CERC notifies sixth amendment of inter-state sharing regulations of transmission charges & losses, 2010

In a recent notification issued by CERC on the (Sharing of inter-State Transmission Charges and Losses) amendments have been announced. These are the sixth amendment in the regulations and will come into effect in retrospection from 31.12.2018.  The below-stated amendments have come been notified in retrospection and will only be applicable to projects whose generation capacity has been declared under the stated commercial operation period.

The amendments in the regulations are as follow:

  • In regulation (7) of the principal regulations subclass (h) & subclass (z) the date “3.12.2019” will be substituted with “12.2.2018.
  • A new sub-clause (aa) will be included in Clause (1) of Regulation 7 of Principal Regulations as under:-  “ No transmission charges and losses for the use of ISTS network shall be payable for the generation based on solar and wind power resources for a period of 25 years from the date of commercial operation of such generation projects if they fulfill the following conditions.”

Provided such generation capacity has to be awarded projects via a competitive bidding process & should have been declared under commercial operations between 13.2.2018 till 31.3.2022.

Also, Power Purchase Agreement(s) should have been executed for sale of such generation capacity to all entities including Distribution Companies for compliance of their renewable purchase obligations.”

Analysis of the discussion paper by CERC on Market-Based Economic Dispatch on a day ahead basis

Central Electricity Regulatory Commission (CERC) recently published a discussion paper titled “Market-based economic dispatch of electricity: Redesigning of Day-Ahead in India”. Currently, the Indian Power Sector is characterized by various players across all segments of the value chain viz. Generation, transmission, trading & distribution. Among the 29 states, there is a total installed capacity of 346 GW (as on sept. 2018) out of which 57% is coal, 13% is hydro, 21% RE, 7.2% gas & 2% nuclear.

Most of these generations are tied up in long-term power purchase agreements with the discoms and the rest in medium-term (5 years) & short-term (1 year). At present, the discoms self-schedule generation from the portfolio to meet the majority of their daily power needs & the remaining is procured through bilateral transactions with other discoms, through power exchanges or traders.

  • Issues with the current mechanism include:
    The present mechanism under the self-scheduling process does not mandate the discoms to declare the cost of their scheduled generation or the variable cost. This causes issues like leaving several low-cost generation capacities partially or sub-optimally utilized. (Because the discoms do not have visibility of other cheaper options nor do they have a right to acquire power from generation stations they do not have a contract with) This occurs because each discom operates in its own region, known as Un-requisitioned Surplus (URS).
  • The case of sub-optimal utilization of generation assets become all the more prominent when the actual generation of each state is combined together and is contrasted with the cumulative pooled generation.
  • Given that the discoms are not obligated to reveal the variable cost of the generation that they are scheduling, true system marginal cost is not known.
  • Self-scheduling often constrains the optimum utilization of renewable sources of energy. As the visibility of a discom is limited to its own territory, surplus renewable energy in the state is curtailed.

Proposed framework – Market-Based Economic Dispatch on a Day Ahead basis

The discussion above suggests a need for optimization of scheduling and dispatch of generation capacities through suitable market design. The proposed framework known as Market-Based economic Dispatch (MBED) model will be on a day-ahead basis and schedule and dispatch all generation on the economic principles with respect to the technical constraints.

  • The main objective of the model will be to meet the system load by dispatching the least-cost generation mix while ensuring the security of the grid.
  • Ensuring that the total cost (system cost) of the generation that meets the system load in all the time-blocks for a day is minimized.

The MBED model involves primarily two following aspects viz ‘Scheduling and Dispatch’ and ‘Settlement of contacts’.

The major difference in the existing framework and the proposed MBED model is: unlike in the current framework, the discoms acquire power specifically from their contracted generators whereas, in the proposed model, the discoms would bid into the power exchange for procuring power and meeting their demand. The generators are expected to bid based on their variable/marginal cost of generation. The existing bilateral contract holders will be paid the fixed cost separately outside the market and fit in the proposed model based on their variable/marginal cost.

The price settlement scenario

Discom’s payment = Discom’s load * MCP

Genco’s revenue = Genco’s total scheduled generation * MCP

⅀ Discom payment = ⅀Genco revenue (under no transmission constraint)

Bilateral contract settlement:

Long term contracts always have a fixed price already determined in the contract. Once the power for such contracts is settled at a market-determined price, the difference will be settled between the constituents. This is generally known as a “contract for difference” and is a well-established practice in more developed power markets.

