RE companies move to the high court requesting exemption from GST on RECs

Renewable Power companies have moved to the Delhi High Court requesting an exemption from Goods & Service Tax on the REC certificates. Currently, there is a GST rate of 12% applied to Renewable Energy Certificates. The Delhi Court had issued notices on Tuesday to the center, the GST council & the Central Board of Indirect Taxes and Customs in this regard.

According to the Counsel of the petitioner companies securities are defined neither as goods nor services under GST laws & hence are not taxable under the indirect tax regime.

As per the Securities Contracts Act regulations, under Clause 2 (h) Securities include “shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or another body corporate;”

RECs fall under the definition of securities. “These scrips are traded on IEX (Indian Energy Exchange) and PXIL (Power Exchange India Limited) and are electricity derivatives,” the Counsel head believes.

Currently, since the GST is levied on the RECs, RE companies are unable to trade Renewable Energy Certificates if they have incomplete GST registration (KYC) in turn unable to reach their REC obligation. Further, apart from being a financial burden, GST is an operational burden. Also, since there are multiple parties involved in the trade process (Exchanges, sell&buyer, and trading members) it becomes an overwhelming task to understand the GST impact on each of them. This makes REC trading a tedious process.

HPERC announces (Rooftop Solar PV Grid Interactive System based on Net Metering) Order, 2019

Himachal Pradesh Electricity Regulatory Commission recently issued a notification for the order on the Rooftop solar PV Grid Interactive System based on net-metering 2019. The summary of the order is as below:

Applicability: The order will be applicable to all the domestic supply consumers with an approved Letter of Approval post 15th November 2018, as per HPERC (Rooftop Solar PV Grid Interactive System based on Net Metering) Regulations, 2015 and who have thereafter installed such system.

This order will be applicable only in such cases where the domestic supply consumer installs the solar rooftop photovoltaic (PV) grid interactive system based on net metering.

In case of a net-metering plant, the distribution licensee will pay per kWh rate to the domestic supply consumers for the excess energy generated. Further, the same will be applied to ground-mounted solar PV plant from 5MW capacity located in the state. The credit will be equal to 30% of weighted average/kWh rate which the distribution licensee has purchased from the generator.

TNERC issues order on Rooftop Solar generation

Tamil Nadu Electricity Regulatory Commission recently issued an order on rooftop solar generation. This comes after the Tamil Nadu Solar Policy 2019 announced a target of achieving 900 MW of solar energy till 2023, out of which 40% is set to be achieved from consumer category solar energy systems.

Applicability

According to the order on the new scheme of rooftop solar generation, consisting of solar net feed-in consumer category will be applicable to all the new applicants. The effective date of commissioning of the order is 25th March 2019. The specifications described in the order are applicable to all the new consumers and the existing consumers under the net metering scheme will continue to be under the provisions of Order No.3 of 2013 dated 13.11.2013.

Eligibility

Consumers under Low Tension category except for Hut and Agricultural category of the tariff.

Permissible maximum capacity for an eligible consumer

The maximum capacity of solar rooftop generating a plant that an eligible consumer can install shall be up to 100% of his sanctioned/contracted demand with the distribution licensee.

Metering

The consumers under the solar net feed-in scheme will have to install two meters. One for measuring solar power generation and the other to measure import & export of energy.

Commercial arrangement

  • The electricity generated by the solar rooftop power plant shall be utilized for self-consumption by the consumer. The surplus energy generated that is unutilized and that flows to the grid and recorded in the export register of the meter shall at the end of the billing period be calculated at a tariff fixed by the commission and credited to the consumer’s account.
  • The price of energy purchase exported by the solar generator during a financial year will be 75% of the pooled cost of power purchase notified by the commission.

Restrictions on grid penetration

At a local distribution level, the connectivity to rooftop solar systems will be restricted to 90% of the distribution transformer capacity on first come first serve basis.

Renewable Energy Certificates and Renewable Energy Obligation

Net injection of power is not eligible for REC. The energy generated from Rooftop Solar Power Plant will be accounted towards the fulfillment of RPO obligation of distribution licensees.

The order is to come in effect on and from 25th March 2019.

Tamil Nadu announces (Forecasting, Scheduling and Deviation settlement and Related Matters for Wind and Solar Generation) Regulations, 2019

Executive summary:

  • The accuracy band is narrower compared to other states and compared to the Model FOR Regulations
  • However, the per unit DSM charge is also lower compared to other regulations (in these aspects TN regulation is similar to that of Gujarat)
  • Total DSM charge is capped at Rs 0.05/unit on an annual basis
  • Aggregation is not allowed

Applicability:

  • From the date of publication in the official gazette.
  • Forecasting tool to be established in three months period.
  • Levy and collection of DSM Charges shall commence after six months from the date of publication in the official gazette.

Regulation Applicable on all Wind and Solar Energy Generators (excluding Rooftop PV Solar power projects) in Tamil Nadu

Deviation Accounting:  The deviation accounting will be carried out based on the Available Capacity:-                                                                            

Generation =  Absolute Error in % = 100 X Actual Generation –  Scheduled/ Available Capacity (AvC)

Point of Forecasting: Plants connected to the Intra-State Transmission System or Distribution System, including those connected through Pooling sub-stations, and using the power generated for self-consumption or sale within or outside the State.

