CERC announces regulations for implementation of Interstate Transmission System in the country

The Central Electricity Regulatory Commission (CERC) recently announced a regulation called the Central Electricity Regulatory Commission (Planning, Coordination and Development of Economic and Efficient Inter-State Transmission System by Central Transmission Utility and other related matters) Regulations, 2018 which came into effect from July 2018. The objectives of the regulation are to:

(1) Lay down the broad principles, procedures, and processes to be followed for planning and development of an efficient, coordinated, reliable and economical system of an inter-State transmission system (ISTS) for smooth flow of electricity from generating stations to the load centers;

(2) Ensure wider participation of stakeholders in the planning process and specify the procedures for stakeholders consultation and participation;

(3) Specify procedures to bring about transparency in the planning process; and

(4) Demarcate the roles and responsibilities of various organizations in line with the Act for meeting the above objectives;

The regulation states responsibilities of the concerned entities like the Central Transmission Utility, Transmission Licensees, Regional Power Committee (RPC), RLDCs, NLDCs & SLDCs respectively and their roles in implementing the above-stated objectives of the regulations. This regulation is in accordance with other CERC regulations like Central Electricity Regulatory Commission (Procedure, Terms, and Conditions for grant of Transmission License and other related matters Regulations), 2009; Central Electricity Regulatory Commission (Grant of Regulatory Approval for execution of Inter-State Transmission Scheme to Central Transmission Utility Regulations), 2010; and the Tariff Regulations issued by the Central Commission from time to time under section 61 of the Act.  

Further, the regulation has mentioned the process for the planning of the inter-state transmission and lastly, there are details provided for the process to be followed by CTUs and transmission licensee for application filing in order to start inter-state transmission.

The regulation has come well in time as there have been recent solar PV auctions with Interstate Transmission System connected solar projects. The regulations have also considered the augmentation of renewable capacity addition and Renewable Purchase Obligation with respect to each state in the country.

Industry reacts to the 25% duty as the Supreme Court allows to impose the safeguard duty on imports.

It has been a roller-coaster ride for the Indian Solar Industry and developers when it comes to the safeguard duty implementation. Recently the Supreme Court of India in the matter of the safeguard duty to be levied on imported solar cells has allowed the Central Government to levy 25% safeguard duty on imported solar cells and follow the previously announced order accordingly. This announcement nullifies the earlier stay from the Orissa High Court on the duty.

For the import-dependent solar power developers, the Supreme Court order which will be effective retrospectively from July 30th, 2018 might cost approximately an extra INR 500 crore ($ 72 Million) for some 1,000 MW of solar modules imported between July 30 & now. The financial burden will slow down the aggregate 16,000 MW projects in the pipeline. However, the announcement is being appreciated by the domestic manufacturers who believe that this step will help the industry which is currently facing competition with Chinese & Malaysian modules which are 8-10% cheaper.

However, not all domestic manufacturers stand to gain from the order. It will hurt the local manufacturers based in special economic zones (SEZs), which currently accommodate 40% of 10 GW of solar module manufacturing units and 60% of the 3 GW cell production base.

“The aggressive bid tariffs from July 30 up to now, are a clear indication that the industry has already factored in the 25% safeguard duty. The new projects will not be gravely impacted; the big worry lies with the aggregate 16 GW solar projects in the pipeline”, Mr. Pranav Mehta, Founder Chairman, National Solar Energy Federation of India (NSEFI) and Chairman-elect Global Solar Council (GSC).

Post the order from the Supreme Court, safeguard duty on the above-mentioned goods for a period of two years.

25% safeguard duty 30th July 2018 to 29th July 2019 (both days inclusive)
20% safeguard duty 30th July 2019 to 29th January 2020 (both days inclusive)
15% safeguard duty 30th January 2020 to 29th July 2020 (both days inclusive)

The notification which came into effect post a complaint from Indian Solar Manufacturers Association (ISMA) in Dec. 2017 after self-investigation. The investigation concluded that locally manufactured cells and panels, which constituted only 10% of the Indian solar projects in 2014-2015 and had reduced more in the subsequent years. 

Read the document here.

Parliamentary panel worries about the power sector post RBI’s revised framework on NPA’s

Reserve bank of India recently issued a revised framework for the resolution of stressed/non-performing assets. A Lok-Sabha committee was called to discuss the consequences of the framework on the electricity sector. The committee was of the opinion that the electricity sector has been forced towards Non-Performing Assets post the revised framework. As per the guidelines, one of the objectives of the revised framework is to ensure prompt action to provide relief to the stress in a borrower’s account as soon as the default takes place. However, the committee was of the opinion that a solution was indeed necessary but not at the cost of affecting the electricity sector majorly. A  37th report of the standing committee on energy on the subjects of stressed/Non Performing Assets in the electricity sector was presented post extensive discussion in order to resolve the issue of NPA in the electricity sector as per the extant RBI guidelines and other legal/ financial/ statutory provisions applicable at that time.

