Guidelines for Selection of 750 MW New Grid Connected Solar Power Projects Under Phase-2, Batch-I

    In the Phase 1 of the Mission, 950 MW solar power projects were selected in two batches (batch-I during 2010-11 and batch-II during 2011-12) through a process of reverse bidding. This was largely based on the option of Bundling Scheme and on GBI option to some extent.  In Phase-II Batch-I of JNNSM, the option of “Viability Gap Fund” Scheme has been selected over reverse bidding.

Operation Guidelines of Viability gap funding under phase 2 batch 1 of JNNSM

·         The developer will be provided a viability gap fund based on his bid. The upper limit for VGF is 30% of the project cost or Rs.2.5 Cr. /MW, whichever is lower.

·         The VGF will be released in following manner

1.       25% at the time of delivery of at least 50% of the major equipment at the site and after inspection by a Committee to be constituted by MNRE. In case the inspection is taking time, SECI may release the VGF due on self-certification by the developer against BG of equivalent amount.

2.      50% on successful commissioning of the full capacity of the plant.  The project’s commissioning will be declared by a Committee to be constituted by MNRE.  The project would be considered as Commissioned if energy has flown into the grid after the entire plant equipment is installed and connected

3.      Balance 25% after one year of operation meeting requirements of generation.

·         The tariff to be paid to the developer is fixed at Rs.5.45 per kWh. This tariff will remain firm for 25 years project period.  In case benefit of accelerated depreciation is availed for a project, the tariff will get reduced by 10% to Rs.4.95 per kWh in line with CERC regulations.

·         The developer has to put his own equity of at least Rs.1.5 Cr. /MW and the remaining amount can be raised as loan from any source by the developer.

·         If the project fails to  generate any power continuously  for 1 year  within 25 years or its assets are sold or the project is dismantled  during the tenure of the project,  SECI will have a right to claim assets equal to the value of VGF granted and paid

 Project Implementation Schedule for Solar PV Projects

Time line for Selection of Solar PV Projects given below:

Chronicle order	Event	Date
1	Notice for request of selection	Zero date
2	Submission of  applications  and Techno-commercial bid opening	30 days from issue of (RFS)(zero date+30 days)
3	Short-listing of Bidders based on Techno-commercial eligibility and opening of Finance Bid	Within  30  days from receipt of  response to  (RFS)  (zero date + 60 days)
4	Evaluation of Financial bids and issue of letter of intent	Within  90  days from opening financial Bids  (zero date + 90 days)
5	PPA Signing	Within 30 days from the date of issue of letter of intent
6	Financial closure of the project	6 months from the date of signing of PPA
7	Commissioning of the Project	13 months from the date of signing of PPA

SMA Inverter___ (Not an advertisement but I think they really deserve Endorsement!!!)

Deep Insights on Tamil Nadu SPO

   The Tamil Nadu Solar Energy Policy 2012 was announced in October 2012.from day one it is popular by one of the most ambitious state solar policy in India. With The operative period of the policy is from 2012 to 2015, during which it targets to add 3 GW of solar power. State which is known by its high installed capacity of wind energy is also on the voyage to be a solar state.

        Under the “Tamil Nadu solar energy policy 2012” 1500MW will be added through utility scale purpose from which 1000MW will be saleable to the TANGEDCO and remaining 500 will be driven by private power purchase agreements.

                                            

	Utility scale (MW) (A)	Solar Roof Top (MW) (B)	REC (MW) (C)	Total (MW) (A)+(B)+(C)
2013	750	100	150	1000
2014	550	125	325	1000
2015	200	125	675	1000
Total	1500	350	1150	3000

Solar Purchase Obligations

       This policy came up with revised term SPO in which H.T consumers and L.T commercial will be off taker for the solar energy. most interesting fact in this policy is that, Instead of implying RPO on DISCOMS it is directly imposed on end users (HT Consumers (HT Tariff I to V) & LT Commercial (LT Tariff V)), this arrangement may relief State DISCOM From additional tariff burden.

