Transcript PPT2 - Himachal Pradesh Electricity Regulatory Commission

ABPS Infrastructure Advisory Private Limited
REC Mechanism in Himachal Pradesh
Utility Perspective
Ajit Pandit
Director, ABPS Infrastructure Advisory Private Limited
www.abpsinfra.com
Outline of the Presentation
•
Legal and Statutory Framework for Renewable Energy Development
•
Regulatory Initiatives for Development of Renewable Energy Certificate
Mechanism in India
•
•
RE Certificate Mechanism in Himachal Pradesh : Utility Perspective
–
Significance of RPO
–
Opportunities & Liabilities
–
Implementation Issues
–
Consequences of non-compliance
Way forward
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20/07/2015
ABPS Infrastructure Advisory Private Limited
Legal and Regulatory Framework
for
Development of Renewable Energy in India
www.abpsinfra.com
Key Drivers for Renewable Energy Development
20000
NAPCC., JNNSM
CERC RE Tariff
Regulations
18000
Generation Based
Incentive
16000
14000
Emergence of
Electricity
Regulatory
Commissions
MW
12000
10000
8000
Policy Announcement
by Central
Government
Policy on Hydro
Power Development
Enactment of National
Tariff Policy
Enactment of
Electricity Act, 2003
6000
4000
2000
0
Wind
Biomass
Small Hydro
Others
Source : Ministry of New and Renewable Energy
RE capacity (18 GW) forms ~ 10% of total generation capacity (170 GW) in the country
In energy terms, it constitutes
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~ 4% - 5% of total consumption
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Electricity Act, 2003 : Enabling Provisions
The EA 2003 has outlined several enabling provisions to accelerate the development of RE based
generation:
–
(Section 3): National Electricity Policy and Plan for development of power system based on
optimal utilization of resources including renewable sources of energy.
–
(Section 61(h)): Tariff Regulations by Regulatory Commission to be guided by promotion of
generation of electricity from renewable energy sources in their area of jurisdiction.
–
(Section 86(1)(e)): Regulatory Commission to Specify Purchase Obligation from renewable
energy sources.
–
(Section 66): Appropriate Commission shall endeavor to promote the development of market
(including trading) in power in such a manner as may be specified and shall be guided by
National Electricity Policy in Sec 3
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Tariff Policy (January 2006)

Appropriate Commission shall fix RPO and SERCs shall fix its tariff latest by April 1, 2006

Initially Appropriate Commission to fix preferential tariffs for distribution utility to
procure RE

In future, distribution utility to procure RE through competitive bidding within suppliers
offering same type of RE

In long-term, RE technologies need to compete with all other sources in terms of full costs

CERC to provide guidelines for pricing non-firm power if RE procurement is not through
competitive bidding
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Amendment to Tariff Policy (January 2011)

SERCs shall fix separate RPO for purchase of energy by the Obligated Entities from Solar
Energy Sources

Solar RPO to go up to 0.25% by the end of 2012-13 and further up to 3% by 2022

Purchase of energy from non-conventional sources of energy to take place more or less in
same proportion across different states

Renewable Energy Certificate Mechanism may be one of the mechanisms to achieve
such target