Pros & Cons of the model:

Pros:

  • Better price discovery: since the entire power capacity in the country will be cleared through the market, price discovery will be more robust and more transparent.
  • Reduction of Un-requisitioned Surplus (URS): a possibility of some cheaper generation capacities not getting scheduled fully will be reduced since the process of self-scheduling will be ruled out.
  • Along with self-scheduling other challenges emanating from the practice of self-scheduling including lack of flexibility to meet seasonal and diurnal variation in demand will be brought down drastically.

Cons:

  • The function of Bilateral Contract Settlement (BCS) which is introduced in the model can also increase the rates of the trade and cause disruption if a proper process is not set up.

Implementation timelines:

  • Participation will be on a voluntary basis in the initial phase
  • After a year all the discoms and other consumers will be required to participate mandatorily

Conclusion:

Overall, the proposals outlined by CERC, when implemented will result in a radical transformation of the power markets in India. It will help eliminate inefficiencies and gaps that result from a bifurcated power sector. Like any large scale change, it will require significant preparation from all stakeholders for proper implementation, and will also take time to implement.  

 

CERC announces draft (Deviation Settlement Mechanism and related matters) (Fourth Amendment) Regulations, 2018

The CERC has announced the draft (fourth) amendments of Deviation Settlement Mechanism & related matters regulations. The principal regulations came into effect in January 2014 followed by three amendments in December 2014, August 2015 and May 2016 in that order. The previous amendments were notified to solve issues related to grid operations the Deviation Settlement Mechanism (DSM) impact with respect to frequency due to emerging markets. The latest amendments talk about the limitations of the DSM price vector and recommendation for the same.  According to the report prepared by an expert group consisting of representatives from CEA, POSOCO, CTU, and CERC suggestive measures have been given for bringing power system operation closer to the National Reference Frequency.

As per the report, the present DSM has design limitations and since the rates are designed by CERC the changing of rates takes time under the regulatory process and does not catch up with the change in prices in other market segments. The present DSM rates at 50 Hz (178 paise/unit) are linked to the variable charges of a pit-head thermal station whereas the highest DSM rate (824 paise/unit) is linked to the variable charges of the costliest generator (liquid fired). Ideally, the DSM price should capture the Value of Lost Load (VoLL) so that utilities procure adequately in advance so as to meet their universal service obligations.

Few amendments from the draft document are as below:

  • The definition of Area Clearing Price (ACP) & Day Ahead Market (DAM) is included in order to connect ACP & DAM to the DSM prices by considering the factor geography & transmission congestion.
  • The reference frequency band (49.85 Hz to 50.05 Hz) is proposed for the purpose of DSM price vector from the previous frequency band of (49.70 Hz and above).
  • The maximum ceiling limit applicable for average daily ACP discovered in the DAM segment of power exchange at 50.00 Hz is proposed to be 800 Paisa/kWh from 824 Paisa/kWh
  • The Day-ahead market price of the Power Exchange having a market share of 80% or more in energy terms on a daily basis is proposed to be taken into consideration for linking to the DSM price vector. If there is no single Power Exchange having a market share of 80% or more, the weighted average day-ahead price is proposed to be used for linking to the DSM price.
  • It is proposed to link the cap rates for generators using coal/lignite/ APM gas to the energy charges as billed for the previous month is proposed.
  • Reduction in the number of time blocks (from 12 to 6-time blocks) for a change of sign in case of sustained deviation in one direction is proposed.
  • Levy of an additional surcharge of 20% on the daily base DSM payable/receivable in case of violation of the stipulation regarding the change in sign.
  • It is proposed that the total deviation from schedule during a day should not be in excess of 3% of the total schedule for the drawee entities and 1% for the generators and in case of violation 20% of the daily base DSM payable/receivable be levied.

CERC extends expiry date for RECs due to expire

The CERC had issued an order extending the validity of Renewable Energy Certificates (REC) which were to expire between 15th May 2018 – 30th October 2018, up to 30th October 2018. There has now been an extension in the expiry of these RECs till 30th March 2019. A summary of the RECs likely to expire between 31st October 2018 to 31st October 2019.

