GUVNL’S BIDDING FETCHES TARIFF OF Rs 2.65

In a bidding which took place on 19th September 2017 for a 500 MW solar plant of Gujarat Urja Vikas Nigam Ltd. (GUVNL), the lowest price determined was Rs 2.65 per unit. This was slightly higher than the price of Rs 2.44 determined in the last reverse bidding by SECI. This increase in the price determined was attributed to the implementation of GST and the increase in the cost of solar panels being imported from China.

A continuous decreasing trend has been seen in the tariff determined for solar projects in the Country this year. The following graph determines the trend in prices of solar power determined in the past:

The article can be accessed here.

CEA’S DRAFT NATIONAL ELECTRICITY PLAN

Central Electricity Authority  (CEA) published the Draft National Electricity Plan (NEP). Following are some of the main features of the report:

  • For the 12th plan (2013-2018), target capacity addition from renewable energy was set at 30,000 MW. However, in view of the revised target of adding 1,75,000 MW capacity of renewable energy sources by the year 2022, the capacity addition for every year has been revised. A target of 16,825 MW has been set for capacity addition in 2016-2017. As per the review, capacity addition from conventional sources is going to exceed its target by 115% and private players will play a big role in capacity addition. Coal based plants are likely to contribute around 39% of capacity addition.

  • Projections for peak demand and energy requirement has been done for utilities for which two scenarios have been considered in the report for the years 2021-22 and 2026-27. One is with the consideration of DSM, energy efficiency and conservation measures. As per calculations, both peak demand and energy requirement values reduce significantly in the scenario where DSM, energy efficiency and conservation measures are being considered.

 

  • The installed capacity from renewable energy sources was 42,849 MW as on 31.03.2016. The share of renewable energy sources in the same is about 13%. However, the share of renewables is estimated to increase as the government is giving a major thrust to renewable energy. India, as a country has vast solar and wind potential. It also has potential for biomass and small hydro projects.

 

  • The CEA carried out EGEAS studies to assess the kind of capacity addition that will be required to meet the projected demand for the year 2021-22. Hydro, gas and nuclear are given maximum priority. CEA has developed three scenarios which consider the different combinations of installed capacity from renewable sources so as to determine the capacity addition from 2017-22. From the study it can be concluded that no additional coal based capacity is required to fulfill the energy demands during the year 2017-22 if the capacity of hydro, gas and nuclear are 15,330 MW, 4,340 MW and 2,800 MW and additional renewable energy sources. However, coal based capacity of 50,025 is under construction in will probably be commissioned during 2017-22.

 

  • As per the report, Electric Power Survey Committee’s 19th report will come out in some time and on the basis of that, changes will be made to the final Electricity Plan. Due to shortage of natural gas in the country, except for the already existing plants, no new natural gas plants have been planned during 2017-22. Also, the coal based capacity of 50,025 MW that is under construction currently will be able to fulfill the capacity requirement for the years 2022-2027. As estimated, in the year 2021-22, generation from RES will be 20.3%. Imports from neighbouring countries is also estimated to increase from 5,100 MW in the years 2021-22 to 21,600 MW in the year 2026-27.

  • The compound annual growth rate of energy demand will grow from 4.42% between the years 2012-13 to 2015-16 to 6.34% from the years 2015-16 to 2021-22. This increase is significantly higher than that in the past considering the increase in demand and the increase due to implementation of PFA and other projects from the government of India between 2017-22. Therefore, as per the report, energy demand of 1611 BU and peak demand of 235 GW in March 2022 under CAGR= 6.34% look realistic and is likely to occur.

 

  • The CEA report has mentioned ambitious targets of achieving an installed capacity of 175 GW by 2022. The breakup of the energy derived by various sources has also been given in the report. The report also mentions the percentage of energy that will be derived from various sources and from different states. As per the report, 9 states will contribute almost 77% of installed capacity by 2022. The report also gives year-wise targets for achieving the desired target.

  • The targets set by the CEA will require strong indigenous manufacturing facility for equipments related to RES. Policy frameworks may be developed to encourage the same and this will also fall in line with the ‘Make in India’ policy.

 

  • At the end of the year 2021-22, the projected peak demand and the energy requirement is 235 GW and 1,611 BU respectively. As per the 18th EPS report, this is around 17% and 16.4% lesser respectively. Similarly for the years 2026-27, these values are 20.7% and 21.3% lower.

 

  • As for the capacity addition predicted from 2017-22, development of hydro, nuclear and gas based project is being given priority. Capacity addition estimated from gas, hydro and nuclear is 4,340 MW, 15,330 MW and 2,800 MW. The capacity addition from RES is predicted to be 1,15,326 MW. For the years 2022-27, similar trends as the previous 5 years will be followed. It is estimated that non-fossil based capacity is bound to increase by 46.8% at the end of 2021-22 and will further increase by 56.5% by the end of 2026-27. For the year 2017-22 and 2022-27, low hydro capacity addition of 11,788 MW and 5,000 MW has been estimated.

