Blog by Team REConnect

GERC Maintains Leniency over RPO Compliance

The Gujarat Electricity Regulatory Commission (GERC) in its orders Dated 16th Jan 2015, has given relief to the state distribution companies against their RPO compliance for the year 13-14. The summary of the GERC orders is given below:

 Orders on GUVNL: GUVNL complied with 5.26% out of 6% obligations for non-solar and achieved 2.18% of Solar against 1% obligation. But overall attained a renewable purchase level of 7.44% against the RPO of 7%. Highlighting this the GUVNL requested before the commission to adjust its excess solar energy purchased into the non-compliance in the Non-solar part. While the Indian Wind Energy Association (IWPA) objected saying that this would result in loss for the wind generators as there is huge amount of Non-solar REC’s available for purchase.

 The commission in its order granted the permission for adjusting the excess purchase by GUVNL from Solar against the wind and other category compliance saying that the solar energy is costlier than the Non-solar energy and further more purchase of non-solar renewable would result in an additional burden on consumers of the distribution licensee.

Order on MPSEZ Utilities – MPSEZ Utilities submitted that it is having a revenue gap and therefore the enforcement of RPO on them will further burden the deemed licensees of SEZ areas. The commission in the order said that looking to the nascent stage of operation of the deemed distribution licensees of SEZ and quantum of power requirement by them for fulfillment of RPO, which is very less, so the commission exempted the licensee from applicability of RPO for FY 13-14.

 Order on Torrent Power ltd. – Torrent power submitted that it has complied with RPO of 4.55% in case of Non-solar against total 6%, and solar RPO of .07% against 1% in the regulation. Saying that due to non-availability of Renewable Energy and factors beyond control, which lead to shortfall in RPO compliance for FY13-14. And requested before commission to revise the RPO percentage of FY 13-14 to the actual targets achieved by the company. IWPA in its submission said that the distribution company had the option of redeeming REC’s from exchange, as huge no. of solar and non-solar REC’s are available for sell.

 The commission in the order said that the petitioner has made sufficient efforts to fulfill the solar and non-solar energy and REC’s as well, also said due to non-availability of renewable energy and factors beyond controlled resulted in shortfall in RPO compliance. And said that any further purchase of REC’s will result in the burden for consumers hence we cannot force the petitioner to buy more REC’s. The commission ordered to revise the RPO of the petitioner company as non-solar RPO at 4.55 % and Solar RPO at 0.07 % for FY 2013-14.

 The decision of GERC to allow the defaulted distribution companies, adjusting their non-renewable RPO with their excess solar energy, and waiving off RPO for Deemed Distribution licensees (Torrent Energy Ltd and MPSEZ Utilities Pvt. Ltd.), and also reducing RPO to match the extent of sourced energy, will adversely impact the REC market which is going through a bad stage.

 These steps even though appear to be practical may give other states chance to be more lenient over RPO enforcement, which could result in effecting the renewable industry badly as they rely on strict RPO enforcement. The step of giving solar power beneficial treatment over other RE power could be discouraging to other RE generators. May be the stagnancy in the REC market is the result of domino effect started by GERC and some other regulatory commissions.

The GERC Order on GUVNL & MPSEZ can be accessed here, and the order on torrent power can be accessed here.

CERC: REC Regulation 3rd Amendment

We are pleased to inform that Hon’ble CERC has finalized a much awaited 3rd Amendment on REC Mechanism. The Central Commission has laid out following changes through this legislation/order:

REC Regulation (3rd Amendment) | Order on Vintage Multipler |  Statement of Objects & Reasons

DISCOMs to get RECs for surplus green power they would have procured. However, this is applicable only if such DISCOM has procured green power over and above RPO target set under NAPCC or National Tariff Policy or by Appropriate Commission WHICHEVER IS HIGHER. Further, before granting RECs for surplus green power, any shortfall in RPO or any carry forward in RPO granted by Commission in PREVIOUS THREE YEARs would be adjusted first before issuance of RECs to such DISCOM. Provided further, such DISCOM would need permission from appropriate commission to procure such green power.

Implications: This provision clearly brings clear incentives for DISCOM having procured higher amount of green power beyond their RPO targets. However, since the proviso brings forth conditionality of “higher of NAPCC, Tariff Policy or State Commission mandated RPO target”, DISCOM would have to align themselves first with all the three RPO targets. We can say that the Center would now have a greater say in directing RPO trajectory which was missing so far.

Pre-Term reduction in Solar Floor/Forbearance Price. The new Floor price now stands at Rs.3500/MWh and Forbearance Price at Rs.5800/MWh.

