Renewable Energy Regulations: Issues and India’s Reponse

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Renewable Energy RegulationsIssues and Indias
Reponse
Rajkiran V Bilolikar
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Agenda

• Renewable Energy Scenario
• Policy Base for RE promotion
• RE regulations support
• RE regulations Issues
• Pricing Options

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Technical Potential of Renewable Energy

• Technical Potential of Renewable Energy in MW

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Technical Potential of Renewable Energy

• Indias installed capacity of Renewable power in
  MW (31.03.2008)

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Technical Potential of Renewable Energy

• State wise Gross Potential and Installed Capacity
  in MW - WIND

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Technical Potential of Renewable Energy

• Biomass Power Generation Potential and Installed
  Capacity

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Technical Potential of Renewable Energy

• State wise Gross Potential and Installed Capacity
  in MW - Biomass

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Technical Potential of Renewable Energy

• State wise Gross Potential and Installed Capacity
  in MW Small Hydro (2007

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Technical Potential of Renewable Energy

• Solar Based installations in India March 31,
  2008

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Technical Potential of Renewable Energy

• India Receives Solar Energy - 5000 trillion
  kWh/year equivalents
• (Total Energy Consumption in FY 2010-11 projected
  as 848 billion kWh by CEA)

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Renewable Energy Programme - India

• India Started its renewable energy programme in
  1981 - Establishment of Commission for
  Additional Sources of Energy
• Converted the same into Ministry of Non
  conventional sources of Energy resources in 1992
• In year 2006, it was renamed Ministry of New
  and Renewable energy (MNRE)

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Policy Base for RE Promotion

• Electricity Act 2003
• Section 86(1) of EA 2003 mandates SERC to
• Promote Co-generation from Renewable Sources of
  energy by providing suitable measures for
  connectivity to Grid and sale of electricity to
  any person, and also specify, for purchase of
  electricity from such sources, a percentage of
  total consumption of electricity in the area of
  distribution licensee
• National Tariff Policy
• Para 6.4 of the Tariff Policy stipulates
• Pursuant to provisions of 86(1) (e) of EA 2003,
  Appropriate Commission shall fix minimum
  percentage for purchase of power from RE sources
  in the region and its impact on retail tariffs

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Policy Base for RE Promotion

• National Rural Electrification Policies (NREP)
  2006
• Include provision of access to electricity to all
  households by 2009
• Quality and reliable power supply at reasonable
  rates
• For villages/habitations where grid connectivity
  is not feasible of cost effective, off-grid
  solutions based on stand alone renewable systems
  may be taken up
• Supports to achieve target of 10 renewable
  energy through RPO (Renewable Purchase
  Obligation)

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Integrated Energy Policy 2006

• Power regulators must seek alternative incentive
  structures that encourage utilities to integrate
  wind, Small Hydro, cogeneration into their
  systems
• Power regulators should mandate feed-in-laws for
  renewable energy where appropriate, as provided
  under the electricity Act
• Generation based incentives for MW scale grid
  connected solar PV and thermal power plants
• An additional tariff for new wind power plants
  which donot claim accelerated depreciation benefit

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Renewable Energy regulations support

• Renewable Energy Purchase Obligations
• Feed in Tariffs
• Fiscal Incentives such as accelerated
  depreciation and tax holiday
• Generation Based Incentive

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Policy Framework for Promotion of Renewable Energy

• Feed-in Tariff Policy
• It is a generic description of a policy that pays
  a price, a tariff for the electricity generated
  by RE that is fed into or sold to the grid
• Transparent, comprehensible, equitable

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Policy Framework for Promotion of Renewable Energy
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Policy Framework for Promotion of Renewable Energy

• Renewable Portfolio Standard
• 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 Section 3

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RPOs targets in few states
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Key Features of existing RPOs

• Specify of RE every utility need to purchase
• Single target for overall renewable energy
  purchase,
• Usually close to existing purchase levels,
• In some cases Y-o-Y targets,
• Technology specific targets in some States
• Period is up to five years,
• Applicable to OA/Captive in only three States,
• Purchase of RE from outside the State is not
  permitted,
• Silent on mode of procurement, competitive or
  cost based
• Weak on enforcement methodology

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Policy Framework for Promotion of Renewable Energy

• Foreign Investment Policy
• Proposal for up to 100 percent foreign equity
  participation in a joint venture qualify for
  automatic approval
• Foreign investment Promotion Board (FIPB)
• Encourages for BOO basis
• There is no prior approval of the Government is
  required to set up industrial undertaking with
  FDI by NRIs
• RBI permitted Indian Companies to accept
  investment under the automatic route without
  obtaining prior approval from RBI to set RE based
  projects

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Policy Framework for Promotion of Renewable Energy

• Foreign Investment Implementation Authority
  (FIIA)
• Under the Ministry of Commerce and Industry
• Would provide one stop after care service to FIs
  by helping them to expedite approvals and
  clearances and to sort out operational problems
• Act as single point interface between the
  investors and Govt agencies

