OPEN ACCESS. Forecasting Company of the Year & REC Trader of the Year September 2016 Volume - 65

Size: px

Start display at page:

Download "OPEN ACCESS. Forecasting Company of the Year & REC Trader of the Year September 2016 Volume - 65"

Alice Bryan
5 years ago
Views:

1 OPEN ACCESS Forecasting the Year & of the Year 20 September 20 Volume - 65

2 CONTENT From Management s Desk The main article this month discusses in detail the Draft Amendment to the 2005 released by the Ministry of Power. The proposed change will have a major impact on the Group captive structures that are used in many states to set up RE projects. REC Trade Results Other notable regulatory updates during the month include our take on the Rise in CSS, APERC and JERC RPO and its compliance regulation, Solar Tariff determination by MPERC, Additional Surcharge determination by GERC. All of these are discussed in detail in the newsletter. The month of September trading saw significant decrease in the demand RPO Table About REConnect for both Solar and Non-Solar RECs as compared to last month. The total transaction value stood at Rs 37.5 Crores in comparison to Rs 52 Crores last month. However, on an year-on-year basis, non-solar RECs demand for the period is up by 67.26% and solar RECs demand is up by 11.42%. As we get into the second half of the year, demand is expected to pick up even further. We hope you will find this volume an insightful read, and as always, look forward to your feedback. -Team Reconnect

REConnect Energy : Forecasting Company & REC Facilitator of the year We are very happy to announce that REConnect was awarded

This is the third year in a row that we have won these awards.

country), faith of our clients in us and the flawless service the REConnect team provides every day.

3 REConnect Energy : Forecasting Company & REC Facilitator of the year We are very happy to announce that REConnect was awarded of the Year 20 & Forecasting the Year 20 in the n Wind Energy Forum. This is the third year in a row that we have won these awards. We would like to thank our clients for the faith that they bestow on us and the dedicated efforts of the REConnect team for this recognition. The of the Year 20 award is a recognition of our continuing REC market leadership (we are the largest REC trader in the country), faith of our clients in us and the flawless service the REConnect team provides every day. The Forecasting the Year 20 award is recognition of our knowledge-centric approach to forecasting and scheduling, and our market leadership in this domain. We currently provide forecasting and scheduling services to over 12GW of wind and solar projects. We have successfully catered the GETCO state level wind forecasting project for a total capacity of 4086MW. Page 1

4 Draft Amendments to 2005 Analysis - Draft Amendment to 2005 The Ministry of Power (MoP) has proposed changes lower value shares being subscribed by the consumers while the higher value shares being owned by the investor. to the The proposed changes focus on rules relating to Captive Power Plants. More specifically, the changes proposed will impact the structures commonly known as Group Captive projects. Group captive projects are an important way in which renewable energy (RE) capacity is set up (its important to note that the Group Captive structure is also used by conventional power plants). What is the change proposed? At present, a power project is considered captive if The proposed change requires 26% or more ownership of the paid up equity share capital. Thus, equity structures with different face value of shares will no longer be tenable as ownership will have to be 26% or more of the total value of equity capital. However, it appears that the structures where a large majority of the capital is brought in as preference shares are likely to still qualify under the draft rules. This is because the draft refers to equity capital alone, not preference capital or total paid up capital. consuming entity or entities consume at least 51% of the power generated and owns at least 26% of What will be the impact of the change? the equity. Various capital structures have evolved to qualify as captive under the rules. For example, a major portion of the capital could be preference shares, with only a small portion being equity capital. Thus, owning 26% of the equity capital actually translates to a very small amount relative to the overall investment in the project. Further, equity shares of different face values are issues with the Group captive structures are a very important tool used by companies investing in RE capacity. This is because once a project is classified as captive, cross subsidy cannot be made applicable to power generated from it. This important protection to captive projects stems from the Electricity Act and an order of the Supreme Court. Page 2

