Maharashtra Published RPO Regulations for FY 2016-17 to FY 2019-20

Maharashtra published RPO regulations covering the period FY 2016-17 to FY 2019-20. The highlights of the regulation are:

 

  • RPO % in FY 2016-17 is 11% in total (10% non-solar and 1% solar). This will increase to 15% by FY 2019-20 (11.5% non-solar and 3.5% solar)

 

  • The regulations are broadly in line with the standard regulations of RPO across various states, except the following clauses:

 

  • RPO is no longer exempt on co-generation power. The Statement of Reasons (SOR) accompanying the regulations refers to the National Tariff Policy as a reason for removing exemption from RPO on co-gen power.

 

  • RPO is applicable only on consumption of conventional power. This is a significant deviation as the Electricity Act/ CERC/ other states require calculation of RPO on “total consumption”. By leaving out RE power from RPO calculation, Maharashtra risks providing double benefit to RE generators – it is possible that a consumer that consumes power from RE sources does not attract RPO provisions and at the same time claims offset of such RE power towards meeting RPO on conventional power.

 

  • RPO is applicable on CPPs with installed capacity of 5MW or more and open access consumers with a contract demand of 5 MVA or more. This will leave out significant open access and captive capacity form the ambit of RPO applicability.

The regulation can be accessed here.

REC Trade Result March 2016

March, being the last month of the Financial Year to fulfil the yearly RPO obligations, saw significant rise in demand in both the Solar and Non-Solar segments, as compared to the last three months. Non-Solar RECs demand almost doubled and Solar RECs demand rose by 68.45%, as compared to February. This was the result of stricter compliance and can also be attributed to the recent Ad by MNRE asking all entities to fulfil their obligation. The total transaction value stood at 213.3 Crores as compared to 119.5 Crores last month.

Analysis of Trading:

Non Solar – Clearing ratio in exchange stood at 7.65% and 8.93% in IEX and PXIL respectively for Non Solar REC’s. A total of 11, 14,319 RECs were traded as compared to 586,501 RECs traded in February. Overall, it was a good recovery in this segment, which also saw the closing Inventory come down marginally.

Solar – Clearing ratio stood good at 5.07% and 3.35% in IEX and PXIL respectively, with total clearing volume of 152,006, as compared to 90,236 last month. The recovery was good, but contrary to the Non-Solar inventory, the solar inventory showed no reduction.

 

As compared to March-2015, where the Non-Solar and Solar demand stood at 654985 and 68982 respectively, it was 70% and 120% higher for Non-Solar and solar respectively, in March-2016. However, the closing inventory for the FY stands at 13.28 million and 3.31 million for Non-Solar and Solar respectively, worth close to Rs. 3151 Crores. April-2015 trading saw huge clearance due to late fulfillment of obligations, and the same can be expected next month as well.

We are hopeful that the FY 2016-17 will bring good fortune to the REC market, considering the proposed regulatory changes and more stricter enforcement by states, which will bring back stakeholders confidence.

Jharkhand Draft RPO Regulation

The Jharkhand State Electricity Regulatory Commission (JSERC) in a recent notification has proposes its RPO (Renewable Purchase Obligation) and its compliance regulations 2016. The regulations will come into force from the date of its publication in the Jharkhand gazette and shall remain in force upto 31st March 2020.

RPO applicable to following category:

  1. Distribution Licensee
  2. Grid Connected Captive Generating plant with installed capacity of 5 MW and above
  3. Open Access Consumer having contract demand of 1 MVA or consume electricity procured from fossil fuel based generation.

The draft notification proposes the minimum percentage of its total consumption for Obligated Entities during a year is shown below:

Minimum Quantum of purchase in (% ) from renewable energy sources (in terms of energy in KwH)
Year Solar Non Solar Total
2016-17 1.50% 3.50% 5.00%
2017-18 2.25% 4.25% 6.50%
2018-19 3.25% 5.25% 8.50%
2019-20 4.50% 6.50% 11.00%

 

Apart from the RPO Targets the commission has also proposed penalty for non-compliance by obligated entity which fails to meet its compliance during any year.

Commission has proposed penalty under Section 142 of the Act and forbearance price penalty on the basis of shortfall in units and may direct the obligated entity to deposit it in separate account and provided that as directed by commission funds may be used for purchase of certificates.  Distribution licensee shall be in breach of its license if it fails to deposit the amount within 15 days of the communication and penalty will not pass through in Aggregate revenue requirement.

Commission has proposed priority for open access and connectivity within distribution system or transmission system as case may be irrespective of installed capacity for RE Projects in the state.

Comments:

  • RPO% proposed is way lower than NAPCC RPO target which is 15% by 2020.
  • Solar RPO proposed is not in line with the National Tariff Policy 2016 which has defined Solar RPO % to be 8% by 2022
  • RPO for Open Access is only proposed on conventional consumption while it should be on all consumption
  • CGP installed capacity of 5 MW must be reduced to 1 MW for RPO Applicability
  • Commission should allow existing projects to participate in REC Mechanism after three years of prior termination of PPA as defined in CERC REC Regulations.