The Committee focussed on 34 coal-based thermal power plants which were categorized as ‘stressed’ due to issues such as:

  • Non-availability of Fuel:

– Cancellation of coal block.

– Projects set up without Linkage.

  • Lack of enough PPA by states
  • The inability of the Promoter to infuse the equity and working capital
  • Contractual/Tariff related disputes
  • Issues related to Banks/Financial Institutions (FIs).
  • Delay in project implementations leading to cost overrun.
  • Aggressive bidding by developers in PPA.

As per the Revised Framework, the extant instructions on resolution of stressed assets such as Framework for Revitalizing Distressed Assets, Corporate Debt Restructuring Scheme, Flexible Structuring of Existing Long Term Project Loans, Strategic Debt Restructuring Scheme (SDR), Change in Ownership outside SDR, and Scheme for Sustainable Structuring of Stressed Assets (S4A) were withdrawn. The Joint Lenders’ Forum (JLF) as an institutional mechanism for resolution of stressed accounts has also been discontinued. Now, all accounts, including such accounts where any of the schemes have been invoked but not yet implemented, shall be governed by the revised framework.

Although the new guidelines have been termed as ‘harmonized’ and ‘simplified’ generic framework, yet they are far from being so. Prior to these guidelines, an asset was classified as NPA if a loan or an advance where interest or installment of principal remains overdue for a period of 90 days in respect of term loan. Similarly, stressed assets were accounts where there has been a delay in payment of interest and/or payment as against the repayment schedule on account of the financial difficulties of the borrower. Under the previous framework, failure of an asset to serve its debt obligation within the prescribed time was taken to be indicative of a developing stress of potential NPA and consequently, corrective measures of various grades i.e. rectification, restructuring, and recovery were the options keeping in view the totality of the situation.

However, the new regime has let go with all such measures and any failure beyond the duration of SMA (Special Mention Accounts) is supposed to directly and immediately invoke the provisions of a resolution plan, making the revival extremely difficult. The committee, therefore, recommended that in the interest of the economy in general and the Electricity Sector in particular, the revised guidelines should be “harmonized and simplified” in the real sense.

 

SECI favours lowest bid in recent solar auctions, cancels rest

The nodal agency for National Solar Mission, Solar Energy Corporation of India (SECI) has canceled mostly all but the lowest bid project in its mega solar auctions held in July. The decision to cancel 2400 MW solar capacity out of 3000 MW came to light at a meeting of developers with government officials and SECI on August 1st, 2018. Out of all the tenders, only ACME solar won 600 MW for quoting INR 2.44/unit. The government felt all the other bids were too expensive and not competitive enough.

Among the canceled projects were 1100 MW by SB energy (a Joint Venture between Japan’s Softbank, Taiwan’s Foxconn & Bharti Airtel), 500 MW by Renew Power, both of which quoted INR 2.71/unit and lastly 300 MW each by Mahindra solar and Mahoba solar (Adani group) who quoted INR 2.64/unit. The developers felt that if they quoted below INR 2.71/unit, it would be not feasible for them to sustain.

Recently an auction in Uttar Pradesh was also canceled for 1,000 MW without stating any reasons.

Post the Safeguard duty implementations, Ministry of New and Renewable Energy (MNRE) has also requested the Finance Ministry to exempt the ongoing solar power projects from the 25% safeguard duty imposed on imported solar equipment. The developers showed their concern over the increase in capital of the projects. While the duty seeks to protect the domestic solar manufacturing industry, project developers have mentioned that the duty would increase solar power tariffs.

Looking at the trend of the competitive tariff over the past years, tariff prices have dropped drastically, and the developers have gone weary of the ongoing trend and believe that they won’t be able to sustain the long-term agreement. However, the government is of the opinion that the tariff is too high and not competitive enough yet.

Maharashtra joins the list of states with final Forecasting and Scheduling regulations

Recently Maharashtra became the latest state to publish final Forecasting and Scheduling (F&S) regulations. These regulations were published in the State Gazette on July 20, 2018. With this, all supposedly “RE rich” states except Gujarat and Tamil Nadu have finalized their F&S regulations.

The detailed summary of the regulations is as below:

Regulation Applicable on All grid-connected Wind and Solar Power Generators with pooling station capacity not less than 5MW or that of an individual Generator connected to some other Substation, shall not be less than 5 MW.

Deviation Accounting: The deviation accounting can be either carried out based on the Available Capacity:-

Available Capacity (AvC) = 100/Actual Generation – Scheduled Generation AbsoluteError in %

Point of Forecasting: Pooling Station or STU Feeder where injection is made.

