HAREDA announces amendments in Haryana Solar Power Policy, 2016

Recently Haryana Renewable Development Agency (HAREDA) announced amendments in the current guidelines for Solar Power Policy, 2016. The amendments  made in clause 4.3 are as under:

  • The wheeling & transmission charges are exempted for ten years from the date of commissioning for all the captive solar power projects who have submitted their projects registration to HAREDA.
  • Further, the projects should also have purchased land or have taken land on lease for thirty years & have bought equipment and machinery or should have invested at least Rs. one crore per Mega Watt for the purchase of equipment & machinery for setting up of such Captive Solar Power Projects till 13th February 2019.
  • Cross-subsidy surcharges and additional surcharges are not applicable for Captive Solar Power Projects as per provisions of Electricity Act 2003.
  • For determining the investment of Rs. One crore per MW, payment for equipment should be made into the bank accounts of equipment supplier before 13th February 2019 and proof of the same needs to be submitted.
  • There is no waiver on transmission charges, wheeling charges, cross-subsidy surcharges, and additional surcharges for solar projects for third party sale.
  • However, against the waivers already specified above, Renewable Purchase Obligation (RPO) benefit will be provided to Power Utilities as per RE Regulations 2017 with amendments from time to time.
  • Banking will be provided for captive/ third party solar generation projects. However, banking charges shall be applicable as per RE Regulations 2017 with amendments from time to time.

These amendments, however, have come in retrospection and will only be applicable to the existing captive solar plants.

Cabinet approves inclusion of Large Hydro Power as Renewable Energy

In a recent development, the union cabinet chaired by the Prime Minister approved to promote hydropower sector which includes large hydropower projects (HPO) as a part of the non-solar Renewable Purchase Obligation (RPO).  India is endowed with large hydropower potential of 1,45,320 MW of which only about 45,400 MW has been utilized so far. Only about 10,000 MW of hydropower has been added in the last 10 years. The hydropower sector is currently going through a challenging phase and the share of hydropower in the total capacity has declined from 50.36% in the 1960s to around 13% in 2018-19.

The details of the development are as below:

  • Large Hydropower Projects shall be declared as  Renewable Energy source (as per existing practice, only hydropower projects less than 25MW are categorized as Renewable Energy; this practice is also followed globally).
  • HPO will be a separate entity within non-solar Renewable Purchase Obligation in order to cover LHPs commissioned after notification of these measures (SHPs are already covered under Non-Solar Renewable Purchase Obligation). The trajectory of annual HPO targets will be notified by Ministry of Power based on the projected capacity addition plans in the hydropower sector. Necessary amendments will be introduced in the Tariff Policy and Tariff Regulations to operationalize HPO.

Analysis:

The immediate impact of the change is likely to be minimal for two reasons: (a) this change will be difficult and complex to implement (see below), and (b) large hydro capacity which sells power in open access or under APPC is likely to be very small, and new projects have a long gestation period.

Over the longer term, this can potentially have a significant impact on the RPO and REC mechanism, depending on the details of the implementation. Some of the impacted areas will be:

  • Non-solar RPO – It remains to be seen if additional HPO% will be incorporated in overall Non-solar RPO. Unless additional HPO is incorporated, existing projects under Non-solar REC mechanism and new capacities of wind projects will suffer as the demand for such power/ REC may reduce drastically.

Also, large hydro projects are very unevenly distributed across the country. If each state will be required to incorporate HPO in its overall RPO target, this may meet with stiff resistance from states that have very limited or no large hydro potential.

  • Non-solar REC – If large hydro projects are also awarded Non-solar RECs, this will likely bring a lot of new RECs in the market, potentially depressing the prices.

It is possible that on the lines of Solar RECs, Hydro-RECs are also created. However, this will bring its own challenge as many states are likely to resist HPO targets.

  • Implementation timelines – Having a new HPO target in state regulations will require amendments to several state regulations. At the same time, the REC mechanism will also have to be amended if Hydro-RECs are introduced. Overall, this change will take time to implement.

On the whole, this change will prove complex to implement and may meet with resistance from many states. One option available would be to just incorporate large hydro in the existing Non-solar RPO. However, this will have put a strong negative pressure of REC prices and future non-solar (primarily wind) capacity addition.

MPERC announces Amendments to the (Forecasting, Scheduling, Deviation Settlement Mechanism and related matters of Wind and Solar Regulations, 2018

Madhya Pradesh has recently announced the first amendment of the (Forecasting, Scheduling, Deviation Settlement Mechanism and related matters of Wind and Solar generating stations) Regulations, 2018. The commission has invited comments for the same till 14th March 2019. The Commission shall arrange a public hearing, if required, on 15.03.2019 at 11:30 AM at Commission’s Office.

