THE NATIONAL CLEAN ENERGY FUND GETS DIVERTED TO COMPENSATE FOR GST

The government of India assigns dedicated funds which is linked to specific cess. This kind of cess One such fund is the National Clean Energy and Environment Fund. In a recent move, there was a diversion of the funds collected as tax for the National Clean Energy and Environment Fund to the states that lost revenue because of GST. Through this move, the unspent funds which were to be used by MNRE have been diverted. This means that from next year, India will not have a National Clean Energy and Environment Fund. Some individuals working in the sustainability sector argued that this amount could have been used in the development of clean coal technologies.

This action is also going to pose a risk to the MNRE as 98% of its budget of which comes from this fund. Not only that, this fund has also aided India in meeting its commitment towards the Paris Agreement. Now that the United States has withdrawn from the Paris Agreement, the Clean Energy fund was the only aid which India had to meet its obligations by 2020. Since it does not exist anymore, out fight to protect the environment has become an even bigger challenge.

 

The article covering the same can be accessed here

POSOCO-IMD WEATHER PORTAL AND WEB PORTAL “MERIT” LAUNCHED

The Ministry of New and Renewable Energy (MNRE), in collaboration with IMD and POSOCO has launched a weather portal for the power sector. This portal will help in predicting extreme weather events such as heat waves and floods which will effect on the load demand and energy production, transport and distribution management. It will be of aid to the DISCOMs to ensure a reliable supply and infrastructure planning. It will provide information regarding regional weather summary, radar, satellite image, meteogram and region specific forecast.

 

The portal “MERIT” (Merit Order Dispatch of Electricity for Rejuvenation of Income and Transparency) was also developed by MoP in association with POSOCO and CEA. It gives an array of information regarding merit order of electricity procured by the state. It will help the DISCOMs to provide power at a lower cost to consumers. It will also promote the use of clean and green power.

 

The article regarding the same can be accessed here.

KEY PROVISIONS FOR THE RENEWABLE ENERGY INDUSTRY IN UNION BUDGET 2017

Nothing exceptional was noticed in the budget this year with regards to the Renewable Energy sector. There was no change in the accelerated depreciation rate or the coal cess. Neither was there any change seen in the National Clean Energy Fund. This year’s budget proved to be quiet uneventful for the renewable energy sector. The only development that has been cited is that 7000 railway stations will be powered by solar energy. The allocation of budget to MNRE was 5,437 Cr which wasn’t a big change since last year’s budget of 5,000 Cr. Other than that, there weren’t any exceptional changes. An article in the Livemint also mentioned the following ” While total budgetary outlay to renewable energy marginally increased, there is little to celebrate. This budget is unlikely to catalyse action, attract private investment or underwrite risks. An opportunity was lost.”

 Key features of the budget can be found here

MNRE’s RENEWABLE ENERGY TARGETS AMBITIOUS AND UNATTAINABLE WITHOUT COOPERATION FROM STATE GOVERNMENTS

As reported by The Hindu the Ministry of New and Renewable Energy (MNRE) has set the targets for solar and wind capacity additions for this year to 12,000 MW and 4,000 MW respectively. This comes as a surprise since the achievement till October for the same has been 1750 MW and 1502 MW respectively. Although these targets are ambitious, they are achievable as per the industrial players only if the lack of seriousness shown by the state government towards promotion of renewable energy decreases.

As per the article, the state governments are not on board. All the energy producers face a plethora of problems such as high prices and cross subsidy surcharges (CSS). Also, some state authorities such as that of Maharashtra make it more difficult for the private producers to sell electricity. States such as Tamil Nadu allow net metering only for individual houses and not for educational institutes and factories. This goes against the intentions of the Government of India to see 40,000 MW of rooftop plants by 2020.

Co-founder and director of REConnect Energy Solutions, Vishal Pandya, made the following observation about the scenario “Whether it is open access or rooftop or enforcement of renewable purchase obligations, the intent on the part of the state machineries seems completely missing”.

Review of UDAY Scheme on completion of one year

The UDAY scheme was launched an year ago, and was then touted as signature Discom reform scheme of the central government. In this article, we have analyzed the impact of UDAY scheme, responsiveness of the states, extent to which the Discom’s have got benefitted and also the reforms which they were supposed to undertake.