 “Obligated entities” for SPO under this policy

·         HT Consumers (HT Tariff I to V)

        This category will cover all HT consumers including:

       1. Special Economic Zones (SEZs)

       2. Industries guaranteed with 24/7 power supply

       3. IT Parks, Telecom Towers

       4. All Colleges & Residential Schools

       5. Buildings with a built up area of 20,000 sq.m. Or more

·         LT Commercial (LT Tariff V)

	Up to  DEC 2013	From   JAN 2014
SPO Percentages	3%	6%

The SPO will be administered by TANGEDCO. Whereas Tamil Nadu Electricity Development Authority (TEDA) will be stated as a nodal agency

The above obligated consumers may fulfill their SPO by:

·         Generating captive Solar Power in Tamil Nadu equivalent to or more than their SPO (due to this big industries will have to invest in solar power by establishing captive power plant)

·         Buying equivalent to or more than their SPO from other third party developers of Solar Power projects in Tamil Nadu (this will promote IPPA with third party power producer)

·         Buying RECs generated by Solar Power projects in Tamil Nadu equivalent to or more than their SPO. (This will nurture REC projects within Tamil Nadu)

·         Purchasing power from TANGEDCO at Solar Tariff (Additional income from this tariff price can be utilized to invest in another solar policy)

   Consumers desirous of availing SPO exemption by captive solar generation shall necessarily install separate meters to measure captive generation.

     Enforcement strategy

·         If any of the obligated consumers has not complied  with the SPO they should pay an amount equivalent to the “Forbearance Price “of the Solar REC to the administrator and in turn the administrator shall purchase REC for the amount collected from the obligated consumers.

·         For the purchases made by the obligated consumers from the TANGEDCO in order to meet their Solar Purchase Obligation, the TANGEDCO shall make equivalent purchases of solar power as prescribed in the Tamil Nadu Solar Energy Policy 2012.

·         In case an obligated consumer has multiple service connections, the SPO can be met in total for his/her electricity consumption in the area of the distribution licensee.

·         The SPO will be fixed on the total consumption of non-solar power of the consumer irrespective of the sources.

·         For those consumers who are purchasing solar power only from the distribution licensee for the fulfillment of their SPO the compliance period may be specified as that of the billing cycle. For others who are purchasing from other solar generators or consuming from their own solar generators the period may be fixed for the Calendar year as prescribed in the Policy.

     Unsolved issues

·         NAPCC had set the target of 5% renewable energy purchase for FY 2009-10, and also envisaged that such target will increase by 1% for next 10 years. It targets a minimum of 5% RE in the supply mix of the entire country by 2010, 15% by 2015 and 20% by 2020. On this guideline CERC had set RPO structure for each state which could make its target reachable within permitted timing. But now it seems that states are ignoring national regulations.

·          “Obligated entity” is defined differently in the Solar Policy 2012 and in Clause 2 (g) of the TNERC Renewable Energy Purchase Obligation Regulations 2010.

·         Connected load by the obligated entities*(as per TNSEP 2012) is approximately 6000MW. It means to fulfill 3% SPO before December 2013 would require 180MW of solar power from around installed capacity of 900MW (by considering 20% capacity factor) which is practically impossible. Also that amount of REC.

·         There is already an obligation to a level of 8.95% from non solar sources with an additional 0.05% from solar sources as RPO as per the TNERC RPO Regulations 2010. Hence the total obligation under RPO is 9% only. However, when the SPO is specified separately, the impact of the present RPO fixed at 9% in total should also be considered for modification. Accordingly, it should specifically exempt to that extent the RPO in suitable manner.

·         SPO are implemented on end users instead of DISCOMS which is contradictory with the policies of other states. Tough it will relief the tariff burden of DISCOMS it will badly affect on industrial consumers who are already purchasing wind energy at higher tariff.

 

·         National solar mission policy already concludes SPO in its Renewable purchase obligation which is also approved by TNERC. Then there is no need to such kind of SPO which is only doubling the obligations.

·         Under the option for fulfillment of SPO, (c) policy stated that obligated entities are mandatory to buy REC those are generated only in the state of Tamil Nadu. Whereas REC market is a national market and not restricted to the certain states. To do so TNERC has to establish their own REC market, as there is no any such kind of identification available on the certificate to recognize from which state it is generated.

    Conclusion

TNERC has to come up with comprehensive outlook on its SPO structure. Also it needs to communicate with industrial consumers on enforcement procedure and percentage proportions after all they are contributing roughly 46% electricity demand. 

