OPEN-ACCESS

In a key judgement pronounced by Hon’ble APTEL on 17th April 2013 condonation of delay was not granted. The issue relates to a case filed by GERC against Century Rayon/MERC for the order passed by tribunal on keeping co-generation plant of Century Rayon outside the purview of RPS obligation (generic order).

The petition was filed by GERC for review after 818 days and evidently the petition was not submitted by tribunal due to huge delay in filling a review and also on the grounds that GERC was not present in the original proceedings and hence cannot be considered as “Aggrieved Entity”.

GERC had prayed for the review because one of the co-generators in Gujarat had approached GERC on the fact that in the order passed by APTEL in favor of century rayon (vs MERC/MEDA), Hon’ble APTEL had asserted that co-generators are at par with renewable energy generators, therefore the co-generator (who knocked GERC) was requesting GERC to allow them to sell their power at preferential tariff on the above grounds.

Subsequently. in the judgement the condonation of delay for review petition filed by GERC was rejected and dismissed.

In a similar spat between UPERC and Hindalco, UPERC was forced to follow the order passed by tribunal in Century Rayon case.

It seems that the breeze, as far as the co-generation issue is concerned, will remain stagnated and a way forward can be expected only if Electricity Act incorporates appropriate amendments.

For our detailed analysis on the co-gen issue, please refer our monthly Newsletter “OPEN ACCESS Vol. 29″.

West Bengal in a gazetted order dated 22^nd March 2013, unveiled its RPO Regulation; the last state in the Republic of India to come up with such order. The state of West Bengal has issued another gazetted order throwing light on the procedure to be followed for application of accreditation of projects under REC Mechanism, but nowhere it has been mentioned that RPO can be complied by purchasing RECs (though DISCOMs can purchase RE power from projects setup under REC mechanism) and therefore we are of the view that WBERC has to provide clarity on the issue. This article presents you a brief summary of the developments.

A preliminary reading of the regulation highlights the following points -

• The key point which catches everyone’s eye is that the Renewable Purchase Obligation is applicable only to DISCOMs (and not on OA consumers and CPPs).
• There is no target set for FY 2012-13 and the targets mentioned are from FY14 onwards.
• Co-generation sources and RE sources are treated at par to each other.

The RPO target set for subsequent financial years are as follows:

The commission has advised DISCOMs to have long term agreements till the ultimate target is reached. Also, Post FY 2018, solar target defined will increase in multiples of 0.10% till it reaches 0.50%.

DISCOMs have been allowed to procure RE energy beyond target but should limit, in case of solar, to 0.25% of total consumption or solar RPO target for that year whichever is higher.

The definition of Pooled Cost of Power Purchase is in line with that mandated by CERC.

Power procurement at APPC (and not mentioned as less than or equal to APPC, can be seen to have taken into consideration the recent amendments proposed in CERC’s second amendment) is a valid instrument to meet RPO and in this the applicability of capping price will not hold any significance.

DISCOMs have to submit compliance reports to state agency on annual basis within the month of October of the succeeding year.

Energy procured from any RE/Cogen source by an Open Access customer in the area of DISCOM can be claimed by that DISCOM for RPO compliance. Along with this, DISCOM can also claim the energy injected in the network for accounting wheeling loss, towards RPO compliance. This very point has the potential to attract substantial debate. Also transmission losses through assets of TRANSCO of WB shall also be accounted for RPO compliance of the licensee in whose area the energy is drawn by the users.

Consequence of non-compliance – IF DISCOM is unable to comply with RPO for a particular year, even after adequate measures, DISCOMs can purchase conventional power and if RE power becomes available subsequently; procurement can be done upto ultimate target (not more than 5 %) subject to condition that such procurement should not increase the average cost of supply to consumers by 2 paise/unit. It is worthwhile to note that proceedings will be initiated for non-compliance, but the magnitude of penalty has not been specified (as in most states where penalty is to the tune of forbearance price of REC for default in compliance).

Solar Power shall be procured through competitive bidding only and that procured from projects under JNNSM bundled power scheme will not be required to go for any competitive bidding.

The generation station under PPA/MOU with DISCOM shall not be eligible for registration and consideration under CERC REC Mechanism.

All renewable energy sources (expect MSW, Biogas, Co-gen Plants) shall be subject to Merit Order Dispatch regime and that of MSW, Biogas and Co-gen Plants will be subject to ABT mode of operation.

Capped Prices set for various sources are as:

Cogeneration – Rs. 3.34 / unit (for 5 years)

Small Hydro – Rs. 4.42 / unit (for 5 years)

Wind – Rs. 5.71 / unit (for 10 years)

Biomass – Rs. 5.41 / unit (for 5 years)

MSW – Rs. 5.12 / unit (for 10 years)

Biogas – Rs. 6.24 / unit.