5 Draft Amendments to 2005 In the current environment where states vary in cross subsidy significantly every year (often with the intent to make open access unviable), such a protection is critical. Without such a protection projects that are build with a life of years face huge uncertainties as PPA s that are viable at present may suddenly become unviable if the state imposes high cross-subsidies. The proposed change will make group captive Many states misuse their power to set cross-subsidy surcharge (CSS) rates and change them drastically every year (please refer to the CSS article below) often making open access unviable. Further, related provision to cross-subsidy like limiting such rates to 20% of the applicable tariff category or progressive reduction over time are not adhered to. The National Tariff Policy also suggested a change in the way CSS is calculated. However, states have not adopted the suggested methodology. structures more difficult as it will require the consumer to put up significantly more equity. This will likely result in less such structures coming up and consequently less investment in RE capacity overall. In this context, making it far more difficult to make group captive structures will result in increasing the risks faced by RE projects. The direct consequence of such a change will be reduction in new investment in Why is the change proposed? the RE capacity. As mentioned in the document of MoP, the rule How soon can the changes be effective? However, we believe that this needs to be looked at in the larger context of the regulatory environment that an RE plant operates in. is being misused by issuing shares of small face value which actually do not represent the monetary are made by notification by the Central share of the capital of the plant (emphasis added) Government (s. 176). This is unlike the Electricity Act or its amendment, which requires the approval of the parliament. As a result, the MoP can modify the rules by notification very quickly after it receives comments and has the opportunity to consider them. Comments are due on the draft rules by November 1, Page 3

6 Cross-subsidy surcharge continues to rise A recent article in Business Standard highlighted the disproportionate rise of cross-subsidy surcharge (CSS) in many states. We have been tracking this issue as well and had highlighted the problem in our blog & NL Volume 62. With increasing cost of power the burden to foot the bill therefore falls on industrial and commercial consumers. As per the MoP data the below graph depicts change in CSS over the span of 1 year in the major states which varies from 35% to 321%. Change in CSS In the past, CSS has been calculated on the basis of 3 the cost of the marginal 5% (in other words the most expensive 5%) of power procured by the state % HA KA This results in a bias towards the highest cost paid, resulting in high CSS. The National tariff policy (NTP) has suggested change in this methodology to % GJ CH AP MP a weighted average cost model, and also proposed 0.5 that CSS be restricted to 20% of the tariff. However, recent increases show that states have largely ig- 0 CSS FY13-14 CSS FY CSS FY 15- nored the provisions of the NTP. A big reason for the rise in CSS is also the fact that states continue to shy away from raising tariffs for Andhra Pradesh Electricity Regulatory Commission (Renewable Power Purchase Obligation and its Compliance) domestic, agricultural and such categories. According to the Business Standard article, like The Ministry of Power (MoP) had recently declared the national RPO trajectory. The order had enlisted the Chhattisgarh, UP, Uttarakhand and Bihar have already come up with their tariff orders for the financial year 20-17, but have not raised retail tariffs. Only Gujarat has allowed a retail tariff increase. yearly RPO trajectory for both non-solar and solar power purchase from till Page 4

7 Following the steps of MoP RPO trajectory, Chhattisgarh, Himachal Pradesh and now Andhra Pradesh has notified its Renewable Power Purchase cure 100% power produced from all the Waste-to- Energy plants in the State, in the ratio of their procurement of power from all sources. Obligation and its Compliance, regulations which RPO % is proposed to increase steeply from will be effective from April 1, % in to 17% in line with the MoP Trajectory. The regulation will be applicable to: The distribution licensee Or any person, consuming electricity procured from conventional sources through open access third party sale. APERC has declared its long term RPO Trajectory with up to 25% till The graph given below gives a comparison between the MoP recent RPO Trajectory and APERC s RPO Trajectory : Every consumer owning a captive generating plant of installed capacity 1 MW and above and synchronized with the Grid % MoP & APERC RPO Trajectory The said obligations will be applicable on total consumption of electricity by an obligated entity, excluding consumption met from hydro electric sources of power % 20.00% 15.00% 11.50% 14.25% 17% 22.50% 19.75% 25.25% APERC RPO Trajec tory Analysis: RPO to be applied on co-generation power while 10.00% 5.00% 0.00% MoP RPO Trajec tory the Consumption from hydro sources to be excluded. The distribution licensees shall compulsorily pro The APERC Regulation can be accessed here. Page 5

