OPEN-ACCESS

Blog by Team REConnect

MNRE favors REC markets for Solar Power

India’s ministry of new and renewable energy (MNRE) is favoring REC markets for development of solar power. Eminent members of the ministry are of the view that solar REC markets will revive soon as they expect buyers jumping in. This optimism is when physical solar power comes at a lower cost as compared to buying solar RECs (floor price – Rs. 9.3 per REC). That means, obligated entities have less motivation paying for higher solar REC cost than physically procuring it.

Also solar floor and ceiling prices have been fixed upto FY2017. The steep declining trend in cost of solar power makes it more difficult for solar REC markets and demands quick revision of these prices.

Recently Shri Upendra Tripathy who has assumed charge as Secretary of MNRE, spoke at a gathering that process is ongoing for a policy review with the FOR (forum of regulators) and CERC (Central electricity regulatory commission). Mr. Tarun Kapoor, Joint secretary MNRE has alaso asked all states to strictly meet the stipulated targets. It is being anticipated that a new policy for solar REC markets will be put in place as soon as a new government is formed at the center.

FOR has also called for engagement of consultants to review the REC mechanism completely.

Media article can be read here.

Captive power plant of Bokaro Steel Plant is co-gen : Jharkhand ERC

In an order dated 24th March 2014, state electricity regulator of Jharkhand (JSERC) is of the view that the captive power plant of Bokaro Steel Plant (a unit of Steel Authority of India) can be regarded as a co-generation plant. This means that power consumption from CPP of BSL will qualify towards fulfillment of RPO set under relevant regulations of JSERC.

BSL had prayed JSERC to

1. declare its CPP of 302 MW as co-generation power plant,

2. exempt BSL from applicability of RPO and

3. waive the RPO applicable on consumption of power from its CPP during FY11, FY12 and FY13.

CPP of BSL fulfills the definition of CPP as BSL has 50% equity in the plant and consumes 100 % of power generated.

JSERC also considered APTEL’s judgement in the case of MERC vs Century Rayon, where in it was declared that fastening of RPO on  would defeat  the objective of section 86 (1) (e) of the Indian Electricity Act.

JSERC has RPO targets defined till FY16. It has a total of 4% RPO (1% solar & 3% non-solar) for all three years FY14, FY15 & FY16.

BSL also is a distribution licensee in Jharkhand. As per data furnished in the order total RPO applicable on BSL for consumption of captive power comes around – 64.8 MW of non-solar and 17 MW of solar RPO.

The order can be accessed here.

Joint ERC proposes amendment to RPO regulations

JERC; the joint electricity regulatory commission for the state of Goa and UTs has recently proposed a draft to its principal RPO regulations of 2010. The main highlight of the amendment is the declaration of RPO targets from FY14-FY22. The targets set for the years till FY22 are as in the table below:

There were few other changes in definitions as:

1. Renewable Energy Sources – Electricity generating sources recognised or approved by the Ministry of New & Renewable Energy and includes bundled power purchase (to the extent of renewable energy content in the bundled power), power generated  from cogeneration based power plants and certified by the state accredited agency. 

2. Obligated Entity – the entity mandated under clause (e) of sub-section (1) section 86 of the Act to fulfill the renewable purchase obligation under these regulations and includes distribution licensee, captive user for 1 MW and above with fossil fuel (excluding co-generation based captive power plants) and open access consumer.

3. Renewable Purchase Obligation - quantum as mandated under clause (e) of sub-section (1) of section 86 of the Act and specified under these regulations for the obligated entity to purchase electricity generated from renewable energy sources. 

 

Comments on this were invited by 23.01.2014.

The draft order on amendment can be accessed here.

Principal RPO regulations 2010 of JERC are available here.

MERC asks BEST to meet shortfall in RPO by March 2014

Electricity Regulator of Maharashtra (MERC) on 6th March 2014 released 3 separate orders with regards to verification of RPO compliance of state discoms; namely Reliance Infrastructure Limited – Distribution (RIL-D), Tata Power Company – Distribution (TPC-D) and Brihan Mumbai Electric Supply and Transport (BEST).

Maharashtra currently has the following defined RPO targets in its relevant regulations.

Further, the Distribution Licensee(s) are also mandated to procure 0.1% per year of their Non-Solar (other RE) RPO obligation for the period from FY 2010-11 to FY 2012-13 and up to 0.2% of their Non-Solar (other RE) RPO obligation for the period from FY 2013-14 to FY 2015-16 by way of purchase from Mini Hydro or Micro Hydro power project.