Since the past year, the shelf life of the RECs has surpassed its expiry life of one year due to high supply but limited demand. Only post-November 2017 there has been a generous market realization of RECs (both solar and non-solar). Des[ite of this and the lack of enforcement there was a petition filed to extend the expiry of the RECs.

From the above inventory, it is evident that 1,83,999 RECs which have been issued prior to 01.04.2017 are due to expire within the next six months. This includes 38,651 Solar RECs and 1,45,348 Non Solar RECs. Hence the Commission is of the view that there is a need to extend the validity of RECs which are due to expire up to 31.03.2019.

The Commission in exercise of Power under Regulation 15 of REC Regulations has extended the validity of RECs which are due to expire between 31st October 2018 and 31st March 2019 up to 30th April 2019. Accordingly, RECs which are due to expire between 31st October 2018 and 31st March 2019 will remain valid up to 30th April 2019.

 

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.

Creation of an RPO compliance cell, MNRE declares in its order

According to a recent order by Ministry of New and Renewable Energy (MNRE) dated 22 May 2018, a creation of Renewable Purchase Obligation (RPO) Compliance cell is in process. This cell will be handling all the matters related to RPO compliance across states and publishing monthly reports on the updates.

The cell is expected to work in accordance with Central Electricity Regulatory Commission (CERC) and SERCs. The cell is also expected to coordinate on publishing a periodic report with the Government of India and take up non-compliance issues with appropriate authorities.

In the past, there have been several efforts initiated by MNRE to increase awareness among RPO obligated entities regarding RPO obligations, and explaining its advantages to them.

With the help of this cell, data management, a repository of obligated entities, preparing state-wise defaulters lists and storing authorities specific information would be convenient.

Currently, there are some gaps in the implementation of RPO in some states, and with the creation of this cell, the issues can be taken care of state-wise, bringing the country closer to achieving its national target of installing 175 GW of renewable energy till 2022.

With the cell formation, supervision of the Renewable Purchase Obligation process across the country can be performed in a seamless manner. All the stakeholder information associated with the process can be maintained in one place making implementation and invigilation easy.

This is a very positive step by MNRE, as there will be a cell responsible for looking over the RPO compliance in the country, ensuring consistent implementation of RPOs across the states while publishing timely reports.

CERC gives a positive nod to extend the validity on RECs

CERC recently announced in its order dated 15th May 2018 that the RECs will be valid till 30th October 2018, which were otherwise expired/likely to be expired between 1st April 2018 and 15th October 2018.

The commission declared this in accordance to its power under Regulation 15 of REC regulations.

The extension related dates are as below:

Duration

Status of RECs

Validity as per the order

1st April 2018 to 14th May 2018

Expired

Extended till 30th October 2018

15th May 2018 to 30th October 2018

Likely to be expired

Extended till 30th October 2018

The issues which were prevailing since early 2017 and saw petitions from various parties seems to have finally come to rest.

More than 10 lakh RECs (9,52,533 Solar RECs; 1,09,520 Non-Solar RECs) were being affected due to the pending petitions. Majority of these RECs were solar which saw a halt in trading for almost 11 months since 8th May 2017.

Since ApTel was in the reviewing process of the petitions, the commission could not take any action on the extension of REC validity before 31st March 2018.

ApTel in its judgment as on 12th March 2018 has disposed all the petitions and upheld the commission’s order dated 30th March 2017 to continue the REC Floor and Forbearance Price applicable from 1st April 2017 onwards.

 The Commission was of the view that there was a requirement to extend the validity since the appeals were dismissed by the ApTel and there was no stay.

Earlier, the commission extended the validity up to 31 st March 2018 which was expired between 1st October 2017 and 31st March 2018 based on Supreme Court’s order dated 29.09.2017 on seeking necessary direction for extension of the validity of RECs.

Based on the recent order, the expired RECs will be added back to the seller’s account which was then removed by NLDC till 31.03.2018.