 

SOLAR CAPACITY SET TO CROSS 20 GW IN THE NEXT 15 MONTHS, SAYS PIYUSH GOYAL:

As per Mr Piyush Goyal, India’s installed solar capacity is going to cross the 20 GW mark from the current 19 GW capacity by 2020. The reason for this estimated increase has been attributed to the fact that Make in India is no more in its nascent stage. Now, India can support majority of its financial and technological needs for increasing its renewable energy capacity. The proof of the same is the drastic reduction in the cost of solar power to an extent that it is comparable to the cost of thermal power. India’s capacity increased four times since the past 3 years when it reached the 10 GW mark in March this year. In May 2014, the capacity was 2,650 MW. The same has been covered in our previous blog.

The Deccan Chronicle article can be accessed here.

INDIA’S SOLAR CAPACITY CROSSES 10 GW:

As per the article in DNA India, the New and Renewable Energy Minister, Piyush Goyal, declared that India has crossed 10,000 MW of solar energy on the 12th of this month and has increased more than three times in the last three years. This milestone coincided with the commissioning of 45 MW solar power project in Rajasthan by National Thermal Power Corporation (NTPC).

This is in concurrence with the proposed goal that India has of installing 100 GW of solar capacity 2022 and its renewable energy capacity to 175 GW.

REC Trade Results February 2017

The Feb trade session remained a robust one, following the record setting session in January.  Total Non-solar demand was 10.4 lakhs (vs 15.2 L demand in January), and clearing ratios on IEX and PXIL were 8.7 and 6.2% respectively. On a year-to-date basis, this year Non-solar RECs demand has been significantly higher than last year. March 2017, which will be the last trading session of FY 16-17, is also expected to result in high trading volumes.

 

Solar RECs trading, on the other hand, has remained subdued. One reason is the significantly solar capacity coming online in states (with record low tariffs) – this result in Discom’s not buying solar RECs in large volumes. Also, the expected price drop in April 2017 may be resulting in potential buyers deferring purchases.

 

Non Solar – The clearing ratio stood at 8.72% and 6.2% in both IEX and PXIL respectively.

Solar – Clearing ratio stood at 1.26% and 0.34% in IEX and PXIL respectively.

 

 

 

KEY PROVISIONS FOR THE RENEWABLE ENERGY INDUSTRY IN UNION BUDGET 2017

Nothing exceptional was noticed in the budget this year with regards to the Renewable Energy sector. There was no change in the accelerated depreciation rate or the coal cess. Neither was there any change seen in the National Clean Energy Fund. This year’s budget proved to be quiet uneventful for the renewable energy sector. The only development that has been cited is that 7000 railway stations will be powered by solar energy. The allocation of budget to MNRE was 5,437 Cr which wasn’t a big change since last year’s budget of 5,000 Cr. Other than that, there weren’t any exceptional changes. An article in the Livemint also mentioned the following ” While total budgetary outlay to renewable energy marginally increased, there is little to celebrate. This budget is unlikely to catalyse action, attract private investment or underwrite risks. An opportunity was lost.”

 Key features of the budget can be found here

PORTUGAL RUNS ON RENEWABLES FOR FOUR AND A HALF DAYS

In a remarkable achievement reported by The Guardian, the country of Portugal ran only on renewable power for 107 hours in the month of May. The sources of renewable power that the country relied on were hydro, wind and solar power.

During the year 2016, 59% of the national energy production was fulfilled through renewable energy while the remaining was from fossil fuels. Out of the 59% yielded from renewable sources, 2% was from solar, 25% was from wind and remaining 32% was from hydro. The article quoted  ”the managing director of the Portuguese Renewable energy association Apren, believes that by 2020, Portugal will be able to generate 60% of its energy from renewables and will be able to completely rely on renewable power by the end of 2040”.

CERC Determines fees for issuance of Renewable Energy Certificates

In a recent amendment in the Regulation 11 of the REC Regulations, CERC determined the fees and charges payable by the eligible entities for participation in the scheme for, registration, eligibility of certificates, issuance of certificates, and other matters connected there with.  Following are some of the highlights of the regulation:

 

a)      Fees and charges other than those for issuance of certificates would be continued as they are at present until further orders.

 

b)      The fee for issuance of certificate for the period from 22.4.2013 till the date of issuance of next order by the Commission was determined at the rate of Rs 10/certificate.

 

c)      The fee for issuance of certificate for the period from 1.4.2015 till the date of issuance of next order by the Commission was to be regularized at the rate of Rs 4/certificate.

 

d)      The fees for issuance of certificate for the period from 1.1.2017 until further orders is determined to be Rs 2/- per certificate.

 

The regulation can be accessed here.

REC Trade result December 2016

This month trading saw good results with respect to the Non solar REC clearance overall. The demand for solar REC saw marginal improvement in respect to the last month. The total transaction value stood at 74.4 Crores in comparison to 53.6 Crores last month.

This month saw fall in the total issuance where the demand decreased by 4.60Lakhs in comparison to November. Though there had been significant increase in the total REC issuance due to the impact of CERC’s 4th amendment to RECs regulations.

