MERC announces generic tariff for various RE sources

Recently the Maharashtra Electricity Regulatory Commission (MERC) announced an order for generic tariff determination of various renewable resources including Solar and Wind. Even after the generic tariff is realized, DISCOMs opt for competitive bidding for tariffs due to the low rates. The details regarding the tariffs for various RE sources is a follows:

Renewable energy sources

Tariff without AD Tariff with AD
Non-Fossil Fuel-Based Cogeneration Projects INR 4.99 _
Biomass projects INR 7.30 INR 7.44
SHP (5 MW-25 MW) INR 3.66 INR 3.92
SHP (1 MW-5 MW) INR 4.36 INR 4.64
SHP (500 kW-1 MW) INR 4.86 INR 5.14
SHP 500 kW and less INR 5.36 INR 5.64
Wind Energy projects INR 2.87
Utility-Scale Solar PV Projects INR 2.72

Rooftop Solar PV projects INR 3.22

The above mentioned solar rooftop tariff will be applicable from August 1 2018 to March 31 2019 and for wind projects between August 1 2018 – March 31 2019 for  a period of 13 years from the date of commissioning. However, in a recent project auction base tariff of INR 2.52/kWh was discovered (INR 0.35/kWh less than the new generic tariff).

In case of SHP, the above-mentioned tariffs will be applicable between August 1, 2018, and March 31, 2019, for 35 years (with capacity up to 5 KW) and 13 years for SHP with a capacity greater than 5 MW and up to 25 MW.

Recently Maharashtra also announced its final regulations for the forecasting, scheduling and deviation management regulations in July 2018.

SECI favours lowest bid in recent solar auctions, cancels rest

The nodal agency for National Solar Mission, Solar Energy Corporation of India (SECI) has canceled mostly all but the lowest bid project in its mega solar auctions held in July. The decision to cancel 2400 MW solar capacity out of 3000 MW came to light at a meeting of developers with government officials and SECI on August 1st, 2018. Out of all the tenders, only ACME solar won 600 MW for quoting INR 2.44/unit. The government felt all the other bids were too expensive and not competitive enough.

Among the canceled projects were 1100 MW by SB energy (a Joint Venture between Japan’s Softbank, Taiwan’s Foxconn & Bharti Airtel), 500 MW by Renew Power, both of which quoted INR 2.71/unit and lastly 300 MW each by Mahindra solar and Mahoba solar (Adani group) who quoted INR 2.64/unit. The developers felt that if they quoted below INR 2.71/unit, it would be not feasible for them to sustain.

Recently an auction in Uttar Pradesh was also canceled for 1,000 MW without stating any reasons.

Post the Safeguard duty implementations, Ministry of New and Renewable Energy (MNRE) has also requested the Finance Ministry to exempt the ongoing solar power projects from the 25% safeguard duty imposed on imported solar equipment. The developers showed their concern over the increase in capital of the projects. While the duty seeks to protect the domestic solar manufacturing industry, project developers have mentioned that the duty would increase solar power tariffs.

Looking at the trend of the competitive tariff over the past years, tariff prices have dropped drastically, and the developers have gone weary of the ongoing trend and believe that they won’t be able to sustain the long-term agreement. However, the government is of the opinion that the tariff is too high and not competitive enough yet.

REC trade results July 2018

Non-solar: Non-solar RECs prices continue to rise on the back of robust demand and limited availability. The RECs were traded at the price of INR 1050 at PXIL ( 5% above the floor price) and INR 1200 at IEX (20% above the floor price). The non-solar REC inventory was completely exhausted in July 2018 with a clearing ratio of 100% at PXIL & IEX both respectively. A total of 235,437 RECs were traded in this session.

Solar: Solar RECs registered the highest ever traded volume. Total 13,82,632 RECs were traded in the current trade session. The clearing ratio was 40.23% at PXIL & 36% at IEX respectively. RECs traded at the floor price, i.e. INR 1000 at PXIL and IEX both respectively. As compared to the available supply of Solar RECs on March 31, 2018, 77% of the RECs have already been sold.

 

Energy Ministers discuss hydro power revival at the bi-annual state power ministers’ conference

Recently at a Pan-India biannual energy ministers meet in Simla, the water scarcity of Simla and woes of power sector were discussed. The host state Simla suggested immediate and long-term reforms in the hydro power sector. Himachal Pradesh’s Chief Minister Jai Ram Thakur requested the government to give hydropower similar status as solar power.

“For years, the people of Himachal have given their land and labor for the growth of hydro power in the state. They have not been duly compensated till yet even after giving up their river catchment areas and natural resources. The pain of displacement from their ancestral land still exists. We urge the Central agencies to expedite the compensation,” – Jai Ram Thakur, Chief Minister of Himachal Pradesh.