8 Gujarat Electricity Regulatory Commission determines Additional Surcharge for Open Access Consumers for the open access transaction commencing from 1st October, 20 to 31th March, The graph below depicts how the addition surcharge has varied over the past: Gujarat Electricity Regulatory Commission (GERC) in its order dated 1 st October 20 has computed the additional surcharge payable by the Open Access Consumers for the control period of 1 st October 20 to 31 st March The order has come as per the GERC Open Access Regulation which states, that additional surcharge shall be determined in every 6 months periods. The GUVNL (Gujarat Urja Vikas Nigam Limited) furnished the data to the commission as per the guidelines defined and proposed an additional surcharge of Rs. 0.44/kWh. The GERC Regulation can be accessed here. The additional surcharge has decreased by Rs. 0.22/ kwh from the previous surcharge. The Additional Joint Electricity Regulatory Commission (Renewable Power Purchase Obligation and its Compliance) Surcharge will be applicable to the consumers of MGVCL, UGVCL, PGVCL and DGVCL, who avail power through open access from any source other than their respective DISCOMs & will be applicable The Joint Electricity Regulatory Commission (Goa and UT s) recently came up with its long term Renewable purchase obligation trajectory & compliance regulation Page 6

9 following the footsteps of states like Chhattisgarh, HP and AP. JERC has declared its RPO Trajectory up to 2022 with total RPO of 17% which lags behind in comparison with MoP RPO Trajectory and of other states. MPERC Determines Tariffs for Solar Power Projects Madhya Pradesh Electricity Regulatory Commission recently released its tariff order for energy procured from solar power based projects for the control period from 31 st March 20 to 31 st Just like other states, the said obligations will be applicable on total consumption of electricity by an obligated entity, excluding consumption met from hydro electric sources of power. The tariff determined by the Commission in this will be applicable to the following Projects located in the State of Madhya Pradesh and selling electricity to the distribution licensees within Madhya Pradesh only:- The graph below gives comparison of MoP RPO Trajectory with JERC RPO Trajectory: (a) Solar PV Power Plants (b) Solar Thermal Power Plants 18.00%.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 4.85% 11.50% 6.70% MoP & JERC RPO Trajectory 14.25% 9% 17% 11.50% 14.10% 17% JERC RPO Traject ory MoP RPO Traject ory Sr. No Solar Project Capital Cost (Rs. Crore/MW) Levelised Tariff (Rs/Unit) 1 Solar Thermal 2 Solar PV The Commission came out; vide its proposal for categorization of solar PV and thermal projects as well as for The JERC Regulation can be accessed here. fixing the norms for technological specific parameters. Page 7

10 The graphs below gives a comparison of the Capital cost and levelized tariff from the previous control period: The Commission has fixed the normative capital costs inclusive of all components as well as taxes etc. for solar thermal and solar PV projects by keeping in line with the CERC benchmark capital cost of Rs. 12 Crore and Solar Thermal Capital Cost 5.3crores per MW for Solar Thermal The MPERC Regulation can be accessed here Solar PV Other Regulatory updates of the month can be accessed here. 3 1 Capital Cost (Rs. Crore/MW) Capital Cost (Rs. Crore/MW) Solar PV Levelised Tariff Solar Ther mal 4 Solar PV 2 0 Levelised Tariff (Rs/Unit) Levelised Tariff (Rs/Unit) Page 8