The regulatory commission has also issued the procedure detailed the operating procedure for implementation of MPERC (forecasting, scheduling, deviation settlement mechanism and related matters of wind and solar generating stations) regulations, 2018.

The summary of the amendments in the DSM regulations are as follows:

Principal regulation

Proposed amendments

Regulation 2 (g) ‘Deviation’ in a time-block for a Seller means its total actual injection minus its total  scheduled generation and for a Buyer means its total actual drawal minus its total scheduled drawal, and shall form part of the State Energy Accounts to be prepared by
SLDC.
Regulation 2 (g) ‘Deviation’ in a time block for a Seller means its total actual injection minus its total scheduled generation.”
Regulation 2 (j) “Gaming’ in relation to these regulations, shall mean intentional misdeclaration of declared capacity by any seller in order to make an undue  commercial gain through Charge for Deviations; Regulation 2 (j) the word ‘declared’ shall be substituted by the word ‘available’.
Regulation 3 (2) These Regulations shall be applicable to Seller(s) and Buyer(s) involved in the transactions facilitated through short-term open access or medium-term open access or long-term open access in intra-state transmission or distribution of electricity (including intra-state wheeling of power), as the case may be, in respect of all wind generators having a combined installed capacity of 10 MW and above and solar generators with an installed capacity of 5 MW and above including those connected via pooling stations and selling power within or outside the State.
Regulation 3 (2) … Provided that these Regulations shall also be applicable to all wind & solar  generators selling power outside the State under open access and having a combined installed capacity of 1 MW and above.”

Regulation 4 (7) All State Entities shall make necessary arrangements for putting up suitable meters,
capable of recording energy flows at 15-minutes intervals, at the points of injection and drawal.
Regulation 4 (7) …providing AMR facility for data downloading remotely at SLDC.”

New added clauses 4(8) & (9)

“ (8) All wind or solar generators including those connected via pooling station shall have to appoint a common QCA which may be one of the generators or mutually agreed agency. If generators fail to appoint a common QCA within a period of one month from the date of issue of notice by SLDC, then SLDC shall advise the concerned licensee for disconnection of pooling station/feeder from the grid.  The licensee shall disconnect the pooling station/feeder from the Grid under intimation to SLDC.

(9) In case more than 50% wind or solar generators including those connected via pooling station have consented for a particular QCA, then remaining generators shall have to appoint the same agency as a QCA. In case of non-compliance of SLDC  instructions, SLDC shall advise the concerned licensee to disconnect the defaulting generators from the Grid The licensee shall disconnect the pooling
station/feeder from the Grid under intimation to SLDC.”

Regulation 5 (c) Settlement Period: Preparation and settlement of ‘Deviation Pool Accounts’ shall be undertaken on weekly basis coinciding with mechanism followed for regional energy accounts.

…Till such time, but not later than three months from the date of the notification, the complete weekly ABT meter data is received through AMR System or manual data download by MRI, the State Load Despatch Centre shall prepare and issue  Deviation Charges Account on monthly basis.
Regulation 10(1) Governance Structure and constitution of State Power Committee (1) Within three months from the date of notification of these Regulations, the State Load Despatch Centre shall formulate Operating Procedures and Business Rules for the constitution of State Power Committee, which shall be approved by the State
Commission
Regulation 10(1) is substituted as under:
“(1) Within two months from the date of notification of these Regulations, the State
Load Despatch Centre shall formulate “a State Power Committee and its functions” and submit to the for approval.”Commission  

Analysis of the discussion paper by CERC on Market-Based Economic Dispatch on a day ahead basis

Central Electricity Regulatory Commission (CERC) recently published a discussion paper titled “Market-based economic dispatch of electricity: Redesigning of Day-Ahead in India”. Currently, the Indian Power Sector is characterized by various players across all segments of the value chain viz. Generation, transmission, trading & distribution. Among the 29 states, there is a total installed capacity of 346 GW (as on sept. 2018) out of which 57% is coal, 13% is hydro, 21% RE, 7.2% gas & 2% nuclear.

Most of these generations are tied up in long-term power purchase agreements with the discoms and the rest in medium-term (5 years) & short-term (1 year). At present, the discoms self-schedule generation from the portfolio to meet the majority of their daily power needs & the remaining is procured through bilateral transactions with other discoms, through power exchanges or traders.

