REC Trade Result March 2016

March, being the last month of the Financial Year to fulfil the yearly RPO obligations, saw significant rise in demand in both the Solar and Non-Solar segments, as compared to the last three months. Non-Solar RECs demand almost doubled and Solar RECs demand rose by 68.45%, as compared to February. This was the result of stricter compliance and can also be attributed to the recent Ad by MNRE asking all entities to fulfil their obligation. The total transaction value stood at 213.3 Crores as compared to 119.5 Crores last month.

Analysis of Trading:

Non Solar – Clearing ratio in exchange stood at 7.65% and 8.93% in IEX and PXIL respectively for Non Solar REC’s. A total of 11, 14,319 RECs were traded as compared to 586,501 RECs traded in February. Overall, it was a good recovery in this segment, which also saw the closing Inventory come down marginally.

Solar – Clearing ratio stood good at 5.07% and 3.35% in IEX and PXIL respectively, with total clearing volume of 152,006, as compared to 90,236 last month. The recovery was good, but contrary to the Non-Solar inventory, the solar inventory showed no reduction.

 

As compared to March-2015, where the Non-Solar and Solar demand stood at 654985 and 68982 respectively, it was 70% and 120% higher for Non-Solar and solar respectively, in March-2016. However, the closing inventory for the FY stands at 13.28 million and 3.31 million for Non-Solar and Solar respectively, worth close to Rs. 3151 Crores. April-2015 trading saw huge clearance due to late fulfillment of obligations, and the same can be expected next month as well.

We are hopeful that the FY 2016-17 will bring good fortune to the REC market, considering the proposed regulatory changes and more stricter enforcement by states, which will bring back stakeholders confidence.

Analysis of Draft Regulations on Forecasting and Scheduling of Wind and Solar Generating Stations at State level in Jharkhand

In the follow-up after the FOR – Model Regulation for the Intra State level projects, JSERC has come out with a Draft Regulation on Forecasting & Scheduling for the Wind & Solar projects at Intra State level in Jharkhand, based on the mechanism suggested in the Model Regulation. Earlier Odisha, Madhya Pradesh, Karnataka, Tamil Nadu and Rajasthan, had come out with their DSM Regulation on Forecasting & Scheduling of Wind & Solar.

Executive Summary:

  • The regulation will be applicable till 31st March, 2021, after it comes into effect.
  • Forecasting and scheduling will be mandatory for all Wind & Solar Pooling S/Ss, irrespective of their capacity, commissioning date and connectivity voltage level.
  • Deviations will be calculated on the basis of available capacity.
  • Penalty is a fixed amount beyond the error range (15% in case of projects commissioned before, and 10% for projects that are commissioned after the date of implementation of the regulation.).
  • Settlement will be done through the “Qualified Coordinating Agency” or QCA. However, the draft regulation does not mention anything about “aggregation” beyond the Sub-station level forecast.
  • SCADA & Telemetry data is to be mandatorily provided to SLDC.

Detailed Analysis:

JSERC has recently come up with draft regulation for forecasting and scheduling and deviation settlement mechanism. The primary objective is twofold: a) facilitate large-scale grid integration of solar and wind generating stations even though there are no wind projects, and the potential for wind is negligible b) maintaining grid stability and security. Highlights of the draft regulation are below:

Applicability: All Wind & Solar Pooling S/Ss, irrespective of their capacity, commissioning date and connectivity voltage level, have to provide day-ahead and week-ahead schedule, and intra-day revisions to a maximum of 16 per day.

- Revisions can be made on a one-and-half hourly basis, with prior notice of minimum1 hour for each revision.

- Payment for generation shall be as per actual generation (this is different from the inter-state regulation and the Karnataka draft regulation, where payment is on the basis of scheduled generation).

- Error is calculated based on Available Capacity (this is same as in the case of draft regulations of TN, MP, Odisha & Rajasthan, but different from the Karnataka draft regulation, where error is calculated on the basis of scheduled generation.).