To briefly summaries, the UDAY scheme aimed at “financial turnaround of Power Distribution Compa-nies”.
Under the scheme, the state government was re-quired to take over 75% of the existing debt of the Discom and issue State Government bonds in re-turn.

The remaining 25% debt would be issued either as a bond by the Discom (guaranteed by the state gov-ernment) or the terms of the loan would be changed by the banks. In return, the Discom’s were required to undertake a series of reforms.

The key ones were:

  • Reduction of AT&C losses to 15% by 2018-19,
  • Quarterly tariff revision (to partly reduce the burden of large revisions once a year),
  • Reduce the gap between cost and revenue per unit to zero by 2018-19 and
  • Discom’s were to comply with RPO outstanding since April 2012 as per timelines suggested by MoP.

For a more detailed list of the requirements and for a detailed understanding of the scheme, refer our article here, or the scheme document here. After an year from launching, 17 states and UT’s have signed up for the UDAY scheme, while 15 have not. Notable states that have not signed up include Tamil Nadu, West Bengal, Kerala, Orissa, Assam and Telangana.
These states have relatively large Discoms and, espe-cially in the case of Tamil Nadu, significant accumulated losses and bank debt. Another way to look at this is the political affiliation of the state.
Most states that have signed up for UDAY scheme are associated or governed by BJP. Notable exceptions are Uttar Pradesh, Karnataka and Bihar. The only notable exception amongst the states that have not signed is Assam (governed by the BJP).

Bonds issuance:
8 states have issued bonds, aggregating to Rs 149,000 crore. The coupon rate (interest rate) on these ranges from 8.12% to 8.55%. Of the total bonds issued more than 80% are contributed by just 3 states – Rajasthan, UP and Haryana. To understand the impact of the bond issuance, we analyzed the balance sheet of one Discom (the Jaipur Discom). The key points are:

*Coupon rates are as per latest issuance
Total debt of the Jaipur Discom has reduced by Rs 5,722 crore, or 22% of the total. However, this ag-gregate number includes a significantly higher amount of debt that was directly taken by the Discom from the banks. This debt is now replaced with debt owed to the state government. Thus, while the debt burden of the Discom has not changed much, its the banks that have benefited the most – they now own government bonds (which are a very good asset to own), compared to Discom loans. The performance on the actions that the Discom’s were supposed to take is analyzed below.

Note : Additional Bank debt taken over in June 2016 – Rs 7,228 crore.

Tariff increases:
Of the 8 largest Discom’s analyzed, not a single Discom undertook tariff revisions on a quarterly basis. Further, there was a wide difference between tariff increases of different Discoms. Discom’s of UP, Punjab, Bihar, Jharkhand & J&K did not increase tariff at all. While Ra-jasthan increased domestic tariff by 2%, Chhattis-garh increased the same by 21%. It is important to note that while Rajasthan issued bonds of 58,000 crores, Chhattisgarh only issued bonds for Rs 870 crores (the lowest amongst all states).

Haryana raised domestic tariff by a respectable 19%Industrial tariff increased also show a similar story – Rajasthan raised tariffs by 1.67%. ,Haryana by 0.98%, while Chhattisgarh by 18%. Other states did not raise tariffs.
Renewable Purchase Obligations:
An important requirement of the UDAY scheme was that Discom’s were to be fully complaint of RPO  from April 1, 2012 onwards. The scheme document says the following with regards to RPO -
“Clause 9 – DISCOM’s opting for the scheme will comply with the Renewable Purchase Obligation (RPO) outstanding since 1st April 2012, within a pe-riod to be decided in consultation with MoP”


However, the MoU entered between the Ministry of Power and the Discom’s is completely silent on the RPO requirement. Prima facie, it appears that this point has been dropped by the Ministry. The only exception is the MoU with UP Discom, which has the following provision.
“Clause 1.3 (f) – In compliance with the Renewable Purchase Obligation (RPO) outstanding since 1.4.2012 to 31.3.2015, Discoms of UP shall fulfill RPO obligation 3 years after the Discom reaches break-even i.e. the Financial year 2019-20”
This clause presents several legal and practical prob-lems that will impact the REC markets significantly. Firstly, it is in direct contravention to the Electricity Act 2003 which obligates RPO on all consumption.

