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.

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.  

 

Ministry of Power announces renewed RPO trajectory for long-term

Ministry of Power (MoP) recently announced an order for long-term growth trajectory of Renewable Purchase Obligation (RPO) for solar and Non-solar for a period of three years i.e. 2019-20 to 2021-2022. In order to achieve the target of 175 GW of RE by March 2022, the MoP in consultation with MNRE notified the long-term trajectory for RPO as below:

The obligations described are on total consumption of electricity by an obligated entity excluding consumption from the hydro source of power. It is necessary that the achievements of solar RPO compliance are up to 85% and above. If so, the remaining shortfall if any can be met by excess non-solar purchased beyond Non-solar RPO for that particular year. The same goes in case of Non-solar compliance which will be met by solar, beyond the solar RPO for that year.

RPO mechanism has been in the frame for a long time but have its own share of ups and down. Since last year, the process is getting back on trade and REC trading is also working consistently. MNRE recently announced about building an RPO compliance cell providing aid to SERCs for better implementation.

An article by Quartz India has also talked about how the Indian government is now pursuing major energy consumers to take the renewable energy route and has quoted entrepreneurs in the industry expressing their views on the current developments.

The trend till now has seen states not following their RPO obligations religiously. It is known by all the states that RPO is very important and abiding by it is mandatory. The order also falls under the National Tariff Policy 2016, which in itself is a recommendatory document in nature.

The updated RPO targets also come into the picture after the country’s  Power Minister R.K.Singh announced in an interview about the increased capacity target to 227 GW from 175 GW earlier.

REC TRADE RESULTS MARCH 2018

For the first time after 2012, the total demand in REC (Non-Solar Segment) market exceeded the supply available. The trade session in March 2018 also ended the dry run that REC Market has been under since 2012 with 100% clearance on both the Power Exchanges!

Non-solar demand was significantly higher than in March 2017, and also last month. In total 27.69 lakh RECs were traded (211.63% higher than March 2017, and 17.43% higher than in February 2018), and clearing ratios on IEX and PXIL were 100% and 100% respectively. Total traded value was Rs 415 crores (This value is calculated considering the rate of Rs 1500 per REC out of which Rs 1000 go to the generator and Rs 500 goes to CERC).

Trading of solar RECs continues to be suspended due to the stay imposed by the Supreme Court.

 

This value is calculated considering the rate of Rs 1500 per REC out of which Rs 1000 go to the generator and Rs 500 goes to CERC

REC TRADE RESULTS FEBRUARY 2018

Non-solar demand was significantly higher than inFebruary 2017, and also last month. In total 23.58 lakh RECs were traded (125.85% higher than February 2017, and 91.61% higher than in January 2018), and clearing ratios on IEX and PXIL were 19.84% and 69.80% respectively. Total traded value was Rs 353 crores*.

REConnect shifted its major volume on PXIL in a timely manner this trade session due to higher demand as compared to IEX.

The written submission for the case on stay of trading of solar RECs has been done and the judgment is reserved.

*This value is calculated considering the rate of Rs 1500 per REC out of which Rs 1000 go to the generator and Rs 500 goes to CERC

Trading of solar RECs continues to be suspended due to the stay imposed by the Supreme Court.

REC TRADE RESULTS JANUARY 2018

Non-solar demand was marginally lower than in January 2017, and also significantly than last month. However, it must be kept in mind that last month traded volumes were at a record high, and overall, this year has seen significantly higher demand.

In total 12.30 lakh RECs were traded (19.04% lower than January 2017, and 76.41% lower than in December 2017), and clearing ratios on IEX and PXIL were 7.83% and 30.55% respectively. Total traded value was Rs 184 crores*.
REConnect shifted its major volume on PXIL in a timely manner this trade session due to higher demand, resulting in higher clearing.
Trading of solar RECs continues to be suspended due to the stay imposed by the Supreme Court.
*This value is calculated considering the rate of Rs 1500 per REC out of which Rs 1000 go to the generator and Rs 500 is retained by CERC

Telangana releases draft RPO policy for the first time

Telangana State Electricity Regulatory Commission (TSERC) has released draft regulations for the compliance of Renewable Purchase Obligations for the state. These regulations are first of its kind in the state. Before this, the state was following RPO percentages determined by APERC (Andhra Pradesh Electricity Regulatory Commission) through its latest regulation.

 

Comments on these regulations are invited till 9 February 2018.

 

The RPO percentages determined in the regulation are as follows:

In the order, the RPO percentages were only given in terms of total of both solar and non-solar percentages. As per the National Tariff Policy 2016, the solar RPO percentage for states across the country shall reach 8% whereas in the mentioned order, the total RPO percentage (including solar and non-solar is 7.5% ie. 0.5% lower.

The RPO trajectory declared by TSERC as compared to that declared by MoP  for the FY 2018-19 can be seen below:

 
The draft regulation can be accessed here. The public notice can be accessed here.

REC TRADE RESULTS DECEMBER 2017

This month’s trading session saw highest ever trade in the REC markets – 2nd time in a row after the record trading session last month. Non-solar demand was significantly higher than in December 2016, and also last month. In total 52.17 lakh RECs were traded (1,136% higher than December 2016, and 136% higher than in November 2017), and clearing ratios on IEX and PXIL were 46.09% and 58.15% respectively.  Total traded value was Rs 782 crores.

The increase in traded volumes have been driven by demand from both Discom’s and captive generators. Several regulatory commissions have issued orders and notices in the recent past. This trend is expected to continue into the last quarter of the financial year.

Trading of solar RECs continues to be suspended due to the stay imposed by the Supreme Court.

DERC NOTIFIES RPO REGULATION

The DERC has released draft RPO regulations in an order dated 28/07/2017. Following are the salient features of the regulation:

 

  1. RPO Compliance:

  • Aggregate from the gross purchases from generating stations by Obligated entities shall be considered as the quantum of RE purchase for RPO compliance.

  • All the power produced from Waste-to-energy plants shall be procured by the distribution licensee. This will also contribute towards RPO compliance.

  • Quarterly reports shall be submitted by the obligated entities which will include parameters such as capacity addition, generation and purchase of electricity from RE sources. The same shall also be posted on their website.

  1. Role of SNA:

 

  • Protocol development for regular information collection from RE generating companies, obligated entities, SLDC, chief electrical inspector, ets.

  • RE procurement and RPO compliance reports on a monthly basis by obligated entities which shall also go on their websites. This shall be done by the 10th of the next month.

  • It shall also receive information on or before 30th April from captive users who are consuming electricity generated from captive generating plants about electricity consumption and purchase from RE sources.

  • The same shall be applicable for open access consumers.

This regulation isn’t very different from the previous RPO regulation which was released in October 2012.

The order can be accessed here. The public notice can be accessed here.

MP PROPOSES AMENDMENTS TO RPO REGULATIONS

The MPERC has released the Sixth amendment to Madhya Pradesh Electricity Regulatory Commission (Cogeneration and Generation of Electricity from Renewable Sources of Energy) (Revision-I) Regulations, 2010 [ARG-33(I)(vi) of 2017] on July 1st 2017. In these regulations, it has revised the RPO percentage which will be applicable to the obligated entities within the state of Madhya Pradesh. Comments are invited till 24th July. The graph below gives a comparison of the RPO percentages suggested as compared to the MoP trajectory.

 

The analysis of the previous amendment can be read here.

The regulation can be accessed here

 

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