The order can be accessed here.

MNRE Issues Notice on RPO compliance

The Ministry of New and Renewable Energy in collaboration with Government of India has made a great initiative by spreading the message about RPO and the need for its compliance through Times of India.  The Government highlights that all the obligated entities must comply with their RPO by March 15-16 since this trading session will be the last trading session of the compliance year, whose result calls for stricter enforcement by states. The Times of India’s article can be viewwd below

Key provision for Renewable Energy industry in the Union Budget 2016

The Union Budget 2016 was a mixed bag for the RE industry. The key provisions that will impact the industry are:

 

  • Reduction in accelerated depreciation (AD) on RE investment – the rate of AD will be reduced from 80% to 40% from April 1, 2017. AD has been historically an important driver of investment in the RE sector. However, off-late IPPs (who generally do not use AD benefits) have become the key driver of investment in the sector. Nevertheless, this change will reduce demand for RE investment. FY 2016-17 is likely to see a spurt in investment under AD as investors rush to complete projects before the lower rate becomes effective.
  • Increase in coal cess – Coal cess has been doubled from Rs 200/ ton to Rs 400/ ton. The proceeds from this cess fund the National Clean Energy Fund (NCEF). NCEF is used for a variety of reasons like Ganga Rejuvenation, proposed payments to states for deviation resulting from wind and solar, and is often not used at all (absorbed by the government to meet fiscal deficit targets).
  • Allocation of funds to MNRE has increased from  Rs 262 crore in FY 15-16 to over 5,000 crore in FY 16-17. These will potentially kick-start large projects.                                                                                                                                                                                                                                           * 1Article titled “Govt uses green energy fund for fiscal balancing”, dated April 21, 2015, Mint newspaper . 

    The article can be accessed here.

     

 

 

UERC determines Levelised tariff for Rooftop and Small Solar PV Power Plant

Uttarakhand Renewable Energy Development Agency, had filed a petition seeking determination of Levelised tariff for Rooftop and Small Solar PV Power Plant as per the revised subsidy scheme notified by Ministry of New and Renewable Energy, Government of India (MNRE).

While fixing the tariff for FY 2015-16 in respect of Rooftop and Small Solar PV Power Plants, the Commission had considered applicable level of subsidy of 30% in accordance with the RE Regulations, 2013. Later MNRE vide its notification dated 03.08.2015 reduced the subsidy level for such plants to 15% suspending the earlier notification. Finally MNRE revised the level of subsidy for these plants based on category of project developers as given in the table below.

Considering the benchmark capital cost specified for FY 2015-16 the Commission has determined the applicable tariffs corresponding to level of subsidy for Grid-Connected Rooftop and Small Solar PV Power Plants as requested by UREDA as under:

UREDA would certify the amount of subsidy available to the Grid-Connected Rooftop and Small Solar PV Power Plants and the admissible tariffs applicable for such plants.

 

The order can be accessed  here.

REC Trade Result February 2016

RECs demand has shown significant improvement over last month trading session. Non Solar REC’s and Solar REC’s traded this month were 70% higher and 57% higher respectively, compared to trading session of January 2016. The total transaction value of REC’s hit a sum total of Rs 119.5 crore, compared to Rs. 71.78 crore last month.

Analysis of Trading:

Non Solar – Clearing ratio in exchange stood at 3.89% and 4.75% in IEX and PXIL respectively for Non Solar REC’s. A total of 586,501 were traded as compared to 344,519 RECs traded in January, but much lower than the volume cleared in December trading session.

Solar – Clearing ratio stood good at 2.14% and 3.58% in IEX and PXIL respectively, with total clearing volume of 90,236, as compared to 57,420 last month. The increase is significant, with much better performance expected next month.

 

Trading volumes are expected to increase significantly during March trading session, as most obligated entities will want to fulfill their obligation for the FY. This trading session results are encouraging, considering last month performances, riding on higher demand on both exchanges. However, compared to the trading session of February 2015, where Non-Solar and Solar clearing volume stood at 747,487 & 44,869 respectively, the performance of Non-Solar RECs was below par whereas Solar RECs demand more than doubled.

 

The trade result for the month of January can be accessed here.

REC TRADE RESULTS JANUARY 2016

RECs demand had been steadily rising in the past few months, but this month’s trading saw a signficant drop in trading volume as compared to last month. Non Solar REC’s and Solar REC’s traded this month were 61.6% lower and 6.79% lower respectively, compared to trading session of December 2015. The total transaction value of REC’s hit a sum total of Rs 71.77 crore, compared to Rs. 156 crore last month.

The reason in drop in trading volume are two fold – a) Previous month trading volumes were higher than normal driven by a specific order of RERC for compliance and b) the Republic Day holiday on Tuesday (also a banking holiday) presented a logistics hurdle for some obligated entities to trade.