There is no provision for waiver or roll forward of such obligations. In light of this, can the MoP and UP Discom circumvent an act of the parliament and mutually decide a timeline for compliance? Further, the MoU wordings itself leave ample scope for further delay/ waiver when it says – “...3 years after the Discom reaches break-even…”. If the Discom does not reach break-even does that mean it will get further time?
In short, the original intent of the UDAY scheme re-sulting in RPO compliance has been abandoned by the Ministry of Power itself.
Reduction in AT&C losses:
AT&C losses remain very high for most Discom’s in the country. This is due to several reasons – weak distribution infrastructure being one. However, this caption is also a proxy for un-checked theft of power and un-metered supply. Even without the UDAY scheme, AT&C losses have been declining. However, since this data becomes available only at the time of ARR filing by the Discom, it is not possi-ble to verify if the decline has accelerated after the adoption of UDAY.

*Source: Forum of Regulators (FoR) Report
Conclusion:
The UDAY scheme has resulted in significant redrawing of the balance sheet of the Discoms. The beneficiaries of the scheme have been the banks, which were sitting on unsustainable levels of debt with loss making enti-ties. This debt has now been replaced with high quality government debt. However, in terms of real reforms and changes on the ground, whether relating to tariff increases or RPO compliance, there seems to be little that is changing. Unless the government follows through with actual op-erational changes, the story is likely to repeat itself over the next 5-10 years, where Discom’s will have again built up unsustainable debt and losses.

Our previous blog on Uday scheme can be accessed here.

Confusion over new Renewable Purchase Obligations

The Ministry of Power (MoP) had recently declared the national RPO trajectory.  The order had enlisted the yearly RPO trajectory for both non-solar and solar power purchase from 2016-17 till 2018-19. For non-solar, the targets ranges from 8.75 % to 10.25 % and for solar from 2.75% to 6.75%. The target is to reach 17% of total energy consumption.

 

These RPO targets have led to confusion amongst the state owned power distribution companies and thus the Union government is likely to revise the renewable purchase obligation (RPO) targets. Following were some of the issues raised:

 

  • The industry executives have said that no order was officially released by any government department.
  • Few states have asked MoP for provisions in the RPO target as the targets are stringent and mandatory.
  • Some north-eastern & northern states, which are either hydro-rich or with low solar radiation have opposed RPO targets for solar being
  • These states want solar RPO to be removed for them and let it be resource flexible.

 

The officials of MNRE and MoP have said that they are likely to revisit the target as it was under wide consultation for the states. Since few states cannot meet the solar targets, the targets will be set in line with the regulations and commitments regarding climate change.

The above update has been taken from Business Standard’s article published on 22nd August, 2016 which can be accessed here.

Our previous blog on National RPO Trajectory declared by MoP can be accessed here.

Policy for Repowering of the Wind Power Projects

The Ministry of New & Renewable Energy in consultation with various stakeholders including the Industry and States had come up with the Draft Policy for Repowering of the Wind Power Projects in the month of March this year. After 4 months the Policy has been finalised with an objective to promote optimum utilization of wind energy resources by creating facilitative framework for repowering. Some of the key pints of the policy are mentioned below:

  • All the wind turbine generators with the capacity of 1MW or below would be eligible for repowering.
  • The Policy offers incentives in form of an additional interest rate rebate of 0.25% over existing rebate available to the new wind projects by IREDA.
  • Secondly through benefits like Accelerated Depreciation or GBI that would be made available to the repowering project.
  • The power generated corresponding to average of last three years’ generation prior to repowering would continue to be procured on the terms of existing PPA.
  • Augmentation of transmission system from pooling station onwards to be carried out by the respective STU.
  • During the period of execution of repowering, wind turbines would be exempted from not honoring the PPA for the non-availability
  •  Similarly, in case of repowering by captive user they will to be allowed to purchase power from grid during the period of execution of repowering.

The Policy can be accessed here.