He further suggested that “hydro sector needs ‘Hydro Purchase Obligation” for assured take-off of power, medium term sale of hydro power, giving renewable status to hydro is the need of the hour and we urge the Centre to look into these demand.”

In other developments, the draft amendments in the National Tariff Policy 2018 also has a clause suggesting exclusion of Hydro Power and “waste heat gases as a byproduct of industrial process” from RPO calculation. The draft NTP proposes to change the basis of calculation of RPO. It states that consumption from hydropower and from “waste heat gases as a byproduct of industrial process” shall be deducted to calculate RPO.

Further the Union Minister RK Singh suggested of a new hydro policy in the pipeline and said that “All advanced countries are exhausting their hydro capacity. In the past few years, hydro projects have been stalled because of that (protests) and geological challenges. The hydro power (delay in commissioning of projects) then becomes costly.”

The new policy is supposed to have points like:

  • To bring down the capital cost of hydro power projects
  • To discontinue mandatory sale of free power for 10-12 years so that the developers can recover the cost
  • To provide soft loans no longer than 30 years

All these points are in turn supposed to reduce the cost of hydropower projects.

Shimla hosted close to 18 state power ministers, 29 senior officials from 26 states at the conference. Currently, Shimla is facing a major water scarcity and the tourism is also affected due to this. Hydropower and tourism are two major revenue generation activities in the state.

Madrid-based developer in talks to sell India projects

According to recent news, a Madrid-based developer of large-scale solar plants ‘Fotowatio Renewable Ventures (FRV) is in talks to sell its 100 MW power project in India in a deal of approximately INR 500-600 crore.

The company is in talks with various investors like Macquarie Infrastructure and Real Assets (MIRA), green infra JV between PE fund Everstone Group & UK-based Lightsource BP’s Eversource Capital and Edelweiss Infrastructure Yield Plus Fund for the deal.

The project up for sale was awarded to FRV by SECI in a PPA for 100 MW in 2016. This is FRVs first project in India, situated in Ananathpuram solar park in Andhra Pradesh.

Recently in April PE firm Everstone Group joined hands with Lightsource BP, the UK-based leader in renewable energy development, to form a JV platform name ‘Eversource Capital’ to fund the green energy businesses in India. The platform has also launched a Green Growth Equity Fund (GGEF) with a target of $700 million where the UK government and India’s National Investment and Infrastructure Fund (NIIF) will be co-anchors with a commitment of $160 million each.

Another participant, Edelweiss Infrastructure Yield Plus Fund, is a new set up the infrastructure-focused fund by Edelweiss Alternative Asset Advisors. The fund has already raised Rs 2,000 crore till last month and plans to raise $1 billion in total.

Australia’s Macquarie Infrastructure and Real Assets (MIRA) has been an active investor in Indian energy sector and have previously invested in Adhunik Power & Natural Resources, Soham Renewable Energy India and Ind-Barath Energy Utkal.

If we look at the past years’ trend of global investment in India, the Compound Annual Growth Rate (CAGR)  of the investments from 2004-2017 is about 11.33%. The graph depicts many ups and down over the years, with the highest investment in 2011.  2017 also shows decent investment scenario. 

                                                                              Source: Indian Environment Portal Report – Global Trends 2018

Several other foreign entities are also in the process of bringing their businesses to India, with the Indian market picking up speed and shining globally.

 

Telangana announces final DSM regulations for wind and solar

Recently TSERC announced regulations on wind and solar forecasting, scheduling regulations, 2018. This is the final regulation and with this Telangana became the sixth, and latest, state to implement Forecasting and Scheduling regulations.

The detailed summary of the regulations is as below:

