REC Trade Results – January 2015

We are pleased to share the Result of REC trading for the month of JAN-15.

  • Solar RECs – Overall market clearance remained low at PXIL in Solar whereas IEX reflected a good clearance ratio in Solar Market. Steep hike in demand for Solar at IEX can be attributed to reduced price of Solar RECs.
  • Non Solar REC market showed some signs of improvement with total 537,009 Non-Solar RECs getting cleared in today’s trade session.
    • While the demand looks improving owing to compliance year end approaching, hon’ble GERC(Gujarat Electricity Regulatory Commission) showed leniency on DISCOMs in Gujarat to adjust surplus solar RECs with non-solar RECs and also allowed reduction in total RPO targets for FY13-14. Detailed analysis can be read here.

Detailed trade results are tabled below for your kind reference.

Non-Solar RECs

Solar RECs

REConnect Energy is the market leader in the REC Market in India, with 36% market share and a portfolio of over 3 GW RE. We have been recently acknowledged with the REC Trader of the Year 2014.

Team REConnect

HPERC Notifies Draft Net Metering Regulation

The Himachal Pradesh Electricity Regulatory Commission (HPERC) on 22nd January 2015, has notified draft regulation for the Net Metering. The regulation enables the consumer of the distribution licensees to install the rooftop solar energy systems and use the generated energy for their consumption and the surplus energy can be fed to the grid.

The maximum peak capacity of the rooftop systems to be installed, shall not be more than 80% of the sanctioned contract demand. Also the Maximum capacity to be installed by any consumer shall not be more than 1 MWp.

The Net Meter as well as Solar generation Meter shall be installed and maintained at the cost of eligible consumer by the distribution licensee. The meters to be installed should adhere to the standard defined by the CERC and CEA.

The billing will be done based on the readings of the meter that is consumer will have to pay for the excess energy used by him from the distribution system.The net export of energy by the consumer over the billing period shall be paid to the consumer, byway of adjustment in the bill, at the rates defined by the commission. No deemed generation charges will be payable to the eligible consumer generating energy from rooftop Solar PV system.

The commission has proposed the Exemption from wheeling, banking and cross subsidy surcharge for the rooftop owners under net metering agreement for a period of 5 years. If the consumers is not an obligated entity, the quantum of electricity generated will qualify towards compliance of Renewable Power PurchaseObligation (RPPO) of the distribution licensee. The eligibility for participating in Renewable Energy Certificate (REC) scheme will be as per CERC REC Regulation 2010.

There have been recent surge in Solar Net-Metering regulations and policies among the northern states and HP is no exception, as the state has a solar power potential of 34 GW and is a large hub for small and medium scale industries. The larger scale industries would also benefit from this policy.

The comments and suggestions in this behalf can be submitted to the Secretary,Himachal Pradesh Electricity Regulatory Commission, within 30 days of publication of the draft.

The Draft can be accessed here.

GERC Maintains Leniency over RPO Compliance

The Gujarat Electricity Regulatory Commission (GERC) in its orders Dated 16th Jan 2015, has given relief to the state distribution companies against their RPO compliance for the year 13-14. The summary of the GERC orders is given below:

 Orders on GUVNL: GUVNL complied with 5.26% out of 6% obligations for non-solar and achieved 2.18% of Solar against 1% obligation. But overall attained a renewable purchase level of 7.44% against the RPO of 7%. Highlighting this the GUVNL requested before the commission to adjust its excess solar energy purchased into the non-compliance in the Non-solar part. While the Indian Wind Energy Association (IWPA) objected saying that this would result in loss for the wind generators as there is huge amount of Non-solar REC’s available for purchase.

 The commission in its order granted the permission for adjusting the excess purchase by GUVNL from Solar against the wind and other category compliance saying that the solar energy is costlier than the Non-solar energy and further more purchase of non-solar renewable would result in an additional burden on consumers of the distribution licensee.