National Solar Mission Report Launch Part 2

National Solar Mission Report Launch - Part 1

Farooq Abdullah: Government's Top Priority Currently Is Solar Energy

Anti dumping duty _ next burning issue in indian solar industry_ part 2

Anti dumping duty

    Definition- “Dumping is supposed to occur when the ‘export price’ of the goods is less than the ‘normal value’ of the articles sold in the domestic market of the exporter”

Indian solar (PV) manufacturer perspective

·         Indian solar PV manufacturers industry is largely smashed by cheap, large scale imported PV modules and cells from the countries like china, U.S, Malaysia and Taiwan. In phase 1 Domestic Content Ratio DCR was mandatory only on crystalline technology, so that project developers were choose thin film technology which was mostly imported from U.S at low cost with the support of us EXIM bank. though Under the draft policy for phase 2 MNRE has considering several options to implement DCR it is hard to predict what kind of decision MNRE will take (by considering project developers perspective).

·         In countries like U.S, china governments are providing lands at low cost, loan at 1-2% interest rates and subsidies financing model to the manufacturing companies due to all this they are capable to spend hefty amount on R&D and vertical integration which is reducing the cost of product. This is unfair for domestic players as they charged by 13% interest rates, low class technology, restricted capacity scaling. Many experts agree with the fact that thin film technology is not suitable for Indian environment but due to the low cost and attractive interest rates many developers were choose it.

·         From ISMA point of view anti dumping should be in charge along with strict instruction on DCR.

Project developer’s perspective

·          Solar Independent Power Producer Association (SIPPA) has come up to oppose anti dumping duty. Accordingly to them instead of applying anti dumping duty government should have to take some long term measures to protect domestic solar industry.

·         A recent research report by the Center for Energy Environment and Water (CEEW) has pointed out that very few Indian developers have adopted Crystalline Technology due to the import restrictions under the Solar Mission 2020 initiative. “Though there is numerous advanced Crystalline Silicon Technologies available the world over, the developers’ choice is restricted to domestically manufacture solar PV panels in this category.

·         Indian manufactures of crystalline silicon based modules import all major raw materials like poly silicon waters and cells and the prices of such raw materials have also crashed due to the heightened demand-supply gap. “In such a situation imposition of anti-dumping duty on solar photovoltaic modules would be counterproductive to the country’s solar aspirations.

·         Also If anti-dumping is imposed on solar imports, cost of solar power in India is bound to go up which will be borne by distribution companies and commercial consumers (as most of the DISCOMS are already poor in state).

   After assessing both the perspectives MNRE should have to take unbiased decision to protect Indian solar industry. Only imposing anti-dumping duties might work for the short-term, but it might de-incentivize innovation and investment in R&D. If India wants to improve its manufacturing, then it is imperative that a competitive advantage is maintained through investment is R&D and efficiency improvements.

    Whether to impose duty or not is not the big question, as industry is going to face little bit hard situation by either decision, the question is what measures MNRE will take to sustain domestic industry in long term basis.

Anti dumping duty _ next burning issue in indian solar industry

   “We will pool our scientific, technical and managerial talents, with sufficient financial resources, to develop solar energy as a source of abundant energy to power our economy and to transform the lives of our people. Our Success in this endeavor will change the face of India. It would also enable India to help change the destinies of people around the world.”

          Those are the words of Hon. Prime minister of India Dr. Manmohan Singh at the time of addressing National Action Plan on Climate Change (NAPCC). Clear, determinant and encouraging speech by prime minister turns into the action by announcing Jawaharlal Nehru National Solar Mission (JNNSM). A mission to transform energy dependency on fossil fuel to the renewable source of power mainly solar energy by creating the policy conditions for its diffusion across the country as quickly as possible. Ministry of New and Renewable Energy (MNRE) started planning to establish strong policy framework for this mission. Before announcement of this mission India had installed capacity of mealy 17.8 mw. It means MNRE has to establish entirely new industry. Even though it was a hard task to develop optional power source which is relatively costlier than conventional sources under the variating global economic conditions. MNRE successfully manage it by implicating various plans. And at the end of October 2012 mission crossed milestone of installed capacity of 1000mw. Since announcement of the JNNSM, Indian solar industry has been facing many hurdles related to the global over capacity, financial backups, loose RPO enforcement conditions and recently born TRADE war.

    The Indian Solar (PV) Manufacturers’ Association on behalf of three Indian cell manufacturers, namely, Indosolar, Websol Energy Systems and Jupiter Solar has filed a dumping complaint against cell and module imports from China, the US, Malaysia and Taiwan. This complaint was first reported on January 2012 to the Directorate General of Anti-Dumping and Allied Duties (DGAD) at the Ministry of Commerce. On November 23rd 2012, DGAD announced that it had found sufficient preliminary evidence of dumping in India. And investigation has started from that day. The ‘period of investigation’ has been determined as between January 1st2011 to June 30th2012 (18 months) as part of the investigation, any entity that is directly impacted in any manner by the duties is referred to as an ‘interested party’. Ac-accordingly, an ‘interested party’ can be any of the following: domestic industry on whose complaint the proceedings are initiated, exporters or the foreign producers of the like articles subject to investigation, importers of the same article allegedly dumped into India, government of the exporting countries, trade or business associations of the domestic producers or importers of the dumped product.

