Karnataka announces APPC for FY 2018-19

Recently Karnataka Electricity Regulatory Commission has announced the provisional Average Pooled Power Purchase Cost for FY 18-19. The revised APPC for FY 2018-19 is INR 3.64/unit with effect from 1st April 2018. The variation of INR 7 paisa/unit from last year’s APPC INR 3.57/unit will be paid by ESCOM’s to the RE generators concerned in three equal monthly installments for the energy supplied under APPC during 1st April 2017 to 31st March 2018.

The trend of APPC in Karnataka in the past years is as follows:

Proposed amendments of Electricity Act, 2018

The Ministry of Power of India has recently announced the draft proposed amendments to the Electricity Act, 2003. The proposed amendments aim to be in line with the country’s changing electricity markets and systems, with their large renewable capacities and the emergence of a smart grid network.
The Amendment proposes important changes in renewable energy, cross-subsidy, open access, operations & responsibility of ERCs, and many other changes. Some of these are discussed in brief below:

Renewable Energy

The EA Amendment 2018 proposes several amendments that are favorable to the RE sector. Some of these are:

  • Definition of Renewable Purchase Obligation and Renewable Generation Obligation introduced.
  • RPO has been separately defined. Related to this, the definition of “Obligated Entity” has also been introduced.
  • RGO means the Renewable Energy Generation capacity required to be established to be procured from Renewable Energy Sources, and sale of such energy along with the electricity generated from the coal or lignite based thermal generating station, by a generating company establishing a coal or lignite based thermal generating station.
  • Introduction of renewable energy service company which provides renewable energy to consumers in the form of electricity.
  • Introducing policies in order to support RE sector like National Renewable Energy Policy to promote smart grid, ancillary support, and decentralized distributed generation in accordance with the provisions of the Act;
  • A penalty of maximum Rs. Fifty lakh for non-compliance of RGO. (Reduced from 1 Cr. to 50 Lakh, the earlier penalty was on 1 lakh.)
  • For non-compliance of RPO, an additional penalty is proposed, which shall be minimum of Rs 1 per unit with a maximum of Rs 5 per unit depending on the extent of the shortfall.
  • Generation and supply of renewable energy will not require any license for such generation and supply.

Cross-subsidy

The draft EA Amendment proposes (a) time-bound reduction in cross-subsidies (CSS), and (b) CSS to be not more than 20% of the wheeling charge. These provisions are nothing new. The EA 2003 also included provisions for reduction of CSS. But these were watered down later.

 

The proposal that CSS be 20% of wheeling charges is significant, as if implemented, it will reduce CSS significantly. Also, the provision for charging “additional surcharge” is proposed to be deleted – this will also have a significant impact as in recent years states have used high additional surcharge as a tool to discourage open access.

Open Access

The draft EA Amendment states the following with respect to open access:

“With effect from the commencement of the Electricity (Amendment ) Act, 2018, all consumers having a connected load of 1 Mega Watt and above with the power system, may procure at their option electricity through open access under contractual agreement from any generating company, trading licensee, or from any other source.”

This implies automatic open access, without the need for permission from the Discom. If implemented, this will be a radical change and can potentially transform the electricity market in the country.

Separation of Carriage and Content

One of the key provisions in the previous EA amendment (proposed in 2014) was the separation of carriage and content – i.e. further breakup of the Discom into supplier and network operator, and also allowing multiple suppliers in the area of the Discom. This proposal was met with significant resistance from the state when the Standing Committee of the Parliament viewed the amendment. As a result, the current amendment, while retaining the provisions, has significantly diluted the scope of carriage and content separation by leaving it entirely to the decision of the state government.

In our opinion, this is a pragmatic approach, as it may allow the passage of the EA Amendment act without significant resistance from the states. However, the flip side of this approach is that such a reform will take a long time to be realized on the ground, and there will be significant differences between states. The EA2003 has heralded the break-up of Electricity Boards into Genco, Transco and Discom’s. Fifteen years on, the separation is still only partially effective in most states.

Others

  • Subsidy to be provided only through “Direct Benefit Transfer”. This can be a potential game-changer for the Discoms, and even for the entire sector. Today, subsidies are paid through the Discom, which, even though is a commercial entity, often works as a government arm. If DBT is introduced, it can pave the way for genuine Discom reforms on commercial principles.
  • Every proceeding before the Appropriate Commission shall be decided efficiently. Matters related to passing through in tariff on account of change in law/duties/taxes etc shall be decided in a maximum of 30 days. All other matters will be disposed of within 90 days. Regulatory Commission shall have all the powers of a civil court.
  • Development of market: Another important change has been the mandate to promote forward and futures contracts in electricity.