Order on MPSEZ Utilities – MPSEZ Utilities submitted that it is having a revenue gap and therefore the enforcement of RPO on them will further burden the deemed licensees of SEZ areas. The commission in the order said that looking to the nascent stage of operation of the deemed distribution licensees of SEZ and quantum of power requirement by them for fulfillment of RPO, which is very less, so the commission exempted the licensee from applicability of RPO for FY 13-14.

 Order on Torrent Power ltd. – Torrent power submitted that it has complied with RPO of 4.55% in case of Non-solar against total 6%, and solar RPO of .07% against 1% in the regulation. Saying that due to non-availability of Renewable Energy and factors beyond control, which lead to shortfall in RPO compliance for FY13-14. And requested before commission to revise the RPO percentage of FY 13-14 to the actual targets achieved by the company. IWPA in its submission said that the distribution company had the option of redeeming REC’s from exchange, as huge no. of solar and non-solar REC’s are available for sell.

 The commission in the order said that the petitioner has made sufficient efforts to fulfill the solar and non-solar energy and REC’s as well, also said due to non-availability of renewable energy and factors beyond controlled resulted in shortfall in RPO compliance. And said that any further purchase of REC’s will result in the burden for consumers hence we cannot force the petitioner to buy more REC’s. The commission ordered to revise the RPO of the petitioner company as non-solar RPO at 4.55 % and Solar RPO at 0.07 % for FY 2013-14.

 The decision of GERC to allow the defaulted distribution companies, adjusting their non-renewable RPO with their excess solar energy, and waiving off RPO for Deemed Distribution licensees (Torrent Energy Ltd and MPSEZ Utilities Pvt. Ltd.), and also reducing RPO to match the extent of sourced energy, will adversely impact the REC market which is going through a bad stage.

 These steps even though appear to be practical may give other states chance to be more lenient over RPO enforcement, which could result in effecting the renewable industry badly as they rely on strict RPO enforcement. The step of giving solar power beneficial treatment over other RE power could be discouraging to other RE generators. May be the stagnancy in the REC market is the result of domino effect started by GERC and some other regulatory commissions.

The GERC Order on GUVNL & MPSEZ can be accessed here, and the order on torrent power can be accessed here.

MNRE to Implement scheme: 1 GW solar Projects by PSU’s and GOI Organizations

Ministry of New and Renewable Energy (MNRE) in its latest notification on 18th Jan 2014, has given guidelines for the implementation of a scheme for the development of 1000 MW of grid connected Solar Power Projects by Central PSU’s and Govt. of India organizations and various central and state schemes with Viability Gap Funding under batch-V Phase-II of JNNSM in a span of 3 years. The Central Financial Incentive (CFA) required is estimated to be 1000 crores.

Solar Energy Corporation of India (SECI) will handle the scheme on behalf of MNRE. SECI will be given a fee of 1% of the VGF disbursed for handling the funds and managing the Scheme.

The Ministry is promoting domestically manufactured solar cells and modules, knowing that the domestic manufacturing capacity is facing tough competition from the foreign players like china and US, which are selling the cells and modules at significantly lower price. The Indian manufacturing capacity is also not enough to meet the demand, which has been a concern for the govt. that resulted in dropping the anti-dumping duties proposed by director general of Anti-dumping.

The Govt. has now taken new steps to promote the domestic manufacturing by giving specific project capacities under certain schemes.

The Scheme Document can be accessed here.

MNRE Releases Draft Guidelines for Development of 3 GW Solar Projects under Batch-II Tranche-I

Ministry of New and Renewable Energy (MNRE) on 14th January 2015, has released draft guidelines for the development of 3000 MW of solar projects under JNNSM batch-II phase-II Tranche-I.it will be implemented by NVVN on Solar Parks to be developed through association of Central and State Agencies, and through open competitive Bidding.