Recently there were updates that Govt. is mulling to introduce hydro-tradable certificates. More on this can be read here

Order w.r.t RIL – D:

In an order dated 5th Dec 2012, MERC had waived/relaxed the shortfall in RPO compliance for FY11 & FY12 and had ordered cumulative compliance of this shortfall along with RPO targets of FY13. Subsequent to this, it was reported that RIL-D had complied with all RPO targets (Non-Solar + Solar) before the deadline of 31st March 2013, except that in case of Mini/Micro Hydel Power projects.

RIL-D fulfilled solar RPO targets with a surplus of 2.13 MUs and non-solar RPO targets with a surplus of 9.29 MUs.

In the present order (refer), MERC has relaxed RPO shortfall in terms of hydro power RPO to FY16, thereby declining the prayer of Reliance to completely waive off such targets. MERC was of strong view that such waive off will be against the intent of having a specific RPO targets from Mini/Micro hydel projects.

RIL-D has now been directed to fulfil shortfall in hydel RPO cumulatively by 31st March 2016.

Order w.r.t Tata Power – D:

Regarding solar RPO compliance, MERC had already directed TPC-D, through an order dated – 20th Dec 2013, waived/relaxed the shortfall in solar RPO till FY16.

Non-solar RPO has been complied by TPC-D with a surplus of 1,2 MUs, except hydro RPO targets.

Current Order waives/relaxes this hydel power purchase requirement by allowing TPC-D to meet the same by FY16.

Order can be read here.

Order w.r.t BEST:

In case of BEST, solar RPO targets were relaxed in an order in Case NO. 30 of 2013. Shortfall in solar RPO is to be met cumulatively by FY16.

MERC noted that BEST has fulfilled its RPO targets w.r.t hydro power cumulatively by FY13.

However, the shortfall in meeting non-solar RPO targets till FY13 is 4.23 MUs which is to be cumulatively met along with RPO target of FY14. This is to be positively complied before 31st March 2014 to repel any regulatory charges, meaning BEST may have to purchase equivalent amount of RECs from the Market in the last trading session of this fiscal.  In our analysis, the approximate requirement in terms of RECs comes down to  4,64,230 non-solar RECs (For gross consumption in FY14 – Refer Page No. 157 – T.O FY13-16 BEST).

Order in case of BEST can be read here.

Our past blog-posts on RPO in Maharashtra can be accessed here -

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Gujarat’s first amendment to RPO regulations

Gujarat Electricity Regulatory Commission (GERC) on 4th March 2014 amended its principal RPO regulations of 2010. In these regulations, Gujarat set its RPO targets post FY13. The RPO set are from FY14 to FY17.

Gujarat announced 10% of energy procurement to come from renewable sources, for its obligated entities for FY17.

The year-wise RPO targets effective April 2014 are tabulated below:

GERC also introduced the definition of APPC which was hitherto missing. Average Power Purchase Cost (APPC) for the purpose of REC Mechanism is in line with that of CERC and is defined as -

‘Average Power Purchase Cost’ means the weighted average pooled price at which the distribution licensee has purchased the electricity including cost of self generation, if any, in the previous year from all the energy suppliers long-term and short-term, but excluding those based on renewable energy sources, as the case may be.’

In addition, GERC also clarified that a RE project registered under REC mechanism selling power under captive or third party mode will receive payment equal to APPC for excess injection after off-setting its own consumption, from the discom.

The present order on amendment can be accessed here

The principal RPO regulations of 2010 can be read here

Rajasthan proposes amendment to RPO regulations

Hon’ble Rajasthan Electricity Regulatory Commission (RERC) has recently proposed an amendment to its principal RPO regulations. Comments have been invited by all stakeholders no later than 18th March 2014. Link to the proposal - http://rerc.rajasthan.gov.in/cnpl/PDFs/REC.pdf

These changes, if incorporated into the RPO regulations will have significant impact on CPPs and OA in Rajasthan.

Following are the highlights of such changes -

1)      Solar RPO will have to be fulfilled separately,

2)      Co-gen and WHR power will no longer be allowed to offset RPO, and

3)      The RPO percentages will increase.

4)      Stricter enforcement of RPO likely.

The proposed changes are discussed in detail below:

Inclusion of Solar RPO for captive power plants (CPP) and open access consumers (OA):

In the present regulation there is no separate solar RPO. As a result in most cases CPPs and OA consumers would meet their obligations through non-solar sources. The proposed amendment introduces a separate carve-out for solar RPO that can be met through solar power/ solar REC alone.