Factors, which are reducing the cost of Chinese product

·         Strong governmental support

At the beginning of 2008 Chinese government sense the future aspects of the solar PV industry worldwide, which was the triggering point for them and accordingly they began their massive capacity formula. Govt had given free land to the pv manufacturers, quick clearance for the projects, large benefits in terms of 1% -2% interest rates on loan, tax benefits on large exports, etc. due to all these reasons Chinese companies were thrive to expand their scale and vertical integration model.

·         Scale and vertical integration

China has some of words largest PV manufacturing companies which cover almost half production market worldwide. Suntech has annual production capacity of 2000 MW, while as the total module production capacity in India is about 1.5 GW and cell capacity is about 500 MW. Chinese manufacturer are surviving in this surplus supply circumstance, is because of their vertical integrating chain of supply, so as per market condition they have a scope to shift their margin along the chain. It is maintaining their flexibility in this harsh condition.

·         excessive export volume

Some experts doubting about their export volume. According to them, Chinese firms are selling PV modules below even the cash cost of production. Chinese manufacturers want to show high export numbers so that state-owned banks do not call in their loans and in the hope that they will eventually be given a debt waiver.

                                                                                                 ,,,,,,,,,, TO BE CONTINUED

Brief overview of REC mechanism _part 3

6.    Movement of Solar REC market from season 1

30 May 2012

Solar RECs were traded for the very first time in the Indian history in the May trading session at market clearing prices of Rs.13,000. Total demand of Solar RECs was 1642, whereas the supply was only 249 and only 5 REC were sold out on both exchange platforms. It was amazing start with very high demand in the market.

          "PXIL has made a history by concluding the first successful solar REC trade. The first certificate was traded on the exchange, which helped the participants to meet their obligations. They were traded at Rs 13,000 per certificate," PXIL chief executive Rupa Singh to The Economic Times

On the next month in June season demand increased drastically from 1,642 to 9,619. This was pleasant surprise for both the side though it wouldn’t affect that much on the price.

August

 In august season demand decreased by almost 72 % to the 2331.where as supply side was bit constant in the 550 - 560 range. Overall august was remembered due to increasing concern about the enforcements of the RPOS by state distribution companies.

       “The biggest disappointment among the renewable energy producers (who are the sellers of RECs) is that no state owned electricity distribution company has come forward to buy the certificates, although they are all ‘obligated entities’. This is due to lack of enforcement of their obligations. “Lack of participation from public Discoms and large captive power plants is the main reason behind the price crash,” said Vishal Pandya, Director, REConnect in the Hindu business lines.

From Aug 2012 non solar RPOs has started to face very harsh conditions. In this whole period it never gets picked up above its floored price.

In solar REC from August to December both demand side and supply side were register very little movement.

November

    "The policy framework is already there. What is lacking is compliance, and if regulators, like Punjab did recently, enforce policies, demand will come back and REC prices will go up," says Shiv Nimbargi, MD & CEO of Green Infra Limited, a renewable energy company

“With existing set of buyers completing major part of their requirements, and no new buyers appearing in near term horizon, the market condition looks very gloomy. The confidence of all the investors on the mechanism completely looks shattered and probably every investor would be thinking on how much they should trust Indian regulatory framework,” said Vishal Pandya, Director, REConnect in the Hindu business lines.

January

New Year came up with significantly high demand of the solar REC. demand increased beyond 42000 + whereas supply side increased up to the 4000.market clearing price at both the platform were marked at 12500 rs.

"There is a contrasting trend in solar and non-solar RECs. There is huge demand for solar power but the projects have not come up, as developers are not getting bank loans on ground of RECs. On the other hand, in non-solar the demand is yet to pick up, hence hindering the returns of already established projects," said Rajesh Mediratta, business development director at India Energy Exchange.

March

At the end of the FY 12-13 both demand and supply side registered bit rise. March was the last trading session for the compliance period 12-13, and hence it showed some up thrust. It was also recorded as the highest volume clearance session in the past 11 months. Price reached up to 13400 in IEX and 1300 in