It will take some time before non conventional technologies to compete with conventional
technologies and accordingly procurement of renewable energy to be done on preferential
tariff determined by Appropriate Commission
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Promotion of Renewable Energy by Policy Design and
Regulatory Initiatives
oElectricity Act 2003 (Jun 2003)
Central Government
oNational Electricity Policy (Feb 2005)
oNational Tariff Policy (Jan 2006)
oNational Action Plan on Climate Change (Jun 2008)
Central Electricity
Regulatory Commission
State Electricity
Regulatory Commission
o
Regulations for Preferential Tariff for RE (Sep 2009)
o
Renewable Energy Certificate Mechanism (Jan 2010)
o
Implementation Framework (2010 – ongoing)
o
Preferential RE Tariff Orders by SERCs (2002–2010)
o
Over 19 States have mandated Renewable Purchase
Obligations (2004 – 2010)
o
Modification to RPO and adoption of REC framework
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Evolution of Market Model & Role of Utility
A
B
C
A - Market model based on Open Access/wheeling for self use
B - Model based on FIT and RPO for sale to distribution licensee & third party, within State
C- Market model based on instruments with cross border features (REC) catering to National level demand
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Key Challenges in Encouraging Deployment of RE
 Enabling Mechanism for Inter-State sales of Renewable Energy
 Cost Effective Mechanism for purchase of Renewable Energy
 Nation wide target for purchase of Renewable Energy
 Stronger enforcement and penalty mechanism
 Mechanism for purchase of small quantity of RE by individual Open Access consumer
Forum of Regulators (FOR) initiated study to address challenges
FOR Report (Nov 2008) on ‘Policies for Renewables’ recommended:
 Need to facilitate ‘Inter-State Exchange of RE Power from National Perspective
 Explore feasibility of introduction of REC mechanism as tool to promote RE within framework of
EA 2003
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NAPCC : Guideline for RE Development
National Action Plan for Climate Change (NAPCC)
 At National level for FY 2010, target for RE Purchase may be set at 5% of total grid purchase, to be
increased by 1% each year for 10 years
 SERCs may set higher target than this minimum at any point in time
 Central & State Govts may set up a verification mechanism to ensure that renewable power is
actually procured
 Appropriate authorities may issue certificates that procure renewable power in excess of the
national standard. Such certificates may be tradable, to enable utilities falling short to meet their
RPS
 Penalties as may be allowed under EA 2003 may be levied, if utilities are still falling short in RPS
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NAPCC has set challenging target for RE Development
•
NAPCC target of 5% for RE Procurement in 2010
•
Target to increase by 1% each year to reach 15% by 2020
•
Separate target for Solar Energy
•
Provides for creation of Renewable Energy Certificate Mechanism
Considering that
demand for electricity
would increase to 1700
BU by 2020, it would
create market for 255 BU
units of renewable
energy generation
NAPCC identified REC framework to realize annual target of National RPO
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ABPS Infrastructure Advisory Private Limited
Regulatory Initiatives for Development of
Renewable Energy Certificate Mechanism in India
www.abpsinfra.com
Key Objectives for Introduction of REC Mechanism

Effective implementation of RPO

Increased flexibility for participants

Overcome geographical constraints

Reduce transaction costs for RE transactions

Enforcement of penalty mechanism

Create competition among different RE technologies

Development of all encompassing incentive mechanism

Reduce risks for local distributor by limiting its liability to energy purchase

In Indian Context, following aspects had to be considered for REC design
 Electricity Market is regulated to great extent
 (> 90% of electricity volumes continue to be transacted at regulated rate)
 Preferential RE Tariff regime to continue (Feed-in tariff & REC to co-exist)
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In the view of hurdles
faced by RE
Development, it appears
that these objectives
should take precedence
over others
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Concept of REC Mechanism in India
Existing
Mechanism
Renewable
Energy
Electricity
REC
Electricity
REC
Mechanism
Distribution
Company
At Tariff
Determined by
Regulatory
Commission
OA / Trader
Bilateral
agreement
(de-regulated)
Distribution
Company
Avg. PP Cost
of Host Utility
(regulated)
Obligated
Entity
(Buyer)
Market Rate
as per
Power Exchange
Renewable
Energy
REC
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REC Pricing Framework
Renewable Energy
REC Component
(Environmental Attribute)
Electricity Component
Bilateral Agreement
(de-regulated)
(OA User/Trader)
Average
Power Purchase Cost
Market Discovered Price
(Obligated Entity/Voluntary Buyer)
(Distribution Utility)
Andhra Pradesh
- Rs 1.78/kWh
Maharashtra
- Rs 2.43/kWh
Karnataka
- Rs 1.85/kWh
Kerala
- Rs 1.46/kWh
Tamil Nadu
- Rs 2.62/kWh
Himachal Pradesh
- Rs 1.48/kWh
Rajasthan
- Rs 2.48/kWh
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Parameters
Non Solar
REC
Solar
REC
Forbearance Price
(Rs/MWh)
3900
17000
Floor Price
(Rs/MWh)
1500
12000
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Entities involved to Operationalise REC Mechanism
Institutional
Framework
Central Entities
State Entities

Forum of Regulators

Central Electricity Regulatory Commission

Central Agency (National Load Despatch Centre)