  • Title of the Regulation: Telangana State Electricity Regulatory Commission (Forecasting, Scheduling, Deviation Settlement and Related Matters for Solar and Wind Generation Sources) Regulations, 2018.The Telangana Forecasting regulation has been finalized within two months of the release of draft regulation.
  • 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 grid-connected Wind and Solar Power Generators (except Rooftop PV Solar Power Projects) connected to a pooling substation of the capacity not less than 5 MW irrespective of commissioning date.
  • Deviation Accounting:  The deviation accounting will be carried out based on the Available Capacity:
  • Absolute Error in % =   100 x  Actual Generation – Scheduled Generation  ⁄ Available Capacity (AvC)
  • Point of Forecasting: Pooling Station or STU Feeder where the injection is made.
  • Aggregation: Unlike in Karnataka and AP, Telangana’s order of F&S does not have a provision to provide an aggregated forecast.
  • Role of a QCA:
      • Provide day ahead, week -ahead schedule generator wise and aggregated schedule for each pooling station and the periodic intraday revisions.
      • Coordination with DISCOM/STU/SLDC for metering, data collection, communication/issuance of dispatch/curtailment;
  • Provide day ahead, week- ahead schedule generator wise and aggregated schedule for each pooling station and the periodic intraday revisions.
      • Coordination with DISCOM/STU/SLDC for metering, data collection, communication/issuance of dispatch/curtailment;
      • De-pooling of charges among generators:
      • Commercial settlement of DSM charges on a weekly basis and
      • All other ancillary and incidental matters.
  • Revisions:
      • 16 revisions are permitted for Wind Generators starting from 00:00 Hrs of the day.
      • 9 revisions are permitted for Solar Generators starting from 05.30Hrs of the day.
      • All the revisions are effective from the 4th time-block.
  • Other Key Points:
    • DSM Settlement will be done on a Weekly basis, with Meter data to be provided by SLDC, and verification to be done in coordination with SLDC.
    • After recovering DSM amounts, if there is a gap between the actual commercial impact for the state as a result of deviation of wind and solar generation, such amount will be further recovered from each generator.
    • The wind and solar generator or the QCA will provide payment security to SLDC by the way of BG or revolving LC which will cover the DSM payment for 6 months.
    • De-pooling will be done in proportion to energy injected in each time block by each generator.
    • The QCA will only be forecasting on PSS level. Aggregation to create a virtual pool/aggregate of multiple substations is not allowed. States like A.P and Karnataka have allowed Aggregation in their final regulations.
  • 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 have to 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

Sr. No

Absolute Error

DSM Charges Payable to State Pool Account
1 ≤ 15% None
2 >15% but ≤ 25% At Rs. 0.50 per unit
3 >25% but ≤ 35% At Rs. 1 per unit
4 >35% At Rs. 1.50 per unit

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

Inter-state Deviation Charges will follow the same mechanism as defined by CERC (PPA linked). However, the final deviation settlement for Inter-state generators shall be done by SLDC on the basis of deviations and its impact at state periphery.

The TSERC Regulation for Forecasting & Scheduling, 2018 has provided a summary of timelines designating the activities to QCA and SLDC, to be accomplished within the following stipulated duration.

Sr. No. Activity/Milestone Action By Duration (Months)
1 Technical Specification and Information Sharing protocol by QCA to SLDC SLDC 3
2 Forecasting tool, alternate means of communication, formats for submission SLDC 3
3 Forecasting tools to be established by QCAs QCA 3
4 Guidelines for registration of QCA, data exchange between QCA and SLDC SLDC 2
5 Manner of making State Pool Account and settlement thereof SLDC 3
6 Detailed Procedures covering plan for data telemetry SLDC 3
7 Trial Run –During this period all parties shall comply with the above All 6
8 Commencement of commercial arrangement. All 6

 

Creation of an RPO compliance cell, MNRE declares in its order

According to a recent order by Ministry of New and Renewable Energy (MNRE) dated 22 May 2018, a creation of Renewable Purchase Obligation (RPO) Compliance cell is in process. This cell will be handling all the matters related to RPO compliance across states and publishing monthly reports on the updates.

The cell is expected to work in accordance with Central Electricity Regulatory Commission (CERC) and SERCs. The cell is also expected to coordinate on publishing a periodic report with the Government of India and take up non-compliance issues with appropriate authorities.

In the past, there have been several efforts initiated by MNRE to increase awareness among RPO obligated entities regarding RPO obligations, and explaining its advantages to them.

With the help of this cell, data management, a repository of obligated entities, preparing state-wise defaulters lists and storing authorities specific information would be convenient.

Currently, there are some gaps in the implementation of RPO in some states, and with the creation of this cell, the issues can be taken care of state-wise, bringing the country closer to achieving its national target of installing 175 GW of renewable energy till 2022.

With the cell formation, supervision of the Renewable Purchase Obligation process across the country can be performed in a seamless manner. All the stakeholder information associated with the process can be maintained in one place making implementation and invigilation easy.

This is a very positive step by MNRE, as there will be a cell responsible for looking over the RPO compliance in the country, ensuring consistent implementation of RPOs across the states while publishing timely reports.

National hybrid wind and solar policy announced by MNRE

Ministry of New and Renewable Energy (MNRE) announced the National Wind-Solar Hybrid policy in a press release on 14th May 2018. The objective behind this is to provide a framework for promoting large grid-connected wind and solar PV hybrid system for efficient utilization of transmission infrastructure and land. Along with this, it also aims to help reduce the inconsistency in the renewable power generation and in turn achieve better grid stability.

The policy also intends to encourage new technologies, methods, and solutions related to the combined operation of wind and solar PV plants.

The summary of the policy is as below:

  • According to the policy, the Wind Turbine Generators (WTGs) and Solar PV systems both will be configured to operate at the same point of grid connection.

  • The integration of wind and solar can vary depending on the size of each source and their technology type.

