in place in the majority of cases.

Clarity in regulations – CERC order of Jan 2013 stated as follows:“

We direct the staff of thee Commission to initiate the process for necessary amendments to the Grid Code in the light our decisions given in this Order. We direct NLDC to align the “Procedures for implementation of the mechanism of Renewable Regulatory Fund”” in accordance with our above directions and put up thee revised Procedures for approval of the Commission expeditiously. All concerned agencies are directed to gear up for implementation of the RRF mechanism w.e.f. 1.7.2013.

Pooling stations are to be regarded as “building blocks” as per recent order. Applicability of RRF is on pooling stations commissioned after May 3rd 2010. In case a pooling station was commissioned (say) 20 years back and two new feeders have been connected to the same after May 3rd 2010. Will the new feeders be eligible for participating in RRF mechanism?

At present, there is nothing strongly mentioned to address his particular issue as per current orders and same needs clarity as far as the operationability is concerned.

For full details of requirements under RRF and services offered in RRF management by REConnect, please contact us at info@reconnectenergy.com.

APERC order on APPPC FY13

The state of Andhra Pradesh has finally got its awaited “average pooled power purchase cost” in an order dated 29.06.2013 released by Hon’ble APERC. as Rs. 2.69 per unit. Although, the same is for FY 2012-13. Before determining the final APPPC cost for the state, Hon’ble APERC had a provisional rate in place which was Rs. 2.00 per unit.
It is worthwhile to iterate the definition that the com-mission follows for determination of its APPPC.

‘Pooled Cost of Power Purchase’ means the weighted average pooled price at which the distribution licensee has purchased electricity in the previous year from all the long-term energy suppliers excluding the purchases based on liquid fuel’. Provided that the purchases from traders, short-term purchases and purchases from renewable sources shall not be taken into account while determining Pooled Cost of Power Purchase.

The power purchase cost incurred by AP DISCOMs were verified by the commission. The order also reads that the difference between new and provisional rate will be paid to the developer in six monthly installments.

For a copy of order – Click Here

For other recent APPC related updates, please follow the links:

KERC

HPERC

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