  • Issues with the current mechanism include:
    The present mechanism under the self-scheduling process does not mandate the discoms to declare the cost of their scheduled generation or the variable cost. This causes issues like leaving several low-cost generation capacities partially or sub-optimally utilized. (Because the discoms do not have visibility of other cheaper options nor do they have a right to acquire power from generation stations they do not have a contract with) This occurs because each discom operates in its own region, known as Un-requisitioned Surplus (URS).
  • The case of sub-optimal utilization of generation assets become all the more prominent when the actual generation of each state is combined together and is contrasted with the cumulative pooled generation.
  • Given that the discoms are not obligated to reveal the variable cost of the generation that they are scheduling, true system marginal cost is not known.
  • Self-scheduling often constrains the optimum utilization of renewable sources of energy. As the visibility of a discom is limited to its own territory, surplus renewable energy in the state is curtailed.

Proposed framework – Market-Based Economic Dispatch on a Day Ahead basis

The discussion above suggests a need for optimization of scheduling and dispatch of generation capacities through suitable market design. The proposed framework known as Market-Based economic Dispatch (MBED) model will be on a day-ahead basis and schedule and dispatch all generation on the economic principles with respect to the technical constraints.

  • The main objective of the model will be to meet the system load by dispatching the least-cost generation mix while ensuring the security of the grid.
  • Ensuring that the total cost (system cost) of the generation that meets the system load in all the time-blocks for a day is minimized.

The MBED model involves primarily two following aspects viz ‘Scheduling and Dispatch’ and ‘Settlement of contacts’.

The major difference in the existing framework and the proposed MBED model is: unlike in the current framework, the discoms acquire power specifically from their contracted generators whereas, in the proposed model, the discoms would bid into the power exchange for procuring power and meeting their demand. The generators are expected to bid based on their variable/marginal cost of generation. The existing bilateral contract holders will be paid the fixed cost separately outside the market and fit in the proposed model based on their variable/marginal cost.

The price settlement scenario

Discom’s payment = Discom’s load * MCP

Genco’s revenue = Genco’s total scheduled generation * MCP

⅀ Discom payment = ⅀Genco revenue (under no transmission constraint)

Bilateral contract settlement:

Long term contracts always have a fixed price already determined in the contract. Once the power for such contracts is settled at a market-determined price, the difference will be settled between the constituents. This is generally known as a “contract for difference” and is a well-established practice in more developed power markets.

Pros & Cons of the model:

Pros:

  • Better price discovery: since the entire power capacity in the country will be cleared through the market, price discovery will be more robust and more transparent.
  • Reduction of Un-requisitioned Surplus (URS): a possibility of some cheaper generation capacities not getting scheduled fully will be reduced since the process of self-scheduling will be ruled out.
  • Along with self-scheduling other challenges emanating from the practice of self-scheduling including lack of flexibility to meet seasonal and diurnal variation in demand will be brought down drastically.

Cons:

  • The function of Bilateral Contract Settlement (BCS) which is introduced in the model can also increase the rates of the trade and cause disruption if a proper process is not set up.

Implementation timelines:

  • Participation will be on a voluntary basis in the initial phase
  • After a year all the discoms and other consumers will be required to participate mandatorily

Conclusion:

Overall, the proposals outlined by CERC, when implemented will result in a radical transformation of the power markets in India. It will help eliminate inefficiencies and gaps that result from a bifurcated power sector. Like any large scale change, it will require significant preparation from all stakeholders for proper implementation, and will also take time to implement.  

 

REC Trade Result – February 2019

February’s trade session saw an increase in the price trend similar to the previous sessions.  The demand for both solar & non-solar remained consistent and the supply also increased. The highlight of this month’s trade was that solar crossed the price of INR 1,750 in the last session and reached at INR 1908 at PXIL (however, PXIL accounted for only 6.1% of the total cleared solar RECs volume).

Non-Solar: This session the RECs were traded at the price of INR 1555 at PXIL (55.5% above the floor price) and INR 1395 at IEX (39.5% above the floor price). A total of 8,32,085 RECs were traded in this session leaving an inventory of 24,50,796 Non-Solar RECs.

Solar: Total number of solar RECs traded in this session was 4,08,764. RECs traded at Rs 1908 at PXIL (90.8% above the floor price) and at Rs 1500 at IEX (50% above the floor price).

The overall trade volume (12,40,849 RECs) increased by almost 54.08 % from the last months’ trade volume (8,05,318 RECs).