Conclusion

We believe that the proposed changes will have a wide and deep impact on the electricity sector. The promotion of RE and removal of roadblocks 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, by watering down the provisions for the same and giving states the choice to implement is a pragmatic way the government has adopted to allow the passage of EA Amendment. In any case, this change is likely to take a long time to start showing on the ground.

Another radical change proposed is of paying subsidies through “Direct Benefit Transfer” only. This can be a potential game-changer for the sector and can pave the way for genuine Discom reforms on commercial principles.

The Infographic displayed above analyses the extent of usage of certain keywords in Electricity Act 2003, Draft EA amendment bill 2014 and the latest Draft Electricity Act 2018. The graph is prepared to understand how the government’s priority has evolved over the years from only conventional power to renewable energy as well.

The word ‘Renewable’ is used 22 times in Draft EA 2018, 23 times in Draft EA bill 2014 and just 4 times in EA 2003. Similarly, Open Access is used 20 times in EA 2003, 32 times in Draft EA bill 2014 and 23 times in Draft EA 2018.

Terms like RPO and Smart Grid have no mention in EA 2003, while in Draft EA bill 2014 RPO was used once & smart grid 7 times whereas Draft EA 2018 smart grid was used 5 times and Franchisee was used the highest 8 times in Draft EA 2018. The term Cross Subsidy is used the least in Draft EA 2018 just once and 3 times in both EA 2003 and Draft EA bill 2014.

Tamil Nadu announces a draft solar energy policy 2018

TEDA has recently announced the draft solar energy policy 2018. Earlier the state had Tamil Nadu policy 2012 (one of the first solar energy policy in the country.) The state has announced for a vision Tamil Nadu 2030 wherein the solar energy target for the state is of 5,000 MW. Under the targets set by MNRE, TN aims for an installed capacity of 8,884 MW of which (40%) that is 3,553 MW is to come from consumer scale rooftop solar system. Tamil Nadu solar energy Policy 2018 intends to create a framework that enables an accelerated development of solar energy in the state. It also intends to facilitate open access to the public electricity grid of the state and create opportunities for a grid-connected distributed generation of solar power in order to reduce the dependence on fossil fuels.

Key points of the draft policy as below:

  • If a DISCOM fails to comply with the RPO mandates, penalties specified by TNERC for such non‐compliance shall be strictly enforced.
  • Solar grid feed-in mechanisms included in the policy are:

 

Solar  energy gross feed-in (utility scale) The solar energy is fed into the grid and sold to the distribution licensee or a third party under the open access facility. In the case of distribution licensees, the solar energy fed into the grid will be purchased by the distribution licensee at the prevailing solar energy tariff as determined by the TNERC or a tariff determined by a bidding process
Solar energy wheeling (utility scale) The solar energy is fed into the grid and credited in one or more service connections of the solar energy producer. Solar energy wheeling will be
applicable to all electricity consumer categories and tariffs and for electricity service connections at any voltage level
Solar energy gross feed-in (consumer scale) The solar energy is fed into the grid and sold to the distribution licensee. An extra energy meter will be installed that records the consumption of energy at the premises to record the energy fed into the grid by the distribution licensee. The energy will be sold to the distribution licensee at the tariff determined under this mechanism can also be sold to a third-party under Open Access.
Solar energy net feed-in The solar energy is used for self-consumption with the surplus, if any, being exported to the grid. A bidirectional service connection energy meter will be installed by the distribution licensee to record the imported and exported energy. The imported energy is debited at the applicable consumer tariff while the exported energy is credited on the basis of a consumer solar energy tariff to be determined by TNERC.
Solar energy group net-metering: To encourage solar plants on rooftops of buildings that cannot consume all of the energy generated locally, there shall be Group Net Metering, whereby surplus energy exported to the grid from a solar plant in excess of 100 percent of imported energy at the location of the solar plant can be adjusted in any other (one or more) electricity service connection(s) of the consumer within the State of Tamil Nadu.
Solar energy virtual net feed-in To give access to the solar net feed-in facility for consumers who do not have a suitable roof for installing a solar system (e.g. residential consumers who live in apartments, consumers with shaded rooftops) there will be the facility of Virtual Net Feed-In. In Virtual Net Feed-In consumers can be beneficial owners of a part of a collectively owned solar system. All energy produced by a collectively owned solar system will be fed into the grid through an energy meter and the exported energy as recorded by that the meter will be pro rata credited in the electricity bill of each participating consumer on the basis of beneficial ownership.