- The deviation slab has been kept as (+/-)15% for existing generators, and (+/-)10% for upcoming projects whose commissioning date lies after the date of implementation of the final regulation.

- Penalty is calculated at fixed amounts per unit (whereas, for Inter-state it is calculated as a percentage to PPA rate).

- RPO accounting can continue as per existing arrangement, and needs no change.

- De-pooling shall be done based on either actual generation or available capacity.

Detailed Mechanism defined for Deviation Settlement

 

This is in line with the FoR Model Regulation, which states like TN, Odisha, MP and Rajasthan have also followed. This will help bring the evenness in the impact on generators, considering that the older RRF regulation had put huge liabilities on generators especially in the low wind season.

The penalty mechanism based on % deviation for all obligated generators:

The draft regulation was notified on 24th March, 2015, and has given time till 11th April, 2016, to submit comments to the Secretary, JSERC.

Other states like Maharashtra, Andhra Pradesh, Telangana and Gujarat are expected to follow soon with their draft regulations. A brief comparison of the draft regulation of the 6 states and the Model Regulation, is given in the table below:

Old/New – Refers to Old and New projects, w.r.t. the date of implementation of the final regulation.

TBA – To be announced.

 The regulation can be accessed Here.

 

 

Draft Policy for Repowering of the Wind Power Projects

The Ministry of New & Renewable Energy in consultation with various stakeholders including the Industry and States recently came up with the Draft Policy for Repowering of the Wind Power Projects with an objective to promote optimum utilization of wind energy resources. Some of the key pints of the policy are mentioned below:

  • All the wind turbine generators with the capacity of 1MW or below would be eligible for repowering.
  • The Policy offers incentives in form of an additional interest rate rebate of 0.25% over existing rebate available to the new wind projects by IREDA.
  • Secondly through benefits like Accelerated Depreciation or GBI that would be made available to the repowering project.
  • The power generated corresponding to average of last three years’ generation prior to repowering would continue to be procured on the terms of existing PPA.
  • Augmentation of transmission system from pooling station onwards to be carried out by the respective STU.
  • During the period of execution of repowering, wind turbines would be exempted from not honoring the PPA for the non-availability
  •  Similarly, in case of repowering by captive user they will to be allowed to purchase power from grid during the period of execution of repowering.

 

The Policy can be accessed here.

 

CERC determines Benchmark Capital Cost Norm for Solar PV and Solar Thermal power projects applicable during FY 2016-17

The Central Electricity Regulatory Commission vide its final order on 23rd March, 2016 determined the Benchmark Capital Cost Norm for Solar PV and for Concentrated Solar Power (CSP) projects for 2016-17. In case of determining the capital cost for Solar Photo voltaic, many parameters were considered like the Land cost and cost of PV modules etc.

The graph below depicts the change in the total capital cost from FY 2012-13 to FY 2016-17 and the % change year on year. The capital cost of Solar PV has decreased approximately by 68%  from  FY 2012-13.

 

 

In case of Solar Thermal, Commission had proposed to retain the benchmark capital cost of Solar Thermal power projects at INR 12.0 Crore / MW for FY 2016-17 (which remained the same in FY14-15 and FY 15-16). After reviewing all the comments and suggestions the Commission came up with the following order:

“Given the nascent stage of technology for Solar Thermal, the Commission has proposed to retain the benchmark cost without any decrease. At this point, it is not feasible to further increase these prices. The Commission decides to retain the benchmark capital cost for Solar Thermal power projects at INR 12.0 Crores / MW for FY 2016-17.”

The final order for FY 14-15 can be accessed here.

The final order for FY 15-16 can be accessed here.

The final order for FY 16-17 can be accessed here.

Haryana Solar Policy 2016

Recently Haryana has released its new Solar Policy dated 3 March 2016 effective from the date of notification.

 

The policy promotes both Ground mounted and Solar Rooftop installations. The Solar Purchase Obligation is also hiked to 3% by 2021-22, which may further increase to 8% under the ambitious plans of MNRE to promote Solar Generation by adding 100 thousand MW of Solar Power Nationwide, This would mean the installed capacity in Haryana would rise up to 3200 MW.