Uttar Pradesh announces Deviation Settlement Mechanism Regulations, 2018

Uttar Pradesh Electricity Regulatory Commission (UPERC) recently announced the (Forecasting, Scheduling, Deviation Settlement and Related Matters of Solar and Wind Generation Sources) Regulations, 2018

The key points of the regulations are as below:

  • The regulations are applicable to all solar (excluding rooftop solar covered under UPERC RSPV regulations) and wind energy plants in Uttar Pradesh connected to the intra-state transmission system and having an installed capacity of 5 MW & above.
  • The solar or wind generation plants with an installed capacity of 5 MW or more, using the power generated for captive consumption will also be covered under these regulations.
  • Each pooling station having a minimum combined installed capacity of 5 MW will have one QCA, However, in case a particular solar or wind generator having a capacity of 50 MW or more, then such generators will act as a QCA provided that such generator is connected alone to a pooling station.
  • Wind and solar generators under these regulations will be required to provide metering with a provision for recording and storing all the load survey and billing parameters for every 15-mn time block as specific in CEA regulations governing metering.
  • A penalty will be imposed in case of failure of generator/QCA to provide data as directed by SLDC or error in the data provided as below:

  • In case of failure of the generators/QCA comply with the above timelines, a penalty of INR 25,000/- per day will be levied.

RERC publishes (Renewable Energy Obligation) (Fifth Amendment) Regulations, 2019

Rajasthan Electricity Regulatory Commission (RERC) recently announced (Renewable Energy Obligation) (Fifth Amendment) Regulations, 2019, which shall come into effect from 1st April 2019 provided that the revised RPO for FY 2018-19 shall become applicable from 1.04.2018. The original RPO target was 14.25% for FY 18-19. This has been reduced with retrospective effect.

Amendment in Regulation 4 of the Principal Regulations:

source: RERC

  • If the solar RPO compliance is achieved up to 80%, then the remaining shortfall if any can be met by excess non-solar energy purchase over and above the specified non-solar RPO for that particular year.
  • Similarly, If the non-solar RPO compliance is achieved up to 80%, then the remaining shortfall if any can be met by excess solar energy purchase over and above the specified solar RPO for that particular year.

source: RERC

(3) The RE Obligation for a distribution licensee including deemed licensee for FY 2018-19 and onwards shall be as under:
source: RERC

In our opinion, the reduction in RPO in FY 18-19 from 14.25% to 13.35% defeats the purpose of having RPO targets and runs afoul on various Aptel judgments.  

 

RERC announces draft REC regulations (third amendment) 2019

RERC announces draft REC regulations (third amendment) 2019

Rajasthan Electricity Regulatory Commission recently announced the draft Renewable Energy Certificate (REC) & Renewable Purchase Obligation (RPO) regulations 2019 (third amendment). The amendments are stated as below:

Original regulation Amendments
10. Pricing and purchase under REC mechanism

(2) The effective electricity component price during the operating period would be as under (a) For distribution licensee(s), shall be equal to the Pooled Cost of Power Purchase. For determination of Pooled Cost of Power Purchase for a particular year, Discoms shall submit a petition for computation of Pooled Cost of Power Purchase to the Commission latest by 30th June of the following year. The Commission shall issue an order relating to the Pooled Cost of Power Purchase within one month of acceptance of the petition. Till the issue of order regarding the Pooled Cost of Power Purchase, the Pooled Cost of Power Purchase of the previous year shall continue to be valid as Provisional Pooled Cost of Power Purchase. After the issue of an order for the Pooled Cost of Power Purchase by the Commission, the difference with the Provisional Pooled Cost of Power Purchase shall be adjusted equally in the bills of the next four months or as decided by the Commission in the order determining the Pooled Cost of Power Purchase for that year. (b) For sale to Open Access Consumers or a Captive User, it shall be at a mutually agreed price

“(2) The effective electricity component price applicable w.e.f. 1.04.2019 to the projects commissioned up to 31.03.2019 shall be as under The electricity component price of energy supplied by a RE project to distribution Licensee(s) shall be Rs 2.67/unit. This rate shall remain applicable for its remaining useful life, for which PPA shall be extended accordingly. Provided that such projects may also use such electricity for self-consumption or sell electricity at a mutually agreed price to other entities.”
10.  Pricing and purchase under REC mechanism

(4) Purchase of electricity component from the Renewable Energy having been issued REC would not be counted in fulfillment of RPO and would not be mandatory. Provided that with the tor, the pricing methodologies for electricity component and REC shall be reviewed at periodic intervals as may be considered appropriate by the Commission