 

Various solar project implementing models:

 

  • Self-owned: Solar PV system is owned and operated by the building owner/user
  • RESCO (Renewable Energy Service Company) owned: The Solar PV system is owned and
    operated by a RESCO. The consumer pays the RESCO for the solar generation and makes
    use of the solar energy gross feed-in or net feed-in mechanism.
  • Lease: The consumer leases the solar PV system from a leasing company and makes use of the
    solar energy gross feed-in or net feed-in mechanism.

 

Any person or entity willing to put a solar project needs to abide by the building by-laws and Energy Conservation Building Code Compliance (ECBC). All the public buildings are mandated to meet 30% of their energy requirement from solar energy by 2022.

 

Solar energy imported by the distribution licensee from non-obligated solar energy producers (including electricity consumers with gross or net feed-in facilities) can be claimed by the distribution licensee towards the fulfillment of their renewable energy purchase obligations (RPO).
The Government of Tamil Nadu wishes to promote the manufacturing of solar energy components including solar cells, inverters, mounting structures and batteries in the state. The land will be identified for the development of solar manufacturing. A single window process for all departmental approvals, including a set time limit for each approval, is expected to be designed.
An incentive program will be designed to promote the co-utilization of land for solar energy projects, crop cultivation, and rainwater harvesting.

 

The policy is open for suggestions and comments to individuals, organizations, and institutions till 15th October 2018.

MPUVNL announces new decentralized solar policy and rooftop solar tariff reaches at INR 1.38/kWh

  • Madhya Pradesh Govt. recently introduced a decentralized solar policy to encourage the development of the decentralized RE projects and applications in the state. The policy allows decentralized RE systems of the following types:
  1. Grid-connected RE systems:
  • Category I: On Net-metering basis
  • Category II: Gross metering with wheeling and banking
  • Category III: For consumption within premises with no export of power (Reduction in the base load during the day)
  • Off-Grid RE systems
  • The policy also encourages Net-metering RE systems under the categories mentioned above. The system capacity for both grid-connected and off-grid is of 2 MW. Bulk consumers who are single point consumers are also eligible under the policy.
  • The maximum permissible capacity of the RE systems for all the Net-metered RE systems connected to a particular distribution transformer of the licensee’s grid shall be equal to the rated capacity of the said distribution transformer w.r.to MPERC Net metering regulations 2015.
  • In case the cumulative capacity of the proposed RE system exceeds, it is the distribution transformers responsibility to provide the infrastructure to accommodate the proposed capacity.
  • In the case of an LT Net metered consumer, the RE beneficiary will not bear the cost of the augmentation of the infrastructure, whereas, in case of the HT consumer, the infrastructure will be upgraded by the distribution licensee at the cost of the consumer.
  • In case installation of the decentralized renewable energy system for low tension (LT) consumer requires system augmentation, such as replacement of existing distribution transformer (DT) with a DT of higher capacity, the entire cost related to augmentation for the interconnection of the renewable energy system with the network of the DISCOM will be borne by the DISCOM. The DISCOM can claim it as part of the ARR filing.
  • Excess or surplus energy remaining banked with the distribution licensee at the end of the year will be settled at an Average Pooled Power Purchase Cost (APPC).
  • Ways to implement the RE projects under RESCO include:
  • Build Own Operate Maintain (BOOM): RESCO will Build, own and operate the system for its lifetime period and supply power to the consumer for the lifetime agreement. RESCO will uninstall the infrastructure once the lifetime period is over and build the roof in the same condition.
  • Build Own Operate Transfer (BOOT): RESCO will finance, develop own and supply power to the consumer from the RE system for the lifetime period under the agreement. Post the agreement period, the system will be transferred to the RE consumer as per the agreement, wherein the consumer can assign the RESCO for the O&M maintenance under the suitable agreement between both the parties.
  • Incentives on various charges are as follows: Open access to be available to all RE systems specified in the MPERC open access regulations 2015, Wheeling charges will be available to all RE systems as specified in the MPERC regulations. Further, Govt. of MP will provide a grant of 4% in terms of energy injected and the balance if any, shall be borne by the RE consumer.
  • Cross-subsidy is exempted for RE system under this policy and net metered systems are exempted from banking charges & wheeling charges as per MPERC regulation 2015. However, Category II, III and Off-Grid systems ate not exempted from the above-mentioned charges.
  • Electricty duty will not be applicable to the producer of renewable energy beneficiary, consumer, licensee for supply, sale or consumption of RE from generating systems installed under this policy for a period of 10 years from the date of start of supply.
  • Consumers connected at LT level will be exempted from electricty duty for a lifetime of the RE system.
  • The installation of the RE system on the premises of the RE beneficiary will not be considered in the Floor Area Ratio (FAR) and will be provided additional FAR for construction in the premises according to the capacity proposed as per the regulations by Urban Development & Housing Dept. Govt. of Madhya Pradesh.
  • Energy consumed from net-metered renewable energy system by a non-obligated entity qualifies towards renewable purchase obligation (RPO) compliance of the concerned distribution company (DISCOM). The DISCOM does not need to pay for such power.