Power Exchanges

Compliance Auditors

State Electricity Regulatory Commission

State Load Despatch Centre

State Agencies

Eligible Entities

Obligated Entities
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Key Role performed by FOR
•
Formulated Model REC Regulations for SERCs
•
Sought Legal Opinion from Solicitor General on key legal aspects
•
–
Applicability of RPO to Captive Users and Open Access Consumers
–
Statutory backing for Enforcement mechanism as regulatory measure
Introduced Enforcement Mechanism for non-compliance
– Apart from legal provisions under EA 2003, obligated entity has to contribute a
charge to Fund at Forbearance Price.
– Fund to be utilised for purchase of RECs or creation of RE infrastructure as
directed by SERCs
•
Extended scope of RPO applicability to captive users, open access consumers apart
from DISCOMs
•
Undertook study for setting RPO targets and long term trajectory at National level
to accomplish NAPCC goals
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Initiatives for the Implementation of REC Mechanism
Central
Level
• CERC REC Regulations, 2010 (Jan 2010)
• FOR Model REC Regulationsfor SERCs
• CERC Orders for REC Implementation
•
•
•
•
•
Designation of Central Agency (NLDC) (Jan 2010 )
Approval of Procedures for REC Implementation (Jun 2010 )
Approval of Floor Price and Forbearance Price (Jun 2010 )
Approval of Fees & Charges for registration, issuance, redemption (Sep 2010 )
REC Registry – Software development, testing & launch (Nov 2010 )
Designation of State Agency
SERC Regulations for REC
Implementation
State
Level
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
• Maharashtra - (MEDA)
• Gujarat - (GEDA)
• Himachal Pradesh –
(Directorate of Energy)
• Rajasthan - (Rajasthan Renewable
Energy Corporation)
• Jharkhand – JEDA
• Manipur (MANIREDA)&
Mizoram(ZREDA)
• Chhattisgarh (CREDA)
• Haryana (HAREDA)
• Tripura (TREDA)
Maharashtra
Gujarat
Himachal Pradesh
Jharkhand
Uttar Pradesh
Manipur & Mizoram
Tripura
Orissa
Uttarakhand
Madhya Pradesh
Kerala
Bihar
Tamil Nadu
Rajasthan
Assam (Draft)
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ABPS Infrastructure Advisory Private Limited
Overview of RE Framework in Himachal Pradesh
www.abpsinfra.com
Renewable Energy in Himachal Pradesh

State has vast hydro potential in India

MNRE has identified around 536 sites with a total potential of around 2267.81 MW

The State has installed power generation capacity of around 375.385 MW and another
132MW is under implementation, predominantly comprising Small Hydel Power.

Biomass Power Generation Potential comprises of around 415MW (Agro based - 133MW &
Forest Residue based – 282MW)

Wind Energy have little or no power generation potential in the State
2,500
2,268
MW
2,000
1,500
1,000
415
500
-
-
-
Wind
Source : Ministry of New and Renewable Energy
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375
2
Biomass
Potential
SHP
Achievement
-
WtE
Past Initiatives for Promotion of RE and impact on DISCOM

State Commission specified RPPO as 20% for distribution licensee, vide Notification dated
June 18, 2007
5. Quantum of purchase of electricity from renewable sources.-(1) Energy from renewable sources and
cogeneration, available after the captive use and third party sale outside the State, shall be purchased by the
distribution licensee(s):
Provided that subject to the availability of renewable energy and co-generation within the area of a distribution
licensee the quantum of purchase of energy from renewable sources and cogeneration by a distribution
licensee, under these regulations shall be minimum 20% of its total consumption during a year;
……………………………………….
(4) Subject to supply constraints or any other uncontrollable factors, the Commission may, at the request of
the distribution licensee, waive off the quantum of purchase laid down under sub-regulation(1).

Applicability of RPPO was for 3 years
 During 2009, RPPO achievement was around 4% against target of 20%
 During 2010, RPPO achievement increased to 7%
 Renewable Energy is essentially available from SHP
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25%
20%
15%
10%
5%
0%
2009
RPO Target
2010
RPO Achievement
Change in Scenario : Recent Initiatives RPO REC Regulations

May 2010, HPERC had specified Regulations recognising REC as valid instrument for
compliance of RPPO by ‘Obligated Entity’

RPPO shall be applicable to,

Distribution Licensee

Person consuming electricity generated from Conventional Captive Generating Plant having capacity 1MW and
above for his own use



Person consuming electricity procured from conventional generation through Open Access
Quantum of ‘minimum’ Renewable Power Purchase,
Year
Non Solar RPO
Solar RPO
Total
2010-11
10%
-
10.0%
2011-12
11%
0.1%
11.1%
2012-13
12%
0.1%
12.1%
Commission may suo-motu or on request of a licensee, revise the targets in supply
constraints and factors beyond control of licensee

Solar Obligation shall be fulfilled through purchase of solar energy or by Solar REC only
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Duties of Distribution Licensee

Distribution Licensee may purchase renewable energy or renewable energy certificates
for compliance with the RPPO targets

Distribution Licensee to indicate the estimated quantum of purchase for the ensuing year
in tariff/annual performance review

Estimated quantum shall be in accordance with the RPPO

Unable to fulfil the obligation, the shortfall of the specified quantum of that year would be
added to the specified quantum for the next year but credit of excess RE purchase shall
not be adjusted