Minimum Projects size will be 10 MW, and the power generated will be bundled with the thermal power and at fixed levellized tariff for 25 years. The tariff will be fixed through bidding process. The bidders will be free to avail fiscal incentives like Accelerated Depreciation, Concessional Customs and Excise Duties, Tax Holidays, etc. NVVN will bundle the Solar Power with unallocated Thermal Power from Coal based stations of NTPC on 2:1 basis (2 MW of Solar with 1 MW of Thermal), and sell the Bundled Power to willing State Utilities at Weighted Average Tariff of the Solar and Thermal components plus Trading Margin of Paisa Seven (7) per kWh. Discoms can fulfill RPO requirement on purchase of this power.

It will be duty of the implementation agency to provide land and connectivity required if the project is in a solar park under MNRE guidelines. The Guidelines clearly says that Under Domestic Content Requirement, the solar cells and modules used in the solar PV power plants must both be made in India.

Previously in October 2014, MNRE had laid guidelines for the development of 1000 MW solar projects in the Andhra Pradesh.

The draft can be accessed here.

Previous post on the MNRE guidelines can be read here.

ET: Startups take to providing forecasting and energy management solutions

With energy management assuming a vital role across sectors, startups such as Ecolibrium Energy, LoudCell and REConnect are providing forecasting and energy management solutions to large and medium-scale manufacturing and retail companies in India. These startups are able to improve fuel and power efficiency through real-time data analytics, forecasting, sourcing of power and switching to green energy where it’s possible.

“Our technology has a hardware device along with software support on the cloud, which helps them (clients) get real-time data of energy consumption on their premises, and we also help them take steps to optimise energy utilisation, plug leakages as well as help them access the cheapest source of power,” said Chintan Soni, co-founder and chief executive of Ecolibrium Energy, based in Ahmedabad. The company has 500 clients including companies such as Delhi Metro, Fiat, Arora Steels and Gobain. Companies investing in the technology saw energy costs go down 10-25%, Soni claimed.

The company, started three years ago, has been incubated by IIM-Ahmedabad and has received funding of Rs 7.5 crore from International Finance Corporation and Infuse Capital. It is targeting revenue of Rs 12 crore in the next two years.

“Since using their technology, my utility costs have come down 20%, and machine running costs have gone down 12%. I have been able to reduce transmission losses by 6%,” said Prakash Rawal, internal and project manager of Harsha Engineering, an Ecolibrium client which manufactures automotive parts. “With the device, we can replace manual reading with software reports.

REConnect, which provides forecasting and power sourcing services to energy companies, helps them reduce carbon footprint, besides trading in renewable energy certificates.

“We also help renewable energy clients in wind and solar energy with close to real-time forecasts as per requirement of the Central electricity Regulatory Commission. Our revenue comes on closing certain units of energy transaction and we charge per unit of transaction. We are looking at revenue of “We also help renewable energy clients in wind and solar energy with close to real-time forecasts as per requirement of the Central electricity Regulatory Commission. Our revenue comes on closing certain units of energy transaction and we charge per unit of transaction. We are looking at revenue of Rs 75 lakh in 2014-15 and target around Rs 3.5 crore in 2015-16,” said CEO Vishal Pandya.

The Media Article in Economics Times

KERC Revises Tariff for Mini-Hydel & Biomass Projects

The Karnataka Electricity Regulatory Commission (KERC) in its order dated 1st January 2015, has revised the Tariff for the Mini-Hydel, Co-generation and Biomass based power projects. The new tariff will be applicable to the projects that get commissioned during the period 01.01.2015 to 31.03.2018 for which PPAs have not been entered into, prior to the date of this order.

Projects for which power purchase agreements have been entered into before 01.01.2015, will not get the benefit of this tariff revision.

The tariff approved by the commission is given in the table below:

The revised tariff in case of Mini-hydel projects is Rs. 4.16 per unit as against Rs.3.40 previously, which has increased by 22%.Tariff determined for Bagasse based projects is Rs. 4.83 per unit for the first year of the commissioning of the project, which was Rs. 3.90 previously, an increase of approx. 24%. While in the case of biomass the tariff has been determined at Rs. 5.19 per unit against Rs. 3.66 per unit in previous order, a hike of about 42%.

 The commission has also approved the prevailing reactive power charges of 40 p/kVAh, till 31.03.2018.

