REConnect Newsletter Volume 42 – OPEN ACCESS

Dear Reader,

We are pleased to present Open Access Vol 42 – our monthly newsletter covering RECs and regulatory and market developments in the renewable energy space.

 Key points covered in this newsletter are:

 1) Analysis of Karnataka’s solar policy

 2) Regulatory updates including important changes in RPO regualtions in Rajasthan, Order of JERC for enforecemnt of RPO including    imposition of penalty, and other regulatory updates

 3) Analysis of the most recent trading session of RECs and capacities in the REC mechanism

 Past newsletters can be accessd here - http://www.reconnectenergy.com/newsletter/past-newsletters/

For latest news and updates, please visit our blog at – http://reconnectenergy.com/blog/

 As always, we will love to hear your feedback on the newsletter.

- Team REConnect

REC Trading Report – June 2014

REC trade session for June 2014 was conducted on 25th June 2014. The following is a summary of results -

The total transactional value of non-solar RECs was INR 208.8 million and for solar RECs it was INR 15.4 million. The closing balance of REC inventory for non solar RECs breached the 7 million mark this  month whereas solar RECs crossed 0.23 million mark.

 

 

Non Solar RECs -

In case of non- solar RECs demand almost quadrupled (up by 376%) as compared to last trade session (refer  - May 2014 trade report) and Supply grew by 5.23 %. Non Solar price continued to remain at floor (INR 1,500 per REC). More insights provided in graphical charts below :

Solar RECs -

Total solar RECs issued this month was 27,787 and redeemed were 1654 only. In contrast to non-solar RECs, the demand for solar RECs took a beating as it went down by 22%. Supply rose by 11% w.r.t May 2014.  More details can be found in the graphs below -

Solar RECs finished trading at floor for consecutive 12 months.

Relevant media article can be read here.

Revenue from sale of carbon credits not taxable

As per a recent ruling by Andhra Pradesh High Court, the revenue accrued on account of sale of carbon credits is “not taxable”. The judgement came in a case between The commissioner of Income Tax, Hyderabad vs My Home Power Limited (a company involved in process of biomass based power generation). The later had sold carbon credits to an Irish company and did not offer the receipts for taxation after claiming losses.

After hearing the case in detail, the court was of the view that carbon credits were not generated or created due to carrying on business but it accrued due to “world concern”. It said -

“The consideration received on account of carbon credits could not be considered as income, as carbon credit is not an offshoot of business but an offshoot of environmental concerns. No asset was generated in the course of business but it was generated due to environmental concerns. Credit for reducing carbon emission or greenhouse effect could be transferred to another party in need of reduction of carbon emission. It did not increase profit in any manner and did not need any expenses. It was a nature of entitlement to reduce carbon emission but there was no cost of acquisition or cost of production to get this entitlement. Carbon credit was not in the nature of profit or in the nature of income and it could not be subjected to tax in any manner under any head of income. It was not liable for tax in terms of sections 2(24), 28, 45 and 56 of the Income-tax Act, 1961. Hence, carbon credit was held to be an entitlement or accretion of capital and hence income earned on sale of these credits was capital receipt.”

MoP at odds with proposal of Commerce Ministry on imposing solar duties

Power minister Mr. Piyush Goyal has reportedly given a statement which goes against the proposal of Ministry of Commerce to impose solar duties on imported equipments. An article in Bloomberg says that as per Mr. Goyal, solar duties will undermine PM’s vision of fostering solar generation in the country. He adds that India currently doesn’t have adequate solar manufacturing capacity to catch up with national targets. India’s transport minister Mr. Nitin Gadkari also holds same views.

The decision must have brought a lot of cheer to lobby and industry associations striving hard against imposition of such duties. A background of the case is detailed below -

Background –

Directorate general of anti-dumping & allied duties (DGAD) under Ministry of commerce and Industry had recommended to impose steep anti-dumping duties on import of solar products like US, China, Malaysia, Taiwan etc. By such levy of duties, DGAD wants to secure favourable market condition for domestic solar manufacturing cos. The DGAD has recognized that despite huge potential of manufacturing, India has negligible capacity operational.  To bolster the fate of Indian solar equipment manufacturers, India had introduced DCR in NSM, but following a dispute with US at WTO, some other means to check dumping was required.

Although DGAD paid heed to complaints raised by Indian manufacturing association, many solar experts across India fear that imposing of such duties is going to adversely affect the growth of solar sector in India.  Intense lobbying against such a decision has been observed. MNRE is also voting against imposing anti-dumping duties.

It is expected that anti-dumping duties are going to make projects selected under open category of NSM also unviable. On the flip side, Indian manufacturing still lags on technological front and the quality of products domestically manufactured is inferior to their imported counterparts. Solar power developers argue that both quality and price is going to be affected if the Min. of Commerce & Industry favours levy of anti-dumping charges.

Recent media articles can be accessed -

PV Tech

Hindu Businessline 

Moneycontrol

Economic Times

MPERC determines retail tariff for FY15

Madhya Pradesh Electricity Regulatory Commission (MPERC) through an order (dated 24th May 2014), has determined the retail tariff for FY 14- 15.       