If fulfilling the RPPO through Purchase of Certificates Solar RPPO shall be fulfilled by
purchase of Solar REC only

Certificates under respective category shall be purchased from Power Exchange(s)
operating under the guidance of CERC only

Obligated Entity should deposit Certificates with the Commission as per the procedure
specified by CERC to show compliance with RPPO
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Recent Initiatives : Consequences of Non Compliance

Non fulfillment of RPPO in any year through procurement of RE or through purchase the respective
RECs, Commission may direct ‘Obligated Entity’ to create and maintain separate fund

Obligated Entity to deposit an amount determined on the basis of shortfall in units in RPPO and
Forbearance Price determined by CERC

Fund shall be utlilised on the direction of Commission for purchase of RECs and partly for the
development of infrastructure for evacuation of power from RE generating stations

Obligated Entity may be liable for penalty under Section 142, if fails to comply with the RPPO

In case of genuine difficulty in compliance with RPPO, the Obligated Entity may approach
Commission to carry forward the compliance requirement to next year

Section 142 shall not be invoked if Commission has consented to carry forward the compliance
requirement
Section 142 (Punishment for Non-Compliance of Directions by Appropriate Commission) the Appropriate Commission may after
giving such person an opportunity of being heard in the matter, by order in writing, direct that, without prejudice to any other penalty to
which he may be liable under this Act, such person shall pay, by way of penalty, which shall not exceed one lakh rupees for each
contravention and in case of a continuing failure with an additional penalty which may extend to six thousand rupees for every day
during which the failure continues after contravention of the first such direction
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Impact on DISCOM for Compliance of RPPO using RECs
Description
FY 11
FY 12
FY 13
FY 14
FY 15
6692.87
7016.90
7356.61
7712.78
8086.18
10%
11%
12%
13%
14%
-
0.10%
0.10%
0.10%
0.10%
Non Solar RPO (MU)
669.29
771.86
882.79
1002.66
1132.07
Non Solar RE Available (MU)*
639.21
739.21
839.21
939.21
1039.21
Non Solar Shortfall (MU)
30.08
32.65
43.58
63.45
92.86
-
7.02
7.36
7.71
8.09
Energy Requirement (MU)
Non Solar RPO (%)
Solar RPO (%)
Solar RPO (MU)
Solar Available (MU)
Solar Shortfall (MU)
-
7.02
7.36
7.71
* Note : assumed additional availability of at least 100 MU p.a. of non-solar RE power
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8.09
Impact on DISCOM for Compliance of RPPO using RECs
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Status of Accreditation and Registration of Projects
Tamil Nadu
300
MW
Accreditation
J&K
373.55
400
Haryana
180.9
200
Rajasthan
100
Chhattisgarh
0
Gujarat
Maharashtra
0
50
100
150
200
250
MW
Accreditation
Registration
ST
MW
Cogeneration
Biomass
WtE
SPV
Registration
J&K
300
100
SHP
373.55
400
200
Wind
Tamil Nadu
180.9
159.05
69.9
38
18
Rajasthan
99.5
70
77
Haryana
Chhattisgarh
23
Gujarat
0
Maharashtra
0
Accreditation
ST
Registration
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28
50
Wind
SHP
100
150
MW
Cogeneration
Biomass
200
WtE
250
SPV
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Status of Transaction of RECs
4503
Transaction Price Discovered
at PXIL was Rs. 2225/REC in March’11
532
424
Issued
260
324
Redeemed
March
Solar Category
Total Buy Bids
Transaction Price Discovered
at IEX was Rs. 3900/REC in March’11
70377
0
274
Non Solar Category
April
3025
4046
Total Sell Bids
Transaction Price Discovered
at IEX was Rs. 1500/REC in April’11
30001
0
150
Non Solar Category
Total Buy Bids
260
Solar Category
Non Solar Category
Total Sell Bids
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0
Total Buy Bids
29
0
Solar Category
Total Sell Bids
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Way Forward

REC mechanism offers alternative to fulfill RPO targets by Obligated
Entities.

Obligated Entities can plan to meet their RPO targets in efficient manner.

Long term visibility of Floor Price and Forbearance price is necessary to
ensure regulatory certainty for Utility as well as RE project developers.

Impact on Avg. power purchase cost of Utility is not very significant.

Utility /SERCs may develop Model Power Purchase Agreement for
procurement of electricity from RE projects at APPC.

Bilateral transactions of RECs as & when enabled would provide larger
flexibility and liquidity for REC market, which is the need of the hour.
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