In addition to the policy, in a new auction for the rooftop RE system, a new tariff of INR 1.38/kWh was discovered for the 35 kW rooftop capacity. The tariff has reduced more than the last discovered tariff for rooftop capacity auction at INR 1.58/kWh.

GUVNL announces tenders for 700 MW solar capacity in the state

The Gujarat Urja Vikas Nigam Limited (GUVNL) has tendered 700 MW of grid-connected solar photovoltaic (PV) power project which will be set up at Raghanesda Solar Park – Gujarat (Phase III). Key points from the tender are as below:

  • The bid-submission deadline: Nov 15, 2018
  • Pre-bid meeting: October 17, 2018
  • Objective: The capacity to be tendered is to fulfill the RPO and to meet the future requirements to the state DISCOMs.
  • Type of auction: Build Own Operate basis
  • The projects will be developed on three plots. While two plots have specifications for 250 MW each, the third one will have 200 MW of solar projects. The bidders can bid for the following capacities: 700 MW, 500 MW, 450 MW, 250 MW, or 200 MW. One must bid for the entire plot or a combination of two or three plots.
  • Earnest Money @ Rs. 10 Lakh / MW is to be submitted in the form of Bank Guarantee along with the Response to RfS.
  • PPA period: 25 years
  • The applicable land lease charges at the Raghanesda Solar Park has been set at ₹10,000/Hectare/Year with an increment rate of 15 percent every three years.

For this particular tender, GUVNL has not set any ceiling tariff. Also, the current tender is announced after the very competitive tariff discovered of INR 2.44/kWh in the last month’s 500 MW tender. Further, In a recent order, GERC has also imposed an additional surcharge of 0.44/kWh to all open access consumers who fall under GUVNL’s discoms. Renewable energy generators who also fall under the third-party sale category will have to pay the additional surcharge according to the order.

UPERC approves UPNEDA’s petition for fixing the ceiling tariff for 500 MW solar projects

UP New and Renewable Energy Development Agency (UPNEDA) and UP Power Corporation Ltd. (UPPCL) had filed a petition seeking approval for RFP & PPA for procurement of 500 MW Grid-connected solar power through tariff based competitive bidding discovering ceiling tariff-based competitive bidding discovering a ceiling tariff of INR 3.25/unit. UPERC has recently approved the petition and suggested certain changes in the PPA but largely accepting the petition as it is. The key points of the approved petition include:

  • Commercial operation date will be 21 months for projects of capacity less than 250 MW.
  • Commercial operation date will be 24 months for projects of a capacity of more than 250 MW.
  • Upper tariff ceiling will be ₹3.25/kWh if safeguard duty is included.
  • If safeguard duty is not included, upper tariff ceiling will be ₹3.10/kWh.
  • Financial closure must be attained within 365 days of PPA signing.

The changes suggested by the commission are:

  • The document talks about providing 210 days time for the submission of technical Feasibility of connectivity of the plant to the STU substation. The commission suggested that in case the STU is not in a position to provide connectivity to the proposed solar plant due to technical issues, then the PPA should be considered unfruitful without any financial liability on either party.
  • The commission is of the opinion that since the power is always procured in kWh or Million Units (MU) and not in MWh. It should be specified in the PPA that the power will be procured in kWh or MU but the bidding will be done in MWh.

 

Power Tariff peaks a decade-high in the spot Day-Ahead Market

The power tariff on Sunday the 30th of September 2018 touched a decade -high due to low hydro and wind energy production and coal shortage at thermal plants. The spot power price for supply touched 17.61/unit in spot trading on IEX on Sunday. The average spot power price was also high at INR 7.64/unit at the stock exchange on the same day. The power price has seen an upward trend in the day-ahead market (DAM) with 14.09/unit last week. A total of 271 MU (million units) were sold for supply on Monday. In the DAM trading session which concluded on Sunday at IEX, there were buy bids for 306 MU against sell bids for 357 MU.

The average spot price MCP trend for the past week is as below:

The upward trend of the power tariff suggests that the prices discovered on the exchange has taken an uphill and buyers now are residing to other options than exchanges for power purchase.  Notably, there has also been a coal shortage in the power plants and the power minister of the country has asked the state power generators to strengthen their coal mining wing.

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