11 s largest REC Trading Company Clickpower.in: s first Green Energy Marketplace Regulatory Updates - September 20 For past trading history - CLICK HERE Non Solar The clearing ratio stood at 1.36% in both IEX and PXIL for Non Solar REC s. A total of 1, 75,525 RECs were traded this month as compared to 2, 58,891 RECs traded in last month, a decrease of 32%. Non Solar Clearing % 4.50% 4.00% 4.01% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 1.91% 1.50% 1.61% 1.86% 2.27% 1.36% 1.35% IEX PXIL 0.50% 0.00% Jun- Jul- Aug- Sep- Non Solar RECs ,35,46,470 1,35,78,685 1,34,68,781 1,32,65, Available Issued Redeemed ,51,138 2,35,007 60,055 4,97,148 4,174,26 1,35,406 2,58,891 1,75,525 Jun- Jul- Aug- Sep- For more details please visit our blog-post here. Page 9

12 s largest REC Trading Company Clickpower.in: s first Green Energy Marketplace Regulatory Updates - September 20 For past trading history - CLICK HERE Solar Clearing ratio stood at 0.8 % and 0.98% in IEX and PXIL respectively, with significant decrease of 20% in total demand of Solar RECs as compared to last month. Solar Clearing % Solar RECs 3.50% 3.00% ,519,829 3,525, ,488,773 3,473, % 2.00% 1.50% 1.00% 2.29% 1.24% 1.17% 0.97% 1% 1.40% 0.97% IEX PXIL Available Issued Redeemed 0.50% 0.00% Jun- Jul- Aug- Sep- 0.80% ,757 1,37,615 51,015 37,973 4,203 24,951 39,978 31,724 Jun- Jul- Aug- Sep- The month of September trading saw significant decrease in the demand for both Solar and Non -Solar RECs as compared to last month. The total transaction value stood at 37.5 Crores in comparison to 52 Crores last month. In contradictory to the total demand, this month also huge rise in the total REC issuance where the issuance increased by more than 5 lakhs as compared to the past month s total issuance. This could be attributed due to the impact of CERC s 4th amendment to RECs regulations. The graph on the right is a Y-o-Y graph Y-o-Y Graph % % FY 15- (April to September) FY -17 (April to September) NS REC TRADED S REC TRADED For more details please visit our blog-post here. Page 10

45 MW Wind 2213 Bio-fuel Cogeneration 920 All figures in MW Projects Registered Source wise Biomass I 700 Solar PV

13 s largest REC Trading Company Clickpower.in: s first Green Energy Marketplace REC Project Status - As on 30th June,20 Registered Capacity MW Wind 2213 Bio-fuel Cogeneration 920 All figures in MW Projects Registered Source wise Biomass I 700 Solar PV 588 Small Hydro 291 Projects Registered State wise (MW) Reg. Capacity (MW) 1,085 1, Page 11

14 s largest REC Trading Company Clickpower.in: s first Green Energy Marketplace s RPO Table RPO Obligation (Non Solar) Andhra Pradesh 2.0 % 1.0 % Assam Arunachal Pradesh 6.75 % 6.80 % 0.25 % 0.20 % Bihar 3.25 % 1.25 % Chhattisgarh 7.75% 2.00% Delhi 8.65 % 0.35% Gujarat 8.25 % 1.75 % Haryana 2.75 % 1.00% Himachal Pradesh 8.75% 2.75% J&K 6.50% 1.00 % Jharkhand 3.00 % 1.00 % Karnataka % * 0.75 % * Kerala 4.5% 0.5% Madhya Pradesh 6.50% 1.25 % Maharashtra % 1.00 % Meghalaya Odisha 1.58 % 3.00 % 0.42 % 1.50 % Punjab 4.10% 1.30% Rajasthan Tamil Nadu 8.90 % 9.0 % 2.50% 2.50% Tripura 6.00 % 6.00% Uttarakhand 8.00% 1.5 % Uttar Pradesh 5.00 % 1.00 % West Bengal 4.80 % 0.20 % Goa & UTs 2.80 % 1.15 % Manipur 4.75 % 0.25 % Mizoram % 0.25 % Nagaland 7.75 % 0.25 % RPO Obligation ( Solar) *BESCOM,MESCOM, CESC - 10 % %, HESCOM, GESCOM, Hukkeri Society - 7 % %. Status of Regulation - Final for all states except - Draft for Haryana, Telangana, Tripura, TN, AP, MP and Rajasthan ( Draft Amendments of targets ) RPO on OA Users? - Yes for all states except West Bengal. Karnataka (5.00% RPO) - Yes (> 5MW). RPO on CPP? - Yes for all states except West Bengal. Gujarat, Odisha, Haryana, Bihar, Jharkhand, Tripura, Karnataka (5.00% RPO) - Yes (> 5MW). RPO Penalty? - Yes (REC max ) for all the states. West Bengal - Not Specified. Page 12