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Policy Framework for Promotion of Renewable Energy

• Industrial Policy
• MNRE is promoting medium, small, mini, micro
  enterprises for manufacturing and servicing of
  various types of RE systems and devices
• For setting up of an RE industry, industrial
  clearances as well as no clearance from CEA for
  power generation up to Rs. 1000 million
• RE power generation projects five year tax
  holiday
• RE Equipment manufacturing soft loans are
  available through IREDA
• Private sector companies can set up enterprises
  to operate as licensee or generating companies
• Customs duty concession is available for RE
  spares and equipment

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Policy Framework for Promotion of Renewable Energy

• Joint Ventures Policy
• Its a financial as well as technical
  collaboration and they are used by FIs
• Usually JVs are in the form of takeovers or
  strategic alliances
• Policies for small scale industries
• Does not exceed Rs. 10 million
• Not permitted more than 24 equity in its paid up
  capital from any industrial undertaking, foreign
  / domestic
• National Small Industries Corporation (NSIC)
  provides assistance

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Policy Framework for Promotion of Renewable Energy

• Incentives for investing in RETs
• Fiscal incentives
• Direct taxes 100 depreciation in the first
  year of installation
• Exemption / reduction in excise duty
• Exemption from central sales tax and customs duty
  concessions on import of material, components etc
• Income Tax
• Sec 32 accelerated 80 depreciation on
  specified RE based devices
• Section 115 J Exemption from MAT to industrial
  undertakings on profits derived from the business
  of generation and distribution of electricity
• 100 deduction in respect of profit and gains
  from business of collecting and processing
  biodegradable wastes

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RE Regulatory Issues - RPOs

• What is the basis for determination of these
  percentages and should the RPO include both the
  minimum and maximum percentage?
• Whether DISCOMs should be free to procure RE
  power from other DISCOMs in case of
  non-availability of RE sources within their own
  distribution area to meet the target?
• Whether the RPO percentage shall be applicable
  for all distribution companies operating in a
  state or should separate percentages be fixed for
  different DISCOMs?
• Further should the DISCOMs be free to purchase RE
  power from outside the state and if so how?

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RE Regulatory Issues Tariff/ Pricing

• Is it more appropriate to set tariffs for RE
  based power based on cost-plus principles or
  linked to the cost of generation of the marginal
  plants?
• Is there a tariff setting mechanism by which
  environmental benefits of RE sources can be
  quantified? In cost plus regime can incentives
  be introduced by the regulator and be built in
  tariff structure of such sources?
• What would be appropriate cost sharing mechanism
  if tariffs which are set using the cost-plus
  principles exceed the average cost of generation
  from RE sources?

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RE Regulatory Issues Grid Connectivity

• Who should bear the cost of grid extensions up to
  the nearest receiving sub-station?
• Should there be a sharing of cost by the
  developer?
• What should be the approach for deciding the
  technical parameters of interconnection?

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Alternative Approaches for Tariff Determination

• Cost Based Approach
• The cost based approach relies on the requisite
  station wise information and is adjusted by
  performance standards by regulators where the
  rate of return on capital investments is
  regulated and a cap is imposed on clear profit
• Marginal cost / Avoided cost based approach
• The marginal cost or the avoided cost based
  approach considers the unit cost of energy
  displaced at the margin by the energy generated
  at the margin by the renewable energy based power
  plant

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Pricing options for non-firm power

• Short run marginal costing/Avoided cost
• UI Mechanism formulated under ABT
• Capacity charge
• Energy charge
• UI charge
• RECs

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Need for inter-state sales

• Renewable sources are not spread evenly across
  country
• Many states with no or little RE are not able to
  promote RE
• States with good RE have exhausted their capacity
• Currently, no mechanism for purchase of RE across
  the State boundary
• It may not be possible to carry out inter-State
  sales using CERC OA Regulations for following
  reasons
• Most RE generators are difficult to schedule
• Transaction would be expensive due to low
  capacity factors of RE
• RE generators are not connected to STU but to
  Discoms
• Intra-state balancing systems have not yet
  stabilized
• Therefore, a mechanism which will enable
  inter-state sale and purchase of renewable energy
  is required.

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NAPCC Specific Provisions related to RE

• 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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Concept of Renewable Energy Certificate
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Model Guidelines / Procedure for Accreditation
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Procedure for Registration
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Procedure for Issuance
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Procedure for Redemption
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Renewable Energy Certificates General Features

• STEP 1 The applicant shall apply for
  Accreditation on the Web Based Application and
  shall also submit the same information in
  physical form with the State Agency.
• The application for accreditation shall contain
• (i) owners details,
• (ii) operator details
• (in case the owner and operator are different
  legal entities),
• (iii) Generating Station details
• In case, the Applicant has multiple RE generation
  projects then, separate Applications will have to
  be submitted by the Applicant for each RE
  generation project. Accreditation of each RE
  generation project shall be carried out
  separately.
• The Application made for accreditation of RE
  generation project shall be accompanied by a
  non-refundable processing fee and accreditation
  charges (one time and annual, if any) as
  determined by the Appropriate State Electricity
  Regulatory Commission from time to time.