Non Solar RECs

As April is the first month of the compliance year FY 13-14 a low demand situation was expected in this month’s trading session. Out of 18.9 lakh RECs which were put for sale only 44,459 RECs were purchased by the obligated entities.The about 93% of the total available RECs participated in the trade session.

The market clearing price was Rs.1500/REC at both IEX and PXIL which will remain the same in the coming months also as long as the oversupply situation will continue to prevail.

 Solar RECs

The demand of solar RECs was higher than the supply. Buy bid was 3,522 and the sell bid was 3,077 out of which 2,217 got redeemed.  The number of solar projects is continuously increasing under the REC scheme which provide a good amount solar RECs in the coming months.

The price at IEX was Rs.12, 206/REC and at PXIL it was Rs.12, 000/REC.

For information on previous months trading, please visit -March 2013 Trading Report

Chhattisgarh State Electricity Regulatory Commission (CSERC) recently brought an amendment to their RPO –REC regulations . The amendment mainly highlights the issue raised by obligated entities where there is an excess purchase of renewable energy/renewable energy certificates. They have requested the commission as there is an uncertainty in consumption pattern of captive users as there has been lower consumption than the anticipated consumption. The commission has agreed to the varying nature of captive consumption. Keeping this in mind, the commission has asked that in case of excess purchase/ shortfall of renewable energy or renewable energy certificates the obligated entities can meet their RPO in the succeeding year. The last proviso of  Regulation 9.1 is proposed as :

 “Provided any excess purchase/ shortfall of renewable energy or the REC procured by obligated entities for meeting the RPO in the obligation period shall be considered for meeting the RPO for the succeeding year.”  

The commission has also proposed that the amended regulations will be called as “Chhattisgarh State Electricity Regulatory Commission (Renewable Purchase Obligation and REC framework Implementation) (First Amendment) Regulations, 2013” and shall be in force for the period of applicability of the principal regulations (CSERC RPO-REC Regulations 2011).

REConnect also participated in providing comments to the commission on the proposed amendment. In our opinion the ‘excess purchase/shortfall’ term will allow the obligated entity to carry forward  its shortfall to the next year. We have requested the commission to allow carry forward the obligation to some extent only else the obligated entities will enjoy a longer compliance period which will which will affect the REC market and the revenue of renewable energy generators in the state. The carry forward should be allowed to obligated entities only if they show genuine interest in purchasing RECs and there is non availability of RECs in the market.

The REC market itself is in a bad situation from the past few months where RE generators could sell only a few fraction of their RECs. This situation was also highlighted by the Honourable CERC in its recent suo-moto petition for extending the validity of RECs. In the petition, CERC noted:

“Needless to say, the main reason for lapsing of RECs is the reluctance and / or apathy on part of distribution licensees to come forward to buy the RECs to meet their RPO” 

We feel that the proposed amendment by CSERC is will affect the RPO compliance status of captive users in the state as it will allow them to easily carry forward their shortfall of RE power/ RECs.

The order can be found here.

Punjab released their renewable energy policy   ‘New and Renewable   Sources of Energy (NRSE) Policy – 2012’ on 26^th December, 2012 with an objective to develop and promote  new  and  renewable sources of energy based  technologies and  energy  conservation  measures  as  well  as  providing  financial  &  fiscal assistance.

Punjab Energy Development Agency (PEDA) has been appointed as the nodal agency which will act as a single window facility for implementation of NRSE Policy.

Major focus :

• To attract private sector investment
• To provide decentralized RE energy particularly in rural areas and to improve quality of power and reduce T&D Losses.
• To give specific support to NSRE projects and conserve energy through energy efficiency.
• To support R&D, demonstration and commercialization of new technologies in RE sector.

The policy says that projects under REC mechanism may be allocated through competitive bidding based on percentage share of REC price. The power generated by projects under REC mechanism will be purchased by Punjab State Power Corporation Limited (PSPCL) / Licensee at APPC ( not yet announced in Punjab ). If PSPCL/Licensee refuse on purchasing power at APPC  the bidding will be envisaged sale of power in the open access. This will be very interesting if implemented. It will encourage investors to set up RE plant as the options to sell RE power will be wide.

The policy also announced incentives like:

• Exemption of stamp duty and registration fee
• Exemption of Change of Land Use (CLU) fee
• External development charges (EDC)
• Other charges for NRSE projects.

Overall the policy looks attractive. The Government of Punjab has to wait and watch how many private players they can pull from their policy.