Vintage Multiplier for Solar RECs has been introduced. Solar projects registered under REC Mechanism after 1st Jan, 2015 would get 1 REC for every MWh of generation. Projects registered before that would get 2.66 RECs for every MWh of energy.

Implications: This proviso brings clear divide between projects that are already registered and projects which would get registered under REC mechanism from today onwards. Since the reduction of REC price would bring additional demand, the sudden spike in supply of REC would again result into subdued/depressed clearance ratio of Solar RECs.

With the current inventory of 5.8 Lac RECs available, we can expect the inventory to shoot to about 15.5 Lac Solar RECs immediately. Further, with 538 MW Solar PV capacity already registered under REC, the inventory pile up can increase rapidly given the multiplier effect.

Differential treatment of Captive/CGP and OA based REC generator has been kept in abeyance.  Hon’ble commission has kept the decision to grant reduced number of RECs to OA/Captive based REC Generator in ABEYANCE and has directed staff to come up with a fresh discussion paper to accommodate the same.

The Hindu Business Line quoted – “ The CERC notification lowering the price band is significant because the previous band did not serve any purpose. Even the floor price (Rs 9,300 per REC) was very high. Since one REC is issued for every megawatt-hour of electricity generated, the floor price translated to Rs 9.30 per unit of solar power. Nobody would buy an REC at this price because any obligated entity would find it cheaper to buy solar energy, which is now available at between Rs 6 and Rs 7 a unit, rather than buy a solar REC paying Rs 9.30. The solar industry had been clamoring for a downward revision of the band”. The same can be read in the media article here.

Regulation (Suo Motu Order), Notification and Statement of Reasons can be accessed.

The same has been mentioned in a media article here.


REC Trade Report of December Trading Session

Non Solar RECs

In November 2014, demand improved substantially over the previous month, closing over 3 Lakh. Clearing ratios showed significant improvement over the last month. The closing balance of REC inventory for Non- Solar RECs did not show much rise. Issuance has been generally high in the last quarter. Trading is expected to show significant improvement over the next 3 months. Clearing price remained glued to 1500.


Solar RECs

This trading session, demand almost doubled over previous month, rallying behind good demand from some states, albeit it remained very low considering the huge inventory. Clearing ratio rose marginally on both IEX and PXIL. Demand showed good signs of recovery, and with the recent amendment to the REC mechanism, Floor price of Solar RECs being reduced to Rs 3500 from previous Rs 9300 per REC, the demand for Solar is expected to skyrocket in the coming 3 months. Clearing price remained at 9300.

Contributed By: Team REConnect

Media coverage: Bloomberg

Odisha Finalizes Guidelines for Net Metering

Odisha Electricity Regulatory Commission (OERC) through an order has finalized the guidelines for Net Metering systems, including LT connectivity for Government/ PSU owned buildings only.

 A brief summary of the guidelines is given in table below:

The commission is mandated to promote Renewable Energy by providing connectivity with grid and sale of electricity to any person under EA 2003, which is why it has released this guidelines to enable consumers to set up Rooftop systems.

The state of Odisha has fairly good potential for solar power generation with 280-300 days of sunshine in a year and Global Horizontal Irradiance of about 4.5-5.0 kWh/m2/day.

This guidelines does not make consumers eligible for REC’s. This may be due to the fact that solar tariffs are on the decline whereas the state retail tariffs are increasing year-on-year.

The order can be accessed here.

Rajasthan Draft Net Metering Regulation

Rajasthan Electricity Regulatory Commission (RERC) has recently notified draft regulation for Net Metering & small solar grid interactive systems. The regulation will come into force from the date of notification in the official Gazette.

The regulation will apply to the distribution licensee and the consumers of the licensee. The consumers in the area of distribution licensee are allowed to install rooftop systems under Net Metering arrangement for their internal use and are allowed to supply surplus energy into the distribution system.

Individual Project Capacities: The rooftop solar system should of minimum 1KWp capacity and should not be more than 1MWp. The maximum capacity for rooftop systems to be installed shall not be more than 80% contract demand of the consumer.

Interconnection with the Grid: The connectivity levels at which the Rooftop PV Solar Power Plants shall be connected with the grid are as specified below:

Energy Accounting and Settlement: The distribution system shall install metering equipment at the point of interconnection. For each billing cycle the distribution licensee shall show quantum of energy injected into the distribution and energy drawn for the system. If the energy injected is more than energy drawn for distribution system then the surplus energy will be carried forward to next month, and if the energy drawn is more than energy injected then in such case the licensee will raise invoice after adjusting previous energy credits.