The KERC Order can be reached here.

MNRE: Subsidy Reduction and Home Loan Initiative for Rooftop Solar

The Ministry of New and Renewable Energy (MNRE) has set a target of 40,000 MWp of Grid Interactive Solar Rooftop systems during the next 5 years. However, it has proposed to reduce the capital subsidy for Solar PV for Rooftop systems from 30% to 15%, citing reduced cost of Solar PV panels and a competitive tariff of Rs. 7 per unit that can be achieved without subsidy. This is applicable for Systems ranging between 1 KWp to 500 KWp. The ministry has asked project developers to go ahead with their projects without waiting for subsidy allocation via Aadhaar Linked Account or interest subvention.

As per the current Home Loan and Home Improvement Loan schemes, Solar PV is not covered among items against which loan can be availed. The Ministry of Finance has issued following advisory to all Public Sector Banks:

“All banks are advised to encourage the home loan/ home improvement loan seekers to install rooftop solar PVs and include the cost of such equipment in their home loan proposals just like non solar lighting, wiring and other such fittings”

This will reduce the dependence on private investors who are little hesitant towards investing in Solar projects, and will enable owners to plan their Home loan with inclusion of capital cost for installing Solar Rooftop, based on the available space and requirement.

This is mainly aimed at encouraging residential, commercial, industrial and institutional setups to adopt viable Grid Interactive Solar Rooftop Systems for their own consumption, and inject surplus electricity into the grid. Solar Rooftop Regulation/Policies/Schemes in states like Delhi, Rajasthan, Haryana, UP, Uttarakhand, Kerala and Karnataka will further attract investors and residential consumers towards Solar Rooftop Power.

The Draft proposed for reduction in subsidy can be read here.

The press release of the inclusion of Solar Rooftop capital cost in Home Loan, can be accessed here.

Preliminary Analysis of PAT Scheme

The Perform, Achieve and Trade (PAT) scheme was launched in 2012 to promote energy efficiency in energy intensive industries.  The scheme is market based where on over achieving the target, energy saving certificates (ESCerts) will be issued which will be purchased by under achievers from the power exchanges to meet their compliance. The targets were assigned to 478 energy intensive industries known as Designated Consumers (DCs) from 8 different sectors. Please refer to our past Newsletters Vol. IX “Introduction to Energy Efficiency“, and Vol. XX “Analysis of the Energy Saving Certificate” for more details.

There has been satisfactory progress in the PAT scheme so far as Bureau of Energy Efficiency (BEE) has actively pushed the scheme. The first PAT cycle (2012-15) is going to end in March 2015. The online PAT Net platform is at its final stage and consultants have been invited to review the framework for ESCerts trading.

There was a recent press release by Bureau of Energy Efficiency on the status of PAT scheme. The final verification of the energy saving done is due followed by issuance of ESCerts. The final verification and certification will be done by Accredited Energy Auditors. After the verification, ESCerts will be issued.

From the above chart we can see that demand is likely to be seen in the first cycle. With more than 50% still to meet the target, the 1st session of ESCerts market will be interesting to watch as the scheme is nascent.

Dr. Ajay Mathur, Director General of the Bureau of Energy Efficiency, said that,

“Overall, it seems likely that there would be overall compliance with the target, with some amount of trading for compliance purposes”.

The price of an ESCert will also attract the market which is variable in nature and depends upon the market price of coal, gas & crude oil. The price of an ESCerts determined by BEE for the year 2011-12 was Rs.10,154.

The trading is likely to happen between Aug and Nov 15.

Analysis of the changes proposed in the Electricity Act

Analysis of the changes proposed in the Electricity Act

The Electricity (Amendment) Bill 2014 was tabled in the Parliament recently. Once approved, the amendment will bring sweeping changes in the entire electricity sector. Most aspects of the power industry as it stands today will be touched in some way or another.