 

 

  • The Policy promotes development of Solar Parks through a joint Venture company has been formed by HSIIDC and HPGCL named “Saur Urja Nigam Haryana Limited” (SUN Haryana)

 

  • The Government of Haryana will also facilitate the lease/sub-lease of Panchayat land through SUN Haryana (Saur Urja Nigam Haryana) or directly for setting up of Solar Power Projects for minimum period of 30 years.

 

  • To harness the solar potential in the state the State Government shall provide Capital /generation subsidy/ incentives to Schools, Private and Public Institutes hospitals and commercial buildings for installation of rooftop solar power plants.

 

  • A total capacity of 1600 MW rooftop solar power plants shall be added by the Year 2021-22.

 

  • All new projects of MW scale generating solar energy will be treated as “Industry” in terms of Industrial Policy of the State. Thus all the incentives available to industrial units under the industrial policy from time to time, shall also be available to the solar power producers/units

 

  • Also the Solar Policy provides exemptions like Land use approval, External Development Charges, scrutiny fee and infrastructure development charges also Environment Clearance, Clearance from Forest Department, Stamp Duty for lease of land for projects

 

 

However the most progressive aspect of the solar policy is the Exemption on Electricity Duty Electricity Taxes & Cess, Wheeling, Transmission & distribution, cross subsidy charges, surcharges and Reactive Power Charges will be totally waived off for Ground mounted and Roof Top Solar Power Projects in the state of Haryana.

 

Banking

 

The banking facility shall be allowed for a period of one year by the Licensee Utilities and IPP will pay the difference of Unscheduled Interchange charges (UI Charges) at the time of injection and at the time of withdrawal. However, Withdrawal of banked power should not be allowed during peak and Time of Day (TOD) hours. If the banked energy is not utilized within a period of twelve

Months from the date of power banked with the concerned power utilities/Licensee, it will automatically lapse and no charges shall be paid in lieu of such Power. The banking facility shall be allowed for the grid connected rooftop solar power Projects on the same pattern as per MW scale projects.

The Policy can be accessed here.

Jharkhand Draft RPO Regulation

The Jharkhand State Electricity Regulatory Commission (JSERC) in a recent notification has proposes its RPO (Renewable Purchase Obligation) and its compliance regulations 2016. The regulations will come into force from the date of its publication in the Jharkhand gazette and shall remain in force upto 31st March 2020.

RPO applicable to following category:

  1. Distribution Licensee
  2. Grid Connected Captive Generating plant with installed capacity of 5 MW and above
  3. Open Access Consumer having contract demand of 1 MVA or consume electricity procured from fossil fuel based generation.

The draft notification proposes the minimum percentage of its total consumption for Obligated Entities during a year is shown below:

Minimum Quantum of purchase in (% ) from renewable energy sources (in terms of energy in KwH)
Year Solar Non Solar Total
2016-17 1.50% 3.50% 5.00%
2017-18 2.25% 4.25% 6.50%
2018-19 3.25% 5.25% 8.50%
2019-20 4.50% 6.50% 11.00%

 

Apart from the RPO Targets the commission has also proposed penalty for non-compliance by obligated entity which fails to meet its compliance during any year.

Commission has proposed penalty under Section 142 of the Act and forbearance price penalty on the basis of shortfall in units and may direct the obligated entity to deposit it in separate account and provided that as directed by commission funds may be used for purchase of certificates.  Distribution licensee shall be in breach of its license if it fails to deposit the amount within 15 days of the communication and penalty will not pass through in Aggregate revenue requirement.

Commission has proposed priority for open access and connectivity within distribution system or transmission system as case may be irrespective of installed capacity for RE Projects in the state.