However, the requirement of meeting solar RPO separately will only apply to CPPs and OA of 10MW or more installed capacity. CPPs and OA below 10 MW will be required to meet RPO in total only, as is the present case.

This change will bring Rajasthan RPO in line with most other state RPO regulations, and also in line with the National Tariff Policy. After this change, Karnataka will remain the only exception where CPP and OA do not have a separate Solar RPO.

Removal of Co-generation as RE power:

The present regulation considered co-generation as equivalent to RE power. As a result several CPPs and OA could fulfill their RPO obligations by consumption of co-gen power. In a separate pronouncement, the Rajasthan Electricity Regulatory Commission (RERC) has considered Waste Heat Recovery (WHR) as co-generation.

The proposed amendment will not allow offsetting of RPO from conventional power generation or OA from co-gen power. This change follows the recent order of ApTel in the case of Lloyds Metal & Energy. The order can be accessed here. Our blog-post covering the issue can be read - here.

In the above order, ApTel has stated the following:

Upon conjoint reading of the provisions of the Electricity Act, the National Electricity Policy, Tariff Policy and the intent of the legislature while passing the Electricity Act as reflected in the Report of the Standing Committee on Energy presented to LokSabha on 19.12.2002, we have come to the conclusion that a distribution company cannot be fastened with the obligation to purchase a percentage of its consumption from fossil fuel based co-generation under Section 86(1)(e) of the Electricity Act, 2003. Such purchase obligation 86(1)(e) can be fastened only from electricity generated from renewable sources of energy.

It is important to note that co-gen power will continue to be exempted from RPO (as per several orders from ApTel earlier). However, such power will no longer be allowed to offset RPO emanating from other sources like conventional generation or OA. This change will bring Rajasthan RPO regulations in line with the regulations of most states, and with the interpretations of Aptel.

Increase in RPO percentages:

The proposed RPO percentages are:

CPP & OA Consumer with total capacity of 10 MW and above:

Year Non-solar RPO Solar RPO Total RPO
2014-15 7.50 1.50 9.00
2015-16 8.20 2.00 10.20
2016-17 8.90 2.50 11.40

CPP & OA Consumer with total capacity of more than 1 MW bet less than 10 MW:

Year

Total RPO %

2014-15

9.00

2015-16

10.20

2016-17

11.40

Stricter enforcement of RPO likely

RERC notes the following in the proposed amendment: certain CPP & Open Access Consumer have made an appeal in Hon’ble Supreme Court against this order of Hon’ble[Rajasthan] High Court. As there is no stay in the matter, the obligated entities are bound to comply with RPO mandate. Further, RERC has also mentioned that the state agency is in the process of identifying compliance levels by CPPs and OA in the state. These comments point to a stricter enforcement of RPO in the near future.

REConnect Newsletter Volume 39 – OPEN ACCESS

We are pleased to present the 39th Volume of “OPEN ACCESS” - our monthly newsletter on REC Mechanism.

The present volume covers analysis on following main topics:

  • Detailed analysis of the bidding under JNNSM Phase 2 by solar industry export Shri Gopal Somani
  • Various regulatory updates including review of revised procedures for RECs accreditation, registration and issuance. Details about reterntion of RECs for own RPO fulfillment are also included.
  • REC trading analysis for February 2014.

To access the current volume (OPEN ACCESS Vol. 39) please Click Here

To read past volumes of our newsletter please follow this link.

We hope you will find this volume of OPEN-ACCESS an insightful read. As always, look forward to your feedback and continued support.

Regards,

Team REConnect

Kerala drafts regulation for net-metering of small solar projects

Kerala State Electricity Regulatory Commission (KSERC) recently unveiled its draft copy of “KSERC – Grid Interactive Distributed Solar Energy Systems, Regulations, 2014″ (refer). With this Kerala joins the league of states namely; Tamil Nadu, Andhra Pradesh, Delhi, Punjab and Uttarakhand, which have a similar policy in their respective states. The highlights of the regulation are as under:

Eligibility – All consumers are eligible to install solar energy systems, either self-owned or that owned by a third party.

The maximum capacity of solar energy systems shall be capped at 3 MW and should be in conformity with Kerala Electricity Supply Code’14.

Cumulative capacity of all solar energy systems within a particular area shall be limited to 50% of local transformer capacity. If the cumulative capacity limit exceeds the above limit, licensee is obligated to replace the existing transformer with a higher capacity transformer within 2 months.