On 14^th December 2012, Hon’ble Chattisgarh State Electricity Regulatory Commission (CSERC) rolled out its pooled cost of power purchase for Chhattisgarh State Power Distribution Company Ltd. (CSPDCL), Bhilai Steel Plant (BSP-TEED) and Jindal Steel (JSPL). As per this order, APPC for FY13 is shown below

As per relevant CSERC regulations  - “Pooled Cost of Power Purchase‟ 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 long-term and short-term energy suppliers, but excluding those based on renewable energy sources, as the case may be.” which is in line with that of CERC and followed by most states.

As per our analysis, the percentage increase in APPC for CSPDCL for FY11 – FY12 has been around 3.08% whereas for FY12 – FY13, a steep increase of 26.34% has been recorded. Likewise, APPC for BSP-TEED increased by a whopping 42.9 %. On the contrary, the APPC for JSPL has remained at Rs. 3.00/unit for all three years (APPC for FY11 & FY12). The increase in APPC for CSPDCL and BSP-TEED can mainly be attributed to the fact that power purchase from central generating stations (CGS) has increased from 4789 MUs in FY11  to 8062 MUs in FY13 and short-term power purchase has almost doubled from 1215 MUs in FY11 to 2083 MUs in FY13 (courtesy: CSERC MYT Order FY11-12).

Non-solar RECs

Demand decreased to 153,000 RECs (down 21% from Jan 2013) this trading session. The compliance period for this financial year will end in March 2013, leaving only one more trading session to go. Given that, the overall demand remains very disappointing. As we have mentioned earlier, till stronger enforcement kicks-in, demand is likely to remain lackluster.

Over 17,42,000 RECs were bid for sale (no change from last month). The significant oversupply situation continues to persist, despite the increase in demand.

3.5 lakh RECs were not bid for sale in the trading session. This represented 17% of the total available RECs.

Prices remain at the floor price (Rs 1,500/ REC) for the seventh consecutive month. Clearing ratio on IEX was 3.3% and on PXIL was 48.7%.

Solar RECs

The situation is more cheerful in the solar REC market.

Demand reduced to 6,777 from the high of 42,000+ last month. Last month saw a significant rise in demand as the compliance year comes to a close. However, given the small capacity in the solar REC market at present, demand remains significantly higher than supply.

Supply of solar RECs was at 2,700 (down 23% from January; possibly due to lower issuances in February – in January 3,300 RECs were issued while only 1,900 were issued in February).

Price remained constant at IEX at Rs 12,500 while it increased to Rs 13,000 on PXIL.

See these results in our dynamic market tracker (Beta version)

Non-solar RECs

Surprisingly volume decreased ( – 29% compared from last month) at beginning of the fourth quarter of compliance year ( in December volume went up by 108% increase). The total volume cleared was only 1,93,337 leaving an inventory of 17.8 lakh RECs.

Supply on the other side continued to increase. The total sell bids at both the power exchanges was 17.4 lakh RECs (up 20 % from last month).

Prices remained at the floor prices i.e at Rs.1,500/REC . Clearing ratios were approximately 15 % in IEX and 0.7 % on PXIL (last month was 22 % and 17.5% respectively).

Solar RECs

The cleared volume of Solar RECs was 2308 ( 1208 in December). The only consolation that today’s trade session provided was the rise in demand for Solar RECs. Compared to last month, the demand for Solar RECs increased by whopping 182 times.

Market clearing price at IEX and PXIL were discovered at Rs 12,500/REC.

Last month’s REC trading session has brought the REC market on the verge of vanishing soon. With no sign of strict enforcement happening and a drop of 40% demand shows that the obligated entities have the least interest to participate in the REC market. Those who were purchasing RECs have taken a step behind and are hesitating to purchase RECs to meet rest of their obligation.   This has shattered the confidence of all the investors on the REC scheme and has put forward a very big question on the Indian regulation and policy makers.

Few media coverages on the falling REC market:

• The Hindu Business Line
• Bloomberg
• Deccan Herald
• Business Today
• Rediff

Non-solar RECs

Volumes reduced sharply and prices remained at floor price for the third month.(Rs.1500/REC at IEX and PXIL; from September). Only 1.32 lakh RECs were redeemed this month (down by 41% from last month). The total supply was more than 12.3 lakhs (up by 21% from last month).

The demand has been falling drastically due to lack of enforcement of RPO regulations by state electricity regulatory commissions. Clearing ratios were approximately 8.7 % on IEX and 25 % on PXIL.

Solar RECs

Demand reduced by 23.3% from last month (3,363 in October) as well as the supply (down by 10% from last month).

The market clearing price on IEX was Rs 12,720 and on PXIL was Rs 12,100 (last month it was Rs 12,500 on PXIL and Rs.12,680  on IEX).  The total Solar RECs cleared was 1,219 ( last month it was 1,791). Supply was unusually high last month as some projects were issued RECs for several months at a time.