Aggregation: Unlike in Karnataka and AP, Tamil Nadu’s regulation does not have a provision to provide an aggregated forecast.

Role of a QCA:

  • Meter reading and data collection and its communication, and coordination with the Distribution Licensees, the SLDC and other agencies;
  • De-pooling of Deviation Charges within the constituent Generators of the Pooling sub-station and settlement of payments/receivables.
  • Settlement of the Deviation Charges specified in these Regulations with the SLDC on behalf of the Generators.

Revisions:

  • The QCA may revise the Schedule of Generators connected to the Intra-State Transmission Network (excluding collective transactions) by giving advance notice to the SLDC.
  • 16 revisions are permitted for Generators starting from 00.00 Hrs of the All the revisions are effective from the 4th time-block.

Other Key Points:

  • The total deviation charges remitted on account of deviations by a wind / solar generators through QCA into State Deviation Pool Account (Wind and Solar) in a financial year shall be capped at the Ceiling Rate of 5 paise per unit, and excess DSM charges beyond this limit shall be remitted back to the generator.
  • Every QCA shall pay the total amount of Deviation Charges pertaining to the Pooling Sub-station to the SLDC, and collect it from the concerned Generators in proportion to their actual generation.
  • Provided that the onus of ensuring the payment of the Deviation Charges to the SLDC by the QCA shall remain that of the concerned Generators.
  • The QCA shall de-pool the Deviation Charges against each Generator in proportion to the actual generation by the generators.
  • The SLDC will share the curtailment information with the QCA id any, via an IT-enabled communication system; failing which the DSM for subsequent time blocks will not be charged by the SLDC.
  • Further, it is the QCAs responsibility to provide the correct schedule on the basis of curtailment.
  • If the QCA is unable to do so, the SLDC will change the schedule as per the curtailed values.

Important differences between intrastate and interstate transactions:

  • The deviations for Inter-State and Intra-State transactions at Pooling Station will be accounted for separately. Separate schedules will be sent for the interstate to SLDC and RLDC.
  • The Inter-State transactions will be settled on the basis of their scheduled generation and will be considered only if the Inter-state capacity is connected to the STU via the separate feeder.
  • The Generator will pay the Deviation Charges for under or over injection applicable within Telangana in case of deviations in the State DSM Pool.

Deviation Charges in case of under or over-injection for sale/supply of power within the State

Deviation Charges in case of under or over-injection for sale/supply of power outside the State

  • Deviations in respect of Inter-State and Intra-State transactions for each source of RE i.e. wind and solar Generation shall be accounted for separately at each Pooling Sub-Station.
  • The SLDC shall provide separate energy and Deviation Accounts for Inter-State and Intra-State transactions in respect of wind and solar Generation to the QCA, who shall settle the Deviation Charges with the concerned Generators.

The TNERC Regulation for Forecasting & Scheduling, 2019 has not provided a summary of timelines designating the activities to QCA and SLDC, to be accomplished within the following stipulated duration.

 

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  

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.  

 

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.

Gujarat announces RE Forecasting and Scheduling regulations, 2019

Gujarat Electricity Regulatory Commission has recently issued Forecasting, Scheduling, Deviation Settlement, and related matters of solar and wind generation sources regulations, 2019 on 19th January 2019. The notifications are effective from the date of notification, however, the deviation charges specified in the regulations will be effective from 1st August 2019.

The key points of the regulations are as below:

  • Deviation accounting:

Absolute Error in % = Actual Generation – Scheduled Generation /Available Capacity (AvC)

  • Eligibility criteria: The regulations will apply to all wind and solar generators having a combined installed capacity above 1 MW connected to the state grid/substation, including those connected via pooling stations, and selling generated power within or outside the state or consuming power generated for self-consumption.
  • Forecasting and scheduling code: Revision of schedule will be allowed if the revision is more than 2% of the previous schedule. For wind energy-based generations, maximum 16 intra-day and for a solar energy-based generation, a maximum of 9 intra-day revisions will be allowed.
  • Aggregation is not allowed of more than one pooling stations or individual generating station connected to a substation.
  • QCA or the wind and solar generator can submit “Day-ahead” and a “week-ahead” schedule  by 9 am every day for each pooling station or each generating station, wherein the Day-ahead schedule can contain wind or solar energy generation schedule at intervals of 15 mins (time-blocks)for the next day, starting from 00:00 hours of the day, and prepared for all 96 time-blocks and Week-Ahead schedule shall contain the same information for the next seven days.
  • The revisions of schedules for solar generators will be effective form 4th time block and there can be maximum of 9 revisions during the day starting from 5:30 hours to 19:00 hours of that day.
  • The revisions for a wind generating plants will be applicable for the entire 24 hours in a day.
  • The QCA will provide payment security to the extent of 110% against the deviation charges in form of Bank Guarantee. The payment security amount for the first year will be worked out considering average deviations observed during the mock trial dor different set of sites:
  1. Wind generating plant of approximately 50 MW capacity at pooling sub-station.
  2. Solar generating plant of approximately 25 MW capacity at pooling sub-station.

The table for the deviation charges and deviation limits is given below:

Deviation charges for wind operators

Deviation charges for solar generators

 

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