Applicability of Charges: The Rooftop PV Solar Power Plant under net metering arrangement shall be exempted from banking charges.

Solar RPO and REC Eligibility: The quantum of energy generated from rooftop systems will qualify towards the RPO of the distribution licensee, in case the consumer is not an obligated entity. Considering that the consumer can self-consume or sell to a third party under open access, as per current REC Regulation, a consumer availing Open Access benefits is not eligible for REC. Captive consumers who do not avail Open Access benefits for the entire generation (self-consumption + injection into grid) are eligible for RECs for the entire generation.

The comments and suggestion on the draft ca be submitted on or before December 4, 2014.

The Draft Regulation can be accessed here.

Our earlier blog on Rajasthan Solar tariff can be read here.

Contributed By Dheeraj Babariya

Stricter penalties in Electricity (Amendment) Act: Piyush Goyal (Power Minister)

The Power Ministry will soon come up with the Amendment in the Electricity Act 2003, which will have strict penalties. The proposed amendment is likely to be presented in the parliament during ongoing winter session.

“We’re looking at presenting amendments to the Electricity Act in this session of parliament, for strengthening the penalty provisions manifold in the renewable purchase obligations, to make these more stringent,” said Mr. Piyush Goyal, Minister of Power, in a statement.

He said that the current renewable purchase obligation (RPO) is also being re-looked and added, “Earlier, we had certain set of targets till 2022, which we are bringing forward to 2019, we hope that 15 per cent of the renewable power purchase obligation can be enforced to 2015”.

The concept of RGO will also be introduced in the act, in which companies setting up new power projects will have obligation to generate 10% Renewable Energy component.

The amendment will focus on bringing RE into mainframe, as the REC market has not been performing well and there is little RPO compliance by the obligated entities. The RGO will help the govt. to meet its ambitious target of 100 GW solar power by 2022 with wind capacity addition of 10 GW per year.

The provision for forecasting and scheduling of Renewable Energy is expected in act. Also the concept of ‘Must Run’ and ‘Deemed Generation’ are also expected to be part of this amendment. The idea of ‘Hydro Purchase Obligation’ and the provision of giving Renewable status to large Hydro projects can also be included.

It will be interesting to see how this amendment affects the market performance, before the proposed Renewable Energy Act is passed early next year.

Media Articles:

Business Standard

The Economic Times

Indian Express

JERC issues stern orders on RPO

The Joint Electricity Regulatory Commission (JERC) for Goa and Union Territories in its order dated 12th Nov 2014, has again showed strictness towards RPO compliance. In the order the commission has asked all the distribution companies to comply with their RPO and submit a report on the compliance.

In its earlier orders, the commission has given strict directions for RPO target compliance.

A brief summary of the hearing a below:

Secretary (Power) Goa: The commission after examining the report has said that the respondent has failed to submit facts and figures to meet its Solar & Non-Solar RPO, therefore the commission has asked the respondent to submit a detailed action plan to meet RPO, has also directed the respondent to meet RPO of all current and backlog years and to submit a quarterly compliance report to the state agency for verification & certification to the commission without fail.

Secretary (Power) UT Andaman & Nicobar: The commission has said that the respondent has successfully complied with the RPO targets, further commission has asked the licensee to continue submitting the quarterly compliance reports to the state agency.

Secretary (Power) UT Chandigarh: The commission after reviewing the report submitted by the licensee, said that the respondent has successfully complied with the RPO targets of 2nd quarter, the commission has further directed the respondent to regularly submit the quarterly compliance report.

Secretary (Power) UT Dadra & Nagar Haveli: The commission said that the respondent has not complied with the RPO targets and has submitted an incomplete report. The commission has asked the licensee to submit a detailed action plan by 09th Feb 2015 and to meet RPO targets. The commission has directed the Licensee to submit quarterly compliance report on regular basis to the state agency and to the commission without fail.

Secretary (Power) UT Daman & Diu: The commission observed that the licensee has not complied with the RPO current year and had not complied with the commission’s previous orders. It has found that there is huge back log of Solar and non-solar RPO of the respondent. The commission has directed the respondent to meet the RPO targets of current and the previous years and to submit action plan to meet the RPOs, and also submit quarterly compliance report.

Secretary (Power) UT Lakshadweep: The respondent did not submit the report of RPO for back log and current year. The commission said it has taken a serious note on non-appearance in the present petition and non-compliance of its order, and has asked respondent to meet all the back log and current RPO targets. The commission has also asked the licensee to submit a detailed plan to meet RPO targets.