  • If the wind turbines are connected to the grid at a fixed speed using an inducing generation, the integration can be on the High Tension (HT) side at the AC output bus.

  • And in case of variable speed, wind turbines using inverters for connecting to the grid, the wind, and solar system can be connected to the intermediate DC bus of the AC-DC-AC converter.

  • Depending on the size of the respective renewable capacity, the other resource can be integrated. However,  a plant will only be considered hybrid if the power capacity of anyone resources is at least 25% of the rated power capacity of the other resource. (i.e. wind and solar).

  • The implementation will depend on various configuration and technology:

                      1. Wind-Solar hybrid – AC integration

                      2. Wind-Solar hybrid – DC integration

                      3. New Wind-Solar hybrid plants

  • The hybrid power generated from the wind-solar hybrid project can be used for captive, sale to third-party through Open Access, sale to the distribution company (ies) either at tariff determined by the respective SERC or at tariff discovered through transparent bidding process; and ) sale to the distribution company (ies) at APPC under REC mechanism and avail RECs.

  • In case of bidding, the Central/State can follow competitive bidding process and can select the winner on the basis of the tariff.

  • The additional power generated from the hybrid plant can also be used for solar/non-solar RPO fulfillment.

  • Battery storage is also enabled in the hybrid projects.

Central Electricity Authority and CERC shall formulate necessary standards and regulations including metering methodology and standards, forecasting and scheduling regulations, REC mechanism, grant of connectivity and sharing of transmission lines, etc. for wind-solar hybrid systems.

With significant capacity additions in renewables in recent years and with Hybrid Policy aiming at better utilization of resources, it is envisaged that the Hybrid Policy will open-up a new area for availability of renewable power at competitive prices along with reduced variability. A scheme for new hybrid projects under the policy is also expected shortly.

In conclusion, the new policy for hybrid wind-solar plants seems to be a good move at a Pan-India level as all the states will get an opportunity to utilize the much abundant renewable sources (Wind and Solar) in the country. We here at REConnect feel that if the implementation of this policy is done correctly, India will get a step closer to its goal of installing 175 GW renewable capacity till 2022.

The detailed policy can be found here.

ANALYSIS OF APTEL ORDER ON REC PRICING AND MULTIPLIER

Order in the case of REC pricing and vintage multiplier has now been uploaded on the ApTel’s website. Following is a quick summary of the same:
ApTel has rejected all prayers of the RE generators. Specifically, it has held:
–       Pricing: ApTel found no issues with the change in methodology by CERC when they used bid-discovered prices as against CERC determined generic tariffs.
The order states: “
“In view of the growing competition and induction of latest technologies, more and more generators are participating in the auctions/bids with considerable reduced cost of generation. Thus, the Central Commission in specifying REC prices, has shifted to bid discovered prices in place of earlier generic tariff fixed by it when the RE sector specially solar was in infancy stage.”
 
And
“We have carefully considered the contentions of all the parties and note that under the prevailing market scenario, the prices of RECs cannot be kept artificially high to burden the end consumers. Further, if the prices of RECs are kept high without aligning them with the market reality and current cost of electricity, the obligated entities may not purchase the RECs and try to fulfil their RPOs by other means.”
–       Vintage Multiplier – The ApTel has said that providing vintage multiplier is the “discretion” of CERC, and said that the CERC has provided “cogent reasoning” in its order, and further that the ApTel found “no unjustness in specifying the floor and forbearance prices of REC and discontinuation of the Vintage Multiplier”

–       In our opinion, the justification of price reduction is also to some extent based on factually incorrect premise. For example, the order says:
 
It is also noteworthy that sufficient time has been given to RE generators to sell their RECs at the power exchange but perhaps in anticipation of selling them at better prices has resulted into unsold REC inventory.”
 
            And further,
 
“Another important fact is that among the three routes available for RE generators, the REC capacity is dominated by RE generators operating under CGP and OA route rendering APPC route as the last choice”
 
We believe that this order will have a significant adverse impact on projects and investors that have invested in REC projects. An immediate impact will be that such project will have to bear heavy losses on the existing inventory of RECs – the losses will be particularly heavy for solar projects.
It also does not bode well for future investment in the REC mechanism, as falling RE prices are an irreversible trend. Does this mean that REC projects will have to bear losses of such reduction every year?

UPDATE ON HEARING ON PRICE AND TRADING OF SOLAR RECS IN APTEL

We attended the hearing at ApTel today. The court has dismissed all the petitions – implying that the CERC order remains as is. More details will be available once the final order is uploaded on the ApTel’s website (generally by end of day or tomorrow).
Since the stay on trading for Solar RECs was till the order of ApTel, it stands automatically vacated, and trading will resume from this month (unless a fresh stay is obtained by the generators).
We will provide a very detailed analysis of the order once it becomes available.
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