As per the recent trade dated 25th April 2018 on IEX and PXIL after a halt of a year, the clearance was as below:

Trading portal

Solar

Non-solar

IEX

6,44,151

1,36,979

PXIL

2,30,967

50,564

REVISION OF REC PROCEDURES BY CERC

Central Electricity Regulatory Commission (CERC) has released Model Guidelines for Accreditation of a Renewable Energy Based project or Distribution Licensee, as the case may be under REC mechanism. These regulations shall be applicable to all renewable energy based projects of generating companies which are grid connected. All sources recognized and approved by the Ministry of New and Renewable Energy shall come under these regulations. Following are the major changes proposed in the procedures:

 

  1. Those renewable energy based Captive Generating Plants which do not fulfill the criteria as prescribed in the Electricity Act, 2005, shall not be eligible for accreditation for the energy generated by the plant for self consumption.

  1. Ownership of existing valid RECs shall be transferable by the central agency in case of change of legal status of registered entity. The procedures include the following conditions as change of legal status:

Change from partnership to company, Pvt. Limited to Public Limited, new entity subsequent to demerger, change in ownership of the company and asset sale/ transfer to another company, etc.”

  1. Revision of formats for Recommendation (checklist) from state agency and declaration.

  2. Application for revalidation or extension of validity of existing RECs shall be done at least three months in advance,prior to the expiry of existing registration by generating companies and distribution licensees.

  3. In case of reduction of the registered capacity of the RE generating plants, the application should be submitted online.

VALIDITY OF RECS WHICH WERE ABOUT TO GET EXPIRED BETWEEN OCTOBER ’17 AND MARCH ’18 GETS EXTENDED BY SIX MONTHS

The Central Electricity Regulatory Commission (CERC) has in its order dated 29/08/2017, declared that those Renewable Energy Certificates (RECs) which were expiring between 1st October 2017 and 31st March 2018 are now going to remain valid till 31st March 2018. In its order dated 30th March 2017, the commission had extended the validity of RECs which were going to expire between 1st April 2017 to 30th September 2017 till 31st March 2018.

 

The order  can be accessed here.

MOP DETERMINES GUIDELINES FOR FOR COMPETITIVE BIDDING FOR POWER PROCUREMENT FROM SOLAR PV PROJECTS

The Ministry of Power (MoP) has released the guidelines for procurement of power from grid connected solar PV power projects. The guidelines are applicable to solar PV projects of size 5 MW and above. The purpose of these guidelines is to provide a direction for proper electricity procurement by distribution licensees and to protect the interest of the consumers. Also to make this process transparent and uniform.

 

Following are the salient features of the guidelines:

 

  • The appropriate Commission shall be CERC only in case if the distribution licensee is located in more than one state

  • SERCs will be the appropriate commission in case if there is a single distribution licensee.

  • The conditions to be met by the procurer are as follows:

  • The bid document should be prepared in accordance with the guidelines of MoP and the Standard Bidding Documents.

  • Clearances need to be procured from the end procurer, the agency developing the solar park.

  • Procurer has to specify where the project has been set up.

  • The bid structure shall be as follows:

  • The bids will be designed in terms of packages where the minimum will be 50 MW and the bids may be in energy quantity or power capacity terms.

  • The procurer may opt for either ‘tariff as bidding parameter’ or ‘VGF as the bidding parameter’.

  • The PPA period should not be less than 25 years and it can be in terms of energy or power. Repowering will be allowed from time to time for the duration of the PPA.

  • In case of default by the power generator, it shall be liable to pay the solar power generator as written in the PPA. Also, in such a case, the lender shall be allowed to exercise their right to substitution as per the substitution agreement provided in the PPA.

  • In case if the procurer is at default, it shall give its part of the PPA to a third party in the given time. In case if that is not done, the solar generators have a choice to terminate the PPA.

  • Once the procurer calls for bids, a single stage bidding process shall be followed. The procurer can also chose if an e-reverse auction shall be held. It is the responsibility of the procurer to give the details of the bidding process in case of a Solar park specific project.

  • For bid submission and evaluation, the bidders may form a consortium and chose a leader who shall be the focal point of contact. Also, for evaluation of bids, the procurer may form a committee. The technical and price bids shall be submitted separately along with a bid guarantee. Minimum number of bidders should be two and a proper methodology shall be followed for bid evaluation.

  • A 30 day period shall be given for bid submission from the issuance of RfS document. A table containing the time table for bid process is given in the guidelines attached below.

  • Bank guarantees such as earnest money deposit and performance bank guarantee need to be submitted.

The guidelines can be accessed here.

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