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Renewable Energy Certificates General Features

• STEP 2 The State Agency shall assign a unique
  acknowledgement number to the Applicant for each
  application for accreditation of its RE
  generation project, for any future
  correspondence.
• STEP 3After receipt of application in physical
  form for accreditation, the State Agency shall
  conduct a preliminary scrutiny to ensure
  Application Form is complete in all respect along
  with necessary documents and applicable
  processing fees and accreditation charges. The
  State Agency shall undertake preliminary scrutiny
  of the Application within 5 working days from
  date of receipt of such Application.

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Renewable Energy Certificates General Features

• STEP 2 The State Agency shall assign a unique
  acknowledgement number to the Applicant for each
  application for accreditation of its RE
  generation project, for any future
  correspondence.
• STEP 3After receipt of application in physical
  form for accreditation, the State Agency shall
  conduct a preliminary scrutiny to ensure
  Application Form is complete in all respect along
  with necessary documents and applicable
  processing fees and accreditation charges. The
  State Agency shall undertake preliminary scrutiny
  of the Application within 5 working days from
  date of receipt of such Application.
• STEP 4 After conducting the preliminary
  scrutiny, the State Agency shall intimate in
  writing to the Applicant for submission of any
  further information, if necessary, to further
  consider the application for accreditation or
  reject application. The reasons for rejecting the
  application for accreditation shall be recorded
  and intimated to Applicant in writing within 2
  working days from date of receipt of the
  completed application by State Agency. 

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Renewable Energy Certificates General Features

• STEP 5While considering any application for
  accreditation of RE generation project, the State
  Agency shall verify and ascertain availability of
  following information
• Undertaking of 'Availability of Land' in
  possession for setting up generating station
• Power Evacuation Arrangement permission letter
  from the host State Transmission Utility or the
  concerned Distribution Licensee, as the case may
  be
• Confirmation of Metering Arrangement and Metering
  Location
• Date of Commissioning of RE project for existing
  eligible RE Project or Proposed Date of
  Commissioning for new RE for accreditation
• Undertaking regarding Off-take/Power Purchase
  Agreement
• Proposed Model and Make for critical equipment
  (say, WTG, STG, PV Module) for the RE Project.
  Confirmation of compliance of critical equipment
  with relevant applicable IEC or CEA Standards
• Undertaking for compliance with the usage of
  fossil fuel criteria as specified by MNRE
• Details of application processing
  fees/accreditation charges

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Renewable Energy Certificates General Features

• STEP 6 The State Agency,
• after duly inspecting/verifying conditions
  elaborated in Step 5, shall grant 'Certificate
  for Accreditation' to the concerned Applicant for
  the proposed RE Generation project
• assign a specific project code number to that
  effect which shall be used by the such Applicant
  (Eligible Entities) for all future correspondence
  with the State Agency. The process of
  accreditation shall normally be completed within
  30 days from date of receipt of complete
  information by State Agency. In case
  accreditation is not granted at this stage, the
  reasons for rejecting the application for
  accreditation shall be recorded and intimated to
  Applicant in writing.
• STEP 7 If accreditation is granted, the State
  Agency shall also intimate accreditation of
  particular RE generation project to the following
  entities,
• The Central Agency, as defined under Clause 2(1)
  (b)
• The host State Load Despatch Center
• The distribution company in whose area the
  proposed RE generation project would be located.

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Renewable Energy Certificates General Features

• 1 certificate ? 1 MWhe of renewable energy
  generated
• Mechanism is used in many countries, RPS (US
  Japan), ROCs (UK), RECs (Australia).
• Certificates are traded to meet the mandatory
  targets for RE purchases by utilities/DISCOMs
• Targets establish demand
• Market for RECs sets price
• At times regulators fixes the ceiling price in
  form of penalty to bring in certainty
• Purchase of REC would be deemed as purchase of
  renewable energy.
• Entity under S 86(1)(e) obligation can purchase
  RECs to satisfy its obligation.

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REC Mechanism for implementation in India

• Renewable Energy Certificate (REC) shall be proof
  that certain environmental attributed have been
  produced by way of generation of renewable energy
• RE generators will be selling two products
• Electricity generated by RE source
• Environmental attributes in the form of REC
• Electricity will be procured by the licensee to
  whose network RE generator is connected
• Purchase would be at the prices determined by the
  SERC which may be average power purchase price
  for that utility
• It will reduce the burden on the local
  distribution licensee
• RECs could be procured by all entities subjected
  to RPS.
• For serving RPS, purchase of RECs should serve
  the purpose

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Thank YouRajkiran V. Bilolikar,Assistant
Professor, Energy Area,Administrative Staff
College of India, Bella Vista, Raj Bhavan Road,
Hyderabad - 500082 T 91 40 6653 4390F 91
40 6653 4356M 91 9704087888rajkiran_at_asci.org.
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