Banking facility - Discoms are obligated to provide banking facility to eligible consumers only upto a target capacity of solar RPO. Eligible consumers not in ToD regime is allowed to use the same regardless of any specific period.

Licensee shall provide net-metering arrangement to consumers, and consumer shall be liable to pay security deposit & rent as per norms determined by KSERC.

A consumer can supply excess power to any other self owned premise located anywhere, within the same distribution area, provided wheeling charges of 5% are paid for wheeling of power.

 The consumer will receive payment for excess generation of solar power injected in distribution network at APPC (1.99 Rs. per unit).

If an eligible consumer happens to be an obligated entity as per relevant RPO regulations, then the energy consumed by the consumer will be accounted towards solar RPO.

There shall be no banking or cross subsidy charges applicable on any eligible consumer.

A summary of such policies across other with main points can be read in the table below:

Govt. pushes for stronger RPO enforcements

The Ministry of New & Renewable Energy (MNRE) has written to Ministry of Power (MoP) to include stronger enforcement provisions in the Electricity Act itself, which at present is absent.

An article in Business Standard, quoted Joint Secretary of MNRE saying the following, at an event:

“What we have requested is that the Electricity Act itself should mention about RPO… Or there (should) be some other alternative, so that it becomes binding. Also the enforcement provision should be more stronger,”.

He also called for greater investments in renewable energy sector of India.

REC markets have been performing poorly. In January 2014 also, which was 1st month of last quarter of FY14, the volumes remained far from encouraging and resulted in continued clearing of RECs at floor price. More insights can be learnt by clicking here – REC Trade Report – January 2014.

According to recent details made public by Hon’ble MNRE, as on 31st January 2014, the total grid connected renewable capacity of the country has touched 30 GW. However, the achievements highlighted are only around 50 % of the target for the year. The details can be accessed here – MNRE – Physical Progress (Achievements).

Gujarat DISCOMs approach CERC to seek REC benefits

Gujarat Urja Vikas Nigam Limited (GUVNL) on behalf of DISCOMs , had approached Hon’ble CERC for certain amendments to REC regulations, enabling the former to claim solar RECs as “Eligible Entity” for excess procurement over & above the stipulated RPO targets. GUVNL had submitted (in Petition no. 128/MP/2013) that dis-allowance of RECs for excess solar power procurement after meeting RPO targets, is a disincentive  for DISCOMs who have been buying solar power at promotional tariffs with an aim to promote solar power generation in the state.

The matter is unprecedented because an obligated entity (usually a buyer of RECs) wants to claim RECs for excess power procurement and not excess power generation.

In the order dated 2nd Dec 2013 (refer), GUVNL brought forward that DISCOMs had to tie up solar capacity of 380 MW to comply with RPO targets (of 1% in FY13). DISCOMs in-fact have signed PPAs of 971.5 MW solar capacity, that too at promotional tariffs.

GUVNL has also argued that buying costly solar power from developers is going to financially impact the consumers in the state as the higher cost of power procurement is passed on to them. To abrogate such a case, it proposes to claim RECs which will reward DISCOMs as well as take care of consumer interests.  GUVNL also requested for a provision where RPO surplus DISCOMs are allowed to exchange RECs with RPO deficit ones by bypassing prevailing exchange based transactions. In our view, this particular demand questions the very purpose of having a double side closed fair market-based mechanism for RECs.

GUVNL had also prayed the apex commission puts in place a uniform solar RPO target for all states in India.

CERC, in the order, is of the view that current regulations stipulating generators only for claiming RECs is adequate for a healthy REC market. Hon’ble commissions decision can be read as -

“The Commission is of the view that the existing provisions of eligibility in the  REC Regulations which is limited to generating companies is adequate at this stage of development of REC market. Without going into the merit of the issues raised, we intend to clarify that filing of the petition is not the proper process for initiating the amendment to the existing regulations. The Commission under Section 178 of the Act has been vested with the power to make, amend and repeal the regulations on the subjects which have been authorized under various provisions of the Act. Action to make or amend the regulations is initiated when the Commission is satisfied that there is need for such regulations or amendment to the existing regulations.”

However, the commission directed its staff to analyse the issue and come up with an appropriate proposal for consideration.

According to Press Information Bureau (Release ID :103402) the matter was brought to light by Hon’ble Minister of New & Renewable Energy in the Lok Sabha (on 7th Feb 2014). In a written reply Hon’ble Minister quoted that obligated entities were free to procure power over and above RPO targets and that any changes to existing regulations is a quasi-judicial process and the CERC takes a view after following due process of law including public hearing.