Comments:

  • RPO% proposed is way lower than NAPCC RPO target which is 15% by 2020.
  • Solar RPO proposed is not in line with the National Tariff Policy 2016 which has defined Solar RPO % to be 8% by 2022
  • RPO for Open Access is only proposed on conventional consumption while it should be on all consumption
  • CGP installed capacity of 5 MW must be reduced to 1 MW for RPO Applicability
  • Commission should allow existing projects to participate in REC Mechanism after three years of prior termination of PPA as defined in CERC REC Regulations.

The order can be accessed here.

MNRE Issues Notice on RPO compliance

The Ministry of New and Renewable Energy in collaboration with Government of India has made a great initiative by spreading the message about RPO and the need for its compliance through Times of India.  The Government highlights that all the obligated entities must comply with their RPO by March 15-16 since this trading session will be the last trading session of the compliance year, whose result calls for stricter enforcement by states. The Times of India’s article can be viewwd below

Analysis of Draft Regulations on Forecasting and Scheduling of Wind and Solar Generating Stations – Rajasthan

CERC had notified forecasting and scheduling (F&S) regulation for inter-state sale of power a few months back. Subsequently, the Forum of Regulators (FoR) had come up with model regulations for forecasting and scheduling at the intra-state level. Rajasthan has published the draft forecasting and scheduling regulations

in line with the FoR model Regulations. Rajasthan is the fourth state to do so in recent days – MP, Karnataka and Tamil Nadu are the others.

Executive Summary:

  • The regulations will be applicable on all wind and solar generators with individual or combined capacity of 5MW and above that are connected to the state grid
  • Deviation will be calculated on the basis of available capacity
  • Settlement with the buyer will be on the basis of actual generation

Qualifying Coordinating Agency (QCA) will play a key role in the total process. QCA will be  responsible for forecasting, telemetry, scheduling and settlement of deviation.

The draft regulations are in-line in every aspect with the model F&S regulations released by FoR earlier. However, the model FoR regulations had proposed a 10% deviation band for new projects and 15% for existing projects. Rajasthan has proposed a 15% band for all projects.

Detailed Analysis:

Forum of Regulators have recently come up with model regulation for forecasting and scheduling and deviation settlement mechanism. The primary objective is two fold :

a) facilitate large-scale grid integration of solar and wind generating stations, and b) maintaining grid stability and security.

Highlights of the regulation are below: -

  • All solar and wind generators connected to State grid have to provide day-ahead and week-ahead schedule – Revisions can be made on a one-and-half hourly basis.
  • Payment for generation shall be as per actual generation (this is different from the inter-state  regulation, where payment is on the basis of scheduled generation).
  • The deviation slab has been kept as (+/-)15% for all generators at Intra-state level.
  • Penalty is calculated at fixed amounts per unit (whereas, for Intra-state it is calculated as a percentage to PPA rate) -
  • RPO accounting can continue as per existing arrangement, and needs no change.

The SLDC will also conduct a forecast of its own with the primary purposed of ‘secure grid operations by planning for the requisite balancing  resources.

Applicability of Regulations

  • All wind and solar generators connected to the State grid are covered:
  •  Having capacity of 5MW and above individually or in aggregate.
  • Regardless of date of commissioning.
  •  Including those connected via pooling stations
  • Selling power within or outside the state. Detailed Mechanism defined for Deviation.

Settlement calculation or Intra-state sale of power is as follows:

Detailed Mechanism defined for Deviation Settlement  calculation or Intra-state sale of power is as follows

In case of Intra-State transmission, Penalty Mechanism for existing generators :

The Draft Order can be accessed here.

 

CERC (Terms and Conditions for Exchange of ESCerts) Regulations, 2016xchange of ESCerts) Regulations, 2016

Background

An important part of the Perform, Achieve, and Trade (PAT) mechanism for Energy Efficiency is the ‘trading’ aspect. PAT Cycle I was completed last year and the next logical step in the process is the trading of Energy Saving Certificates (ESCerts).  For a detailed analysis of the PAT scheme, see our Newsletter  Vol. 47 January 2015.