Keypoints

  • No Aggregation – Clause 5.13 specifies the aggregation of schedules at Pooling Substation level only, and not of multiple pooling station capacity.
  • Further charges in case of shortfall in DSM pool – Clause 12.1 (d) specifies that any shortfall in the aggregate amount of Deviation Charge payable by Solar and Wind Energy Generators at the State periphery and the amount receivable from them by the Pool Account shall be recovered in proportion to their deviation reflected at the State periphery.

Sr.

No.         

Absolute Error in %age terms in 15-minute time block                               Deviation Charge payable to Pool Account for Wind/Solar Generation
1 < = 15%

None*

2 >15% but <=25% At Rs. 0.50 per unit for the shortfall or excess beyond 15% and up to 25%
3 >25% but <=35% At Rs. 0.50 per unit for the shortfall or excess beyond 15% and up to 25% + Rs. 1.00 per unit for the balance energy beyond 25% and up to 35%
4 >35%

At Rs. 0.50 per unit for the shortfall or excess beyond 15% and up to 25% + Rs. 1.00 per unit for the shortfall or excess beyond 25% and up to 35% + Rs. 1.50 per unit for the balance of energy beyond 35%      

Role of a QCA:

  • Provide day ahead, weak ahead and intra-day forecast, schedules and periodic revisions;
  • Coordination with DISCOM/STU/SLDC for metering, data collection, communication/issuance of dispatch/curtailment.
  • De-pooling of charges among generators
  • Commercial settlement of DSM charges and all other ancillary and incidental matters.
  • The QCA shall furnish weekly meter readings to the SLDC by 00.00 hours on Thursday of the previous week, in addition to the data provided to the SCADA Centre, for the purpose of energy accounting under these Regulations.

Revisions:

  • 16 revisions are permitted starting from 00:00 Hrs of the day for Wind & Solar Generators
  • All revisions will be effective from the 4th time-block

Important differences between intrastate and interstate transactions:

  • The sale of power within Maharashtra by Solar and Wind Energy Generators connected to the Intra-State Transmission Network shall be settled by the Procurers on the basis of their actual generation.
  • The sale or of power outside Maharashtra by Solar and Wind Energy Generators connected to the Intra-State Transmission Network shall be settled by the Procurers on the basis of their scheduled generation.
  • Inter-State transactions at a Pooling Sub-station shall be permitted only if the concerned Generator is connected through a separate feeder. In that case, a separate Schedule will have to be provided for its energy generation.
  • The Generator shall pay the Deviation Charges applicable within Maharashtra in case of deviations in the State DSM Pool Account, the consequences of such deviation at the Inter-State level being governed by the CERC Regulations governing the Deviation Settlement Mechanism and related matters.

MoP reveals proposed amendments related to captive power plants in Electricity Rules 2005

Ministry of Power recently announced proposed amendments in the electricity rules 2005 related to provisions regarding captive generating plants. The captive power producers body ICPPA expressed their woes against the proposed amendments.  According to ICPPA, these amendments are aimed at creating new ways of earning Cross Subsidy Surcharge (CSS) from captive users.

The amendments state that any captive user whose ownership of that plant is not exceeding 15% shall not qualify the power plant as a captive power plant. The proposed amendments have associated the ownership of the captive power plant with the eligibility of being a captive user.

In case the captive user fails to abide by the rules, then the electricity generated by the plant will be considered as if its a supply element by a generating company.

ICPPA secretary Rajiv Agrawal while interviewing with Economic Times said that “If any user is forced to draw lesser power share due to genuine reasons like the closure of its end-use plant for maintenance then the whole power generated in a year will be treated as non-captive and state income will charge CSS on it. It means all users of CPP will also have to pay the penalty, and thus the CPP may have to close down.”

The amendments suggest each captive user utilize 51% of the generated electricity from the captive plant and in case of group captive, each member should have a 26% equity share in the plant to be able to utilize the power from the plant.

“Captive plant set up by a company or any other body corporate, shall mean the issued and paid-up share capital in the form of equity share capital with voting rights (excluding equity share capital with differential voting rights) only as per the provisions of the Companies Act, 2013. In other cases, ownership shall mean proprietary interest and control over generating station or power plant, Provided further that for the purpose of assessing status as captive generating plant, a normative debt : equity ratio of 70:30 will be considered i.e. at least 26% of the equity base of 30% of capital employed, in the form of equity share capital with voting rights (excluding equity share capital with differential voting rights) needs to be invested by Captive user(s).”

In our opinion, the proposed amendments can bring stability in the electricity sector and increase the workability of DISCOMs across the country. By suggesting the eligibility of captive plants to be associated with the ownership in the plant the commission is asking the captive users to conduct rightful investments and be responsible towards the generation from the plant.

Read the document here.

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