Secretary (Power) UT Puducherry: The commission observed that the respondent has not complied with the RPO targets, so it has asked them to meet the current and back log targets. The commission has asked for a detailed action plan and submit the quarterly compliance reports.

Though the UTs do not significantly contribute much to the demand of electricity, JERC has taken their RPO compliance seriously, but has not yet imposed penalties on any of them.

The order can be accessed here.

Uttar Pradesh Solar Rooftop Policy 2014

Hon’ble Uttar Pradesh New and Renewable Energy Development Agency (UPNEDA), has issued the Solar Rooftop Policy, aimed at Government, Public and Private institutions. The policy aims to promote solar energy generation for self consumption, while excess energy will be injected into the distribution network.

The State has vast potential for deployment of plants utilizing Solar Energy. The State receives daily average solar radiation in the range 5.0 kWh/sqm –5.5 kWh/sqm, in most of its part, offering opportunity for deployment of suitable solar energy facilities.

The main objectives of the policy are:

  1. Encouraging solar energy generation in the state and contributing towards sustainable development.
  2. Attracting investments in manufacturing, research & development in solar energy sector.
  3. Optimally utilising available solar resources & enabling stakeholders to reducing greenhouse gas emissions.
  4. Attracting private sector participation in solar energy sector.

The policy is summarized in the table below:

Overall the policy is good initiative by the state to promote Rooftop solar, but the paltry target of 20 MW by March 2017 does not clearly justify how the government wants private investments in manufacturing and projects, and neither its objective of promoting Sustainable Development to a larger extent. It will not meet its Solar RPO target of 1.5%, 1.75% and 2.00% for 2014-15, 2015-16 and 2016-17 respectively, with the solar roof-top capacity addition target of 20 MW. Buying solar power from states like Rajasthan, would suffice its Solar RPO.

There is no clarity on subsidies, and the interconnectivity with grid rests in the hands of Discoms who are required to submit procedures for the same. The procedures are to be approved by the commission. If Discoms and UPERC cause any delay on their account, it may become a huge deterrent for early projects implementation.

The winter months, starting from November and extending up to March, with foggy weather conditions, will not help the cause of Roof-top solar, but since the long summers are generally characterized by high Solar Irradiation and acute power shortages, Solar Rooftop might provide the right answer for small commercial and residential consumers.

However the government has assured target revision from time to time, and has set attractive tariffs for Solar Rooftop with 5 year commercial visibility.

The Policy can be found here.

Our recent blog on UP RE tariffs can be read here.

Contributed by Dheeraj Babariya.

HPERC imposes penalty on HPSEBL

HPERC on 10th November 2014 issued order on petition filed by M/s Ujaas Energy Limited for non compliance of Renewable Power Purchase Obligation by obligated entities.  Honorable commission has directed obligated entities to procure RECs from power exchange if there is any shortfall in the fulfillment of RPPO. Commission while deciding the case has noted that HPSEBL had fully met and in fact exceeded the specified target for Non Solar RPPO for last three years but was unable to meet the Solar RPPOs for FY 12 and FY 13.The commission has also decided that shortfall of Solar RPPOs for FY 12 and FY 13 shall be met during FY 16 and FY 17.  There was a shortfall of 0.74 MU and 18.4 MU in the solar RPPO for FY 12 and FY 13.

Honorable commission is of the view that in the MYT they have already approved the purchase of solar power by HPSEBL to meet its Solar RPPOs. Keeping in view the judgement of Hon’ble APTEL that since RECs are available in the market, targets cannot be carried forward to future years and had directed HPSEBL should deposit the compensation of Rs 17.23 crores in a separate fund to be created by HPSEBL in its account as RPPO Compensation Fund for non-compliance of RPPO in 2013-14.

JERC orders amendment to RPO Regulation

JERC (Joint Electricity Regulatory Commission) for Goa and Union Territories has ordered amendment to its principal RPO Regulation 2010. The order has already come in force from 22nd April 2014.

The Commission under this amendment has declared RPO targets till FY 21-22. The main highlights of the amendment are as below:

There are few changes in the definitions as:

1.       Renewable Energy Sources - Electricity generating sources recognized or approved by the Ministry of New and Renewable Energy and includes bundled power purchase (to the extent of Renewable Energy content in the bundled Power), power generated from co-generation based power plants wherein the fuel used is non fossil fuel duly recognized as renewable sources by MNRE and certified by the State accredited agency.

2.       ObligatedEntity – The entity mandated under clause (e) of sub-section (1) section 86 of the Act 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 – The 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.

The relevant order can be accessed here.

Our previous blog on JERC Solar Tariff can be read here.

Contributed by Dheeraj Babariya.