We have analyzed the impact of the proposed changes in this article. The changes that we have focused on concern the following areas: Renewable Energy, Open Access, distribution of electricity (ie the role of the Discom), and other changes that have significant impact. There are various other changes as well, but those are outside the purview of this article.

Renewable Energy:

The EA Bill 2014 proposes to include the definition of “Renewable Energy Source” and of “Obligated Entities” in the Act. Further, the bill also states that obligated entities may be mandated to

“procure electricity from or any market instrument representing the renewable energy sources”

These changes are significant as they lay to rest the argument that the obligation to meet RPO is not mandated in the Electricity Act 2003 (‘EA’), particularly for open access and captive generation. This is the premise of on-going cases many states and also in the Supreme Court.

Another objection made to the current regulatory set-up is that RECs have no basis as per the EA. Both these shortcomings will have been addressed with the new Bill.

The Bill also proposes various measures to promote RE generation in the country. The most significant of these is that power procured from RE sources under open access will not attract cross-subsidy. This will give a significant boost to the RE market.

Further, the concept of Renewable Generation Obligation (‘RGO’) has been brought in. The bill requires coal based generators to also set up RE generation,

“…which shall not be less than ten per cent. of the thermal power installed capacity”

This generation will also be allowed to be passed through to the discom as bundled power.

A major shortcoming in the existing act has been the interpretation of the ApTel which leaves co-generation out of the application of RPO regulations. This is now proposed to be changed by mandating RPO to be met only though RE and co-generation from RE. Co-gen from other sources is also required to be promoted, but through sale of power to the licensee only (and not through an RPO).

 

Open Access:

Under the current act, open access has been a failure as most states still do not allow open access, and policies in states are unpredictable. Sweeping changes are now proposed in the open access regime. The Bill proposes that OA will be available to all consumers with load of more than 1 MW by default. Such consumers will be allowed to enter into a bilateral agreement for procurement of power.

 

Change in the role of the Discom:

At present the Discom provides the service of last mile connectivity through the distribution system and also supply of power. This role is proposed to be broken up. A consumer will therefore have the choice to choose his supplier. In a distribution area, more than one supplier will be allowed to operate. The retail tariff set by the SERC will act as the maximum tariff, with suppliers allowed to offer a lower than prescribed tariff.

 

Other significant changes:

Penalty clause: A very important change change is in the penalty clause. Penalty for non-compliance of any provision of the act has been raised to Rs 1 crore. Originally, the penalty was Rs 1 lakh. The bill also proposes a reduced penalty of Rs 10 lakhs for RE generators.

 

Most importantly, the Bill specifically mentions the applicability of penalty in case of non-compliance of RPO or RGO. It says that Sec 142 will be applicable in case:

“…..has not complied with the renewable purchase obligation or renewable generation obligation as specified”

 

Development of market: Another important change has been the mandate to promote forward and futures contracts.

Smart grid and ancillary services: The concept of “smart grid” and “smart meters” have also been incorporated.

“Ancillary services” have also been defined, and all generators will be required to keep a certain portion of generation capacity as “spinning reserve”

 

Conclusion

We believe that these changes will have wide and deep impact in the electricity sector. The promotion of RE and removal of road blocks for development of RE and of open access in the country is a welcome step, and one that was long overdue.

The separation of distribution and supply function also signifies a fundamental shift in the way electricity is distributed in the country. However, this change will take time and strong will to implement. This is evident from the fact that after the EA 2003, the State Electricity Boards were required to be broken up. However, in many states they function in conjunction, and often enjoy the protection of the SERCs and state governments, to the detriment of the industry and consumer.

These changes are bold and welcome. The government will now need to focus on implementation and enforcement. Only then the ambitious plans of “Electricity for All by 2019”, “Make in India” and over 100,000 MW of RE capacity will become a reality.

The Bill would be delayed, as the Standing Committee is yet to give its report on the same.

“The Standing Committee will give its report on the proposed Electricity (Amendment) Bill 2014 by April and then we can introduce it in Parliament,” Power Minister Piyush Goyal

 

The copy of Electricity (amendment) Bill can be accessed here.

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