Analysis of Trading:

Non Solar – The clearing ratio stood at 3.19% and 2.81% in both IEX and PXIL, with a significant increase of 61% in the no. of REC’s traded as compared to last month

Solar – Clearing ratio stood at 0.85% and 0.53% in IEX and PXIL respectively, with a dip of 23% in total demand of Solar RECs as compared to November.

 

 

 

REC Market demand & supply forecast for FY 16-17

Every year, around the mid-year mark we forecast the demand and supply in the RECs markets for the remain-der of the financial year. The second half of the FY is the busy period for the RECs markets as most transactions take place in this period. As an example, of the 43 lakh non-solar RECs sold last year, 9 lakh were sold between Apr – Sept 2015 and 34 lakh were sold from Oct 15 – March 2016 (21% and 79% split between the two halves of the year).
FY 16-17 is characterized by several changes in the RECs markets :-

  • Significantly higher demand compared to same pe-riod last year for Non-solar RECs (non-solar RECs de-mand is up by 51% compared to the same period last year, ie April to November)
  • Drastic reduction in RECs issuances due to impact of CERC’s 4th amendment to RECs regulations
  • Impeding price change in the short term (April 2017) particularly for solar RECs
  • Changing regulations in light of the national tariff policy (NTP). This will result in much higher RPO and removal of exemption for co-gen. However, due to inconsistencies in the NTP with the Electricity Act 2003 we expect the impact of these changes to be visible only in the next FY.

Overall, we expect demand to remain robust for Non-solar RECs (but not for Solar RECs). Increased demand, combined with significantly lower issuances of RECs will result in much improved clearing ratio for projects that are holding RECs.
Demand Comparison
As mentioned above, demand for non-solar RECs has been robust compared to the same period last year. As of Novem-ber, demand is up by 51% compared to the same period last year.
We expect this trend to continue, driven by several factors –

  • Several regulatory commissions have given out orders for RPO compliance during the year – this is likely to result in significant demand in the coming months. Notable examples are Maharashtra and Kerala.
  • Private Discom’s, which are large buyers, have so far re-mained marginal participants in the market. This is expected to change in the coming months.
  • CPP and open access consumers will continue to be ma-jor buyers, with several new participants coming into the market in the coming months.

Demand for Solar RECs this year compared to the same pe-riod last year has been down by 1%, or essentially the same. However, we believe that by end of FY 16-17, there is a pos-sibility that the total demand totals less than that of the pre-vious year.

This is because the current floor prices are valid only till March 31, 2017. The general expectation is of a small correction in the price of Non-solar RECs and a signifi-cant correction in the price of solar RECs. Besides this, the vintage multiplier (of 2.66x) currently in place will also expire. This may result in

(a) Significant price reduc-tion of Solar RECs,

(b) a major jump in S-RECs inventory as existing S-RECs are adjusted to the new price, and

(c) drastic reduction in S-RECs issuance from April 2017 on-wards.
These changes in the near future make market forecast-ing for solar RECs a perilous task. Our approach assess demand in the same basis as mentioned above, but moderates it by a significant factor as closer to March obligated entities are expected to hold off purchases till new prices take effect.

RECs Supply
Two factors have resulted in reduced supply of RECs :-

 

  • Several projects have existed the RECs mechanism in favor of green power sale/ state tariff PPA or captives as RECs are no longer a viable mechanism
  • Impact of the 4th amendment to RECs regulations by CERC

As a result, Non-solar RECs issuance is down by 38%  compared to the same period last year, and Solar RECs issu-ances down by 41%. Going forward, we expect the non-solar RECs issuance to remain subdued compared to last year (as a big impact of the 4th amendment has been on sugar co-gen project which see issuances starting from November to April or May). For the full year FY16-17 we forecast Non-solar RECs issuance to be 35% below the last year number. The reduction in Solar RECs issuance is due to higher issu-ance last year as a result of solar vintage multipliers, and time-lag this year as the documentation related to 4th amendment is completed. Overall, we expect the year to end with roughly 30% lower issuance compared to last year.

Demand and supply
We have forecast demand under three scenarios –

(1) Base case – demand from states that have enforced RPO in the past or have current orders for RPO enforcement are in-cluded. Even for such states, a probably of demand material-izing is applied to the total RPO gap;

(2) Medium enforce-ment – expected demand from states that have on-going RPO assessment are added to the demand in scenario 1;

(3) High enforcement – this scenario envisages that most states will take some action towards RPO enforcement. Under this scenario, even those states that have not enforced RPO regulations till date are expected to initiate action, albeit the expected demand from such states is moderated by assign-ing a low probability (20-30%).

Conclusion:

Looking at the overall picture after the demand-supply forecasting exercise shows the following:

  • Non-solar RECs markets are showing a significant improvement. Demand is up by 51% compared to last year, and this year may become the first one in which demand exceeds issuance during the year. This is a major development towards the revival of the RECs markets.
  • Solar RECs market however is lagging behind. Demand has failed to increase this year, and may actually be lower than last year. This is driven primarily by expectation of drastic price decrease in April 2017. Only possibility of this scenario changing is if a large demand comes Discom’s.

 

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