 

 

 

Ministry of Power sets green energy targets for State Discoms

The Ministry of Power has issued guidelines, for long term growth trajectory for RPO of Non solar as well as for Solar. Though the guidelines have been issued, the final targets will be set by each individual state’s electricity regulatory commission (SERC).

In order to achieve the target of 1, 75,000 MW of renewable capacity by March, 2022, MNRE has notified the RPO uniformly for all States/ UTs initially for three years from 2016-17 to 2018-19 as given in the table below:

 

 

State Discoms will have to mandatorily draw at least 2.75% of their total power consumption from solar plants in the current fiscal, according to the renewable purchase obligation (RPO) norms laid down by the power ministry. Considering this proposed regulatory changes and stricter enforcement by states FY2016-17 is expected to bring a good fortune to the REC Market.

 

The article can be accessed here.

India generated 33029.39 MU Wind Power & 7447.92 MU Solar Power Generated during Year 2015-16

The Minister of State for Power, Coal, New & Renewable Energy and Mines Shri Piyush Goyal informed that the generation of electricity from wind and solar sources in the country stood at 33,029.39 million units and 7,447.92 million units, respectively, during 2015-16.

Quoting the figures received from the Central Electricity Authority (CEA), the minister said during the last two years, i.e., 2014-15 and 2015-16, the country added a total of 5,735 MW of wind power capacity and 4,131 MW of solar power capacity.

It was also told that a capacity addition target of 4,000 MW and 12,000 MW has been proposed for generation of electricity from wind and solar energy, respectively, during 2016-17 and a total of 315 MW have been installed under Solar Roof top Scheme. Power generated from these projects is being used for both domestic and captive use, the minister informed.

Goyal stated that tenders for 20,766 MW solar power projects have been issued. He also said that the wind power projects are mainly developed by private sector under various modes, including PPA, REC, captive use, third party sale etc, adding that the centre has not undertaken construction of wind energy project.

  • The ministry is implementing several schemes to promote generation of solar and wind energy. These include: Development of solar parks and ultra mega solar power projects
  • Development of solar PV power plants on canal banks / canal tops
  • Setting up of 300 MW grid connected solar PV power projects by defense establishments under ministry of defense and Para military forces with viability gap funding (VGF) under Batch-IV of Phase-II/III of Jawaharlal Nehru National Solar Mission (JNNSM)
  • Setting up 1,000 MW grid-connected solar PV power projects by CPSUs with VGF under Batch-V of Phase-II of JNNSM
  • Setting up of 15,000 MW grid-connected solar PV power projects under Batch II of Phase II of National Solar Mission (by NTPC/NVVN)
  • Setting up of 2000 MW grid-connected solar power projects with VGF through Solar Energy Corporation of India (SECI) and generation based incentive scheme for promotion of wind power.

The press release can be accessed here.

 

 

 

MNRE scheme for Development of Solar Zones in the country commencing from 2016-17 and onwards

MNRE has recently sanctioned the scheme for setting up of 10 solar zones. Each solar zone will be having around 10,000 hectares of government owned or privately owned wasteland, uncultivable land or fallow land in one or more than one patches. An estimated amount of Rs. 4400 crore has been granted as a Central Financial Assistance for this project.

Following are some of the highlights of the scheme:

  • The objective of the scheme is to promoted developers and investors and thereby helping the country in achieving the target of 100000MW by 2022.
  • This scheme will in return help the states in meeting its mandate RPO, and also provide employment opportunities to the location.
  • All the states and Union Territories will be eligible for benefiting under this scheme.
  • The solar zones will be developed in collaboration with the State Government and their agencies. SECI will act as MNRE’s agency for handling the scheme.
  • The state government shall identify an area having daily average insulation of over 4kWh per meter square and having around 10000 hectares of government owned or privately owned wasteland.
  • The solar zones will be set up in a span of 5 years commencing from 2015-16 and the solar projects may come in as per demand and interest shown by the developers.
  • Out of the total solar potential in the solar zone, 25% area will be set apart for deployment of manufactures of ingots, water, solar cell and modules to promote make in India.
  • 25% area for small and medium enterprises, farmers and unemployed youth and 50% for solar project developers.

The scheme can be accessed here.

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