 

The actual ‘trading’ may soon become a reality as CERC recently came out with draft regulations that will govern such trading on power exchanges. A brief analysis is below:

 

Draft Regulation:

The draft Regulations has proposed to assign the responsibilities to BEE, CERC and POSOCO:

 

BEE:BEE shall discharge the role of Administrator of ESCerts and shall provide assistance to the Commission in the matters involving exchange of ESCerts on Power Exchanges and shall coordinate with the Power Exchanges and Registry for smooth interface for Exchange of ESCerts

 

CERC : CERC would function as the Market  Regulator.  In its role as Market Regulator, the draft Regulations proposes to  approve the procedure for interface activities between Power Exchanges and Registry, Administrator and Registry, and Registry and Designated Consumer And monitor the operations and performance of Power Exchanges with regard to exchange of ESCerts ;

 

POSOCO: During the introduction of Renewable Energy Certificates ( RECs) , POSOCO was mandated to act as the Registry.  Ministry of Power has assigned the

function of Registry of ESCerts trading to POSOCO for the exchange of ESCerts on the Power Exchanges .  In its capacity as the Registry for ESCerts, POSOCO is envisaged to discharge the following important functions:

 

  • Assistance in registration process of ESCerts including crediting of ESCerts to DCs after approval from MoP,
  • Guidance on dealing in the process of ESCerts trading/ exchange
  • Coordination and information dissemination with DCs, Power Exchanges, BEE and Regulator (i.e. CERC)

 

Issuance of ESCerts:

  • The DCs would be issued ESCerts in electronic form in a cycle period for achieving specific energy consumption less than the energy consumption norms and standards notified by the Central Government for the cycle period, under Energy Conservation Rules, and subsequent cycles, who have held such certificates in Registry accounts.

 

  • The DC’s whose specific energy consumption shall be more than the prescribed energy consumption norms and standards specified for a cycle period and subsequent cycles and who wish to comply with the prescribed energy consumption norms and standards using ESCerts in lieu of implementing energy conservation and energy efficiency improvement measures shall be entitled to purchase the ESCerts to meet compliance with the norms and standards prescribed under

 

The Certificate issued to eligible entities by the Government on the recommendations of the Bureau could be transacted on any of the Power Exchanges by the ESCerts holder.

It’s important to note that BEE has proposed that ESCerts have no floor or forbearance price. Pricing will therefore be determined purely through demand and supply of ESCerts. Initial analysis suggests that there will be significant oversupply of ESCerts, leading to low prices. However, its important to note that companies have the choice to ‘bank’ ESCerts to the next cycle – this feature may have the effect of a floor price as if the trading price is lower than the cost of achieving energy savings, the company will be better off banking the certificates rather than trading them.

 

The regulation can be accessed here.

 

Key provision for Renewable Energy industry in the Union Budget 2016

The Union Budget 2016 was a mixed bag for the RE industry. The key provisions that will impact the industry are:

 

  • Reduction in accelerated depreciation (AD) on RE investment – the rate of AD will be reduced from 80% to 40% from April 1, 2017. AD has been historically an important driver of investment in the RE sector. However, off-late IPPs (who generally do not use AD benefits) have become the key driver of investment in the sector. Nevertheless, this change will reduce demand for RE investment. FY 2016-17 is likely to see a spurt in investment under AD as investors rush to complete projects before the lower rate becomes effective.
  • Increase in coal cess – Coal cess has been doubled from Rs 200/ ton to Rs 400/ ton. The proceeds from this cess fund the National Clean Energy Fund (NCEF). NCEF is used for a variety of reasons like Ganga Rejuvenation, proposed payments to states for deviation resulting from wind and solar, and is often not used at all (absorbed by the government to meet fiscal deficit targets).
  • Allocation of funds to MNRE has increased from  Rs 262 crore in FY 15-16 to over 5,000 crore in FY 16-17. These will potentially kick-start large projects.                                                                                                                                                                                                                                           * 1Article titled “Govt uses green energy fund for fiscal balancing”, dated April 21, 2015, Mint newspaper . 

    The article can be accessed here.

     

 

 

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