The new tariff determined for FY15 is same as it was for FY14, The summary of the new tariff for INDUSTRIAL, NON-INDUSTRIAL consumers can be found in the table below –


Wheeling Charges –


Transmission Charges – T
he transmission charges for FY 14-15 has been calculated as Rs .48 per unit, applicable for a consumer having contract demand of 1MW or above. 

Cross-subsidy surcharge – The Cross-Subsidy Surcharge has been computed as Rs .39 per unit.

Transmission losses – The transmission losses for FY 14-15 have been calculated as 3%.

Aforementioned wheeling charges and cross subsidy surcharges are not applicable to consumers availing open access from renewable sources of energy.

The details on this tariff can be read on Page 189 of the Retail Tariff

Our latest Blog post on the retail tariff can be read here

Contributed by – Dheeraj Babariya

Andhra Pradesh declares APPC for FY15

Hon’ble Andhra Pradesh Electricity Regulatory Commission (APERC) in an order (DATED – 31 MAY 2014) has determined the APPC for FY 14-15.

The definition of the APPC being followed by APERC can be read as –

‘Pooled Cost of Power Purchase (PCPP)’ 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.

AP’s APPC definition is not in sync with that of CERC as it excludes power purchases from suppliers based on liquid fuel, Purchases from Traders, short term purchases and purchases from Renewable sources.

The APPC for FY 14-15 has been calculated as Rs. 3.38 per unit.

The APPC is AP has been growing steadily with a CAGR of 7.91%.

The order by APERC can be found here.

Our previous Blog posts on APPC of other states can be Read here.

Contributed by – Dheeraj Babariya

TN lifts ban on inter state open access

According to an article in Times of India (refer), Tamil Nadu has allowed consumers and generators in the state to procure and sell power from/to outside states.

The directive comes in continuation to commitment given by Hon’ble CM of TN -  that there would be no scheduled power cuts in the state and also grated “must-run” status to all windmills.

A statement from Raj Bhawan reads -

“In exercise of the powers conferred by sub-section (1) of Section 11 of the Electricity Act, 2003 (Central Act 36 of 2003), the Governor of Tamil Nadu hereby rescinds the Energy Department Notification No. II(2)/EGY/104(c)/2009, published at page 1 of Part II—Section 2 of the Tamil Nadu Government Gazette, Extraordinary, dated the February 17, 2009,”

Following this directive it can be expected that power business in Tamil Nadu becomes more competitive with time.

CERC finalizes RE tariff for FY15

Central Electricity Regulatory Commission (CERC) in its order on 15th May has finalised the Renewable Energy tariff for FY 14-15.

The details of the tariff calculated for FY 14-15 can be found in table below.

In the table above, it is clearly evident that CERC has finalized a higher price in case of solar projects as compared to that proposed in its draft. The price now finalized of Rs. 6.95 per unit is approx. 9.7% higher (than Rs. 6.33 per unit proposed in the draft).

A higher tariff determination for solar follows a similar consideration of higher benchmark capital cost. It was proposed that the capital cost for SPV projects to be Rs. 612 Lakh per MW. However, in the final order the capital cost now stands at Rs. 691 Lakh per MW.

It can be said that the apex regulator has finalised the tariff in response to views/suggestions of all stakeholders.

A higher solar tariff means grid parity still remains a distant dream. However, given the pace with which the retails tariffs across various states have been increasing and the fact that solar prices are coming down aggressively, it can be inferred that a “distant dream” is not too far away.

 

Himachal Pradesh proposes APPC for FY 2014-15

HPSEBL has filed a petition before Himachal Pradesh Electricity Regulatory Commission (HPERC) seeking APPC determination for FY 2014-15.

The definition of APPC followed by HPERC can be read as –

The weighted average pooled price at which the Distribution Licensee has purchased the electricity including cost of self generation, if any, in the previous year from all the energy suppliers, long-term and short-term, but excluding those based on renewable energy sources, as the case may be.

HPSEB has proposed the APPC as Rs. 2.24 against the current APPC of Rs. 2.17, and has requested to approve the same APPC for FY-14-15 effective from 01 April 2014.

A copy of the proposal can be found by clicking here.

Our previous blog post on Himachal Pradesh APPC for FY 13-14 can be read here.

Blog post on all other states APPC can be read here.

Contributed by – Dheeraj Babariya

Madhya Pradesh determines APPC for FY15

Madhya Pradesh Electricity Regulatory Commission (MPERC) has finally unveiled its APPC rate for financial year 2014-15. MPERC follows this definition of APPC  (which is in line with that of CERC) -

for the purpose of these regulations ‘Pooled Cost of Purchase’ means the  weighted average pooled price at which the distribution licensee has purchased the  electricity including cost of self generation, if any, in the previous year from all the energy  suppliers long-term and short-term, but excluding those based on renewable energy  sources, as the case may be.”

i.e. it excludes only renewable energy for APPC rate calculation.

Accordingly the APPC for FY15 has been determined as Rs. 2.66 per unit (up by 5.13% as compared to APPC FY14).

APPC for FY14 was Rs. 2.53 per unit.

More details can be had on Page no. 63 of this Retail Tariff Order.

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