(4) “Purchase of electricity component from the Renewable Energy having been issued REC would not be counted in fulfillment of RPO.”
12. Pricing options for new renewable energy projects to be commissioned during the Operating Period

(1) All the new renewable energy projects commissioned during the Multiyear Control Period, after coming into force of these Regulations and which do not have PPA prior to coming into effect of these Regulations for purchase of Renewable Energy shall have the option of either following the tariff structure and other conditions as stipulated in the RERC (Terms and Conditions for Determination of Tariff) Regulations, 2009 as amended from time to time, subject to agreement of licensee or adopt pricing of the REC mechanism.

“ In case RE generator under REC mechanism wishes to opt out for REC mechanism and if the Discoms agree to purchase the renewable energy they may extend the PPA at the tariff not exceeding Rs 3.17/unit for remaining useful life of the plant and in such case the electricity purchased would be counted towards fulfillment of RPO and RE Generator would not be entitled to REC Certificate. Provided that above provision of the regulation shall not be applicable to an entity whose accreditation/registration has been a progressive development of the electricity revoked by the State / Central Agency.”

Tamil Nadu announces final solar energy policy 2019

Tamil Nadu Energy Development Agency announced the final Tamil Nadu solar energy policy 2019. The policy intends to include solar energy in demand side management, energy conservation, energy efficiency, smart grids etc.the policy also talks about encouraging public-private partnerships, joint ventures etc. to accelerate solar energy projects, manufacturing facilities, and R&D.

  • Tamil Nadu intends to have an installed capacity of 9,000 MW by 2023, of which 40% is intended to come from rooftop solar plants.
  • The policy is applicable to both utility & consumer category systems.

Utility category: where the objective is sales of solar energy to a distribution licensee or a third party or self-consumption at a remote location (wheeling). For these systems, the grid connection is through a dedicated gross metering interface.

Consumer category systems: where the objective is self-consumption of solar energy and export of surplus energy to the grid. For these systems, the grid connection is through a consumer service connection of a distribution licensee.

  • The tariffs will be based on market-based competitive bidding & net feed-in tariff decided by TNERC time to time.
  • TNERC may introduce Time of Day (TOD) solar energy Feed-in tariffs to encourage solar energy producers & solar energy storage operators to feed energy into the grid when the energy demand is high.

Types of solar plant models:

  • Upfront ownership: The purchaser of the solar system pays the supplier for the capital cost and takes ownership of the solar system.
  • Deferred ownership: The solar system is installed and operated by the supplier. The purchaser makes system performance-based payments to the supplier or leases the system from the supplier. System ownership is transferred to the purchaser on a mutually agreed date or is triggered by a mutually agreed event.

Incentives:

  • Rooftop solar plants will be exempted from electricity-tax for two years from the date of the policy.
  • Solar energy injected into the grid of the distribution licensee by solar energy producers who have no renewable energy purchase obligations (non-obligated entities), including the solar energy export by non-obligated electricity consumers, can be claimed by the distribution licensee towards the fulfillment of their Renewable Energy Purchase Obligations (RPO).
  • The government will provide land for the development of solar system manufacturing components in the state, components like solar cells, inverters, mounting structures, and batteries etc.

Grid connectivity and Energy evacuation:

  • For consumer category solar PV systems, the system capacity at the service connection point shall not exceed 100% of the sanctioned load of the service connection.
  • For high tension consumers, open access regulations of TNERC will apply, subject to the conditions imposed by SLDC. However, wheeling for less than 1 MW shall not be allowed.

TEDA and TANGEDCO will be the leading government agencies in implementing the new solar policy in the state of Tamil Nadu.

REC trade result – January 2019

The price increase trends of the last few months continued in January as well.  The demand for both solar & non-solar remained consistent while the supply remained limited. The highlight of this month’s trade was that solar crossed the price of INR 1,500 in the last session and reached at INR 1750 at IEX.

Non-Solar: This session the RECs were traded at the price of INR 1501at PXIL (50.1% above the floor price) and INR 1500 at IEX (50% above the floor price). A total of 4,91,890 RECs were traded in this session leaving an inventory of 19,39,720 Non-Solar RECs.

Solar: Total number of solar RECs traded in this session was 1,18,526 (33.12% decrease from the last months’ trade). RECs traded at Rs 1500 at PXIL (50% above the floor price) and at Rs 1750 at IEX (75% above the floor price).

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