Trading volumes are expected to increase significantly going forward, as most obligated entities are now gearing up to fulfill their obligation considering that only 2 trading sessions are remaining in the current FY. Last quarter of previous FY saw RECs trading volume of 20.85L. We should expect a significant increase over that this FY – this means we will see significant volumes in February and March.

Analysis of Trading:

Non Solar – Clearing ratio in exchange were at 2.16% and 3.12% in IEX and PXIL respectively for Non Solar REC’s. A total of 344,519 were traded as compared to 898,439 RECs were traded in DecemberClearing ratio at PXIL saw a jump, but IEX results showed huge dip in demand. Overall Non-Solar demand was below expectation

Solar – Clearing ratio stood good at 1.65% and 2.34% in IEX and PXIL respectively. However, the total clearing volume fell to 57,420, as compared to 61,602 last month. This was a marginal fall, but since we are approaching FY end, much better results were awaited.

 

Trading volumes are expected to increase significantly going forward, as most obligated entities are now gearing up to fulfill their obligation considering that only 2 trading sessions are remaining in the current FY . Further, this year we have seen regulatory action in the form of compliance orders and/ or proceedings in several states like Orissa, Kerala, UP, MP and Maharashtra, to name a few. This trading session result calls for stricter enforcement by states, since the next two months will be very crucial for the future of the REC Market.

 

The December’s trade result can be accessed here.

REC TRADE RESULTS DECEMBER 2015

The demand response for REC’s saw very good momentum in the December’s trading session. Non Solar REC’s and Solar REC’s traded this month were 288% higher and 29.8% lower respectively, compared to trading session of November. The total transaction value of REC’s hit a sum total of Rs 156 crores, compared to Rs. 65 crores last month.

Analysis of Trading:

Non Solar – Clearing ratio in exchange were at 8.31% and 2.22% in IEX and PXIL respectively for Non Solar REC’s. A total of 898,439 RECs were traded in this trading session (in November 231,545 RECs were traded). Clearing ratio at IEX saw a huge jump, whereas the effect was opposite on PXIL.

Solar – Clearing ratio stood at 2.62% and 0.37% in IEX and PXIL respectively, compared to 2.07% and 4.97% last month. The total clearing fell by 26,165, as compared to last month, with PXIL recording very low clearance this time.

 

Trading volumes are expected to increase significantly going forward, as most obligated entities are now gearing up to fulfill their obligation considering that only 3 trading sessions are remaining in the current FY . Further, this year we have seen regulatory action in the form of compliance orders and/ or proceedings in several states like Orissa, Kerala, UP, MP and Maharashtra, to name a few. Overall the market showed clear signs of recovery, especially Non-Solar, and is expected to grow further in the closing months of the FY.

The November’s result can be accessed here.

 

MPERC waives off past Solar RPO

In a recent order, MPERC has waived off past solar RPO for its Discom’s.

 

This comes despite ApTel’s judgment specifically disallowing waive-offs, and CAG’s remark about states not meeting RPO regulations.

 

Even more telling is the fact that India is playing a lead role at the ongoing international climate talks in Paris, and has been promoting its solar capacity additions as the most ambitious in the world.

 

However, MPERC’s decision goes contrary to all of the above. In its order, MPERC has said the following:

 

“The Commission also noted that respondents could not fulfill the Solar Renewable Purchase Obligations during the FY 2014-15 also. The Commission is monitoring the progress through the Suo-Motu petition no. 43/2015 regularly. The Commission also gone through the progress achieved by the respondents during the FY 2015-16 based on which, the Commission feels that the respondents may purchase more than the Solar Renewable Purchase Obligations fixed for the FY 2015-16. This may mitigate the default on the part of the respondents in fulfilling the statutory Solar Renewable Purchase Obligations in previous financial years. Under the above circumstances, the Commission is of the view that it would not be appropriate to impose any penalty at present on the respondents.” (emphasis supplied)

 

And further -

 

“The Commission is not in agreement with the views of the petitioner that the Solar Renewable Purchase Obligations during the FY 2015-16 should be cumulative as this will generate bad practices to accumulate the shortfall and to carry forward the targets.”

 

It is worthwhile to note that in its judgment on the same issue, dated 20/11/2013, MPERC had said the following:

 

“….Commission is constrained to express serious concern on the lack of effort on the part of the utilities in fulfilling their respective RPOs. More than four months of the current financial year still remain and the respondents are directed to pursue renewable energy procurement to the maximum so that the shortfall against the RPO is minimised. Continuous failure on the part of utilities in this regard cannot be allowed to go unpunished” (emphasis supplied)

 

In response the potential bad precedent, the Commission has instead decided to not impose past year obligations, and instead hopes that excess purchase of solar power in 2015 “may mitigate the default” of prior years.

 

REConnect Analysis:

 

This order sets a very bad precedent. Not only has MPERC clearly gone against the order of ApTel, it also goes against the government’s ambitious plans of developing solar energy and all the commitments that India is making at the international stage.

 

Go to top