15 s largest REC Trading Company Clickpower.in: s first Green Energy Marketplace About REConnect Energy is s leading renewable energy trading company. We provide end-to-end services for projects in the Renewable Energy Certificate mechanism from contract structuring, advisory to monetization of RECs. We also work with power consumers to manage Renewable Purchase Obligation (RPO) liabilities, and develop and execute their energy sourcing strategy. We are a knowledge focused company that prides itself in providing premium services to our clients backed by in-depth research and analysis. REConnect is run by an experienced and professional team. The team consists of members with relevant experience of working at IEX, L&T, JP Morgan, Arthur Andersen and Gensol. Key members of the team are alumnus of IIT Bombay, Columbia University (an Ivy League university). For more details of services provided and profile of the team, please visit our website. Contact Details Bangalore: Vishal Pandya Vishal.Pandya@reconnectenergy.com No. 2, Victor Mansion, 2nd floor, Kodihalli, Old Airport Road, HAL 2nd Stage (PO), Bangalore O : / 84 F : Chennai: Venkat Mutharasu ( ) venkat.mutharasu@reconnectenergy.com # 18/1 (88), 2nd Floor, Aarya Gowda Road, West Mambalam, Chennai New Delhi: Vibhav Nuwal Vibhav.Nuwal@reconnectenergy.com C 503, 5th Floor, Nirvana courtyard, Nirvana Country, Sector 50, Gurgaon O : F : Hyderabad: Rahul ( ) Rahul.tyagi@reconnectenergy.com Mumbai: Ram Kumar ( ) Ramkumar@reconnectenergy.com 1013, 10th Floor, Micro (Haware) Infotech Park, Plot no., Sector-30A, Vashi, Navi Mumbai , Maharashtra,. Solar Market: Vibhav Nuwal Vibhav.Nuwal@reconnectenergy.com Call: W: Renewable Purchase Obligation (RPO): Chetan Singh Adhikari ( ) Chetan.Adhikari@reconnectenergy.com Forecasting and Scheduling (F&S) Siddhartha P. ( ) Siddhartha.priyadarshi@reconnectenergy.com Follow us on: Disclaimer: All the information presented in this newsletter is from publicly available sources. REConnect does not warrant the accuracy and completeness of information available and therefore will not be liable for any loss incurred. The content provided here is for the general informational purposes only. REConnect shall not be responsible for damages resulting from the use of any information in this newsletter. Readers are advised to make appropriate analysis and take appropriate advise before acting on the contents of this newsletter. Page 13

OPEN ACCESS. Wind Facilitator of the Year & REC Facilitator of the Year March 2016 Volume - 60

OPEN ACCESS. Wind Facilitator of the Year & REC Facilitator of the Year March 2016 Volume - 60 OPEN ACCESS Wind Facilitator of the Year & REC Facilitator of March 20 Volume - 60 CONTENT From Management s Desk FY 2015- was a very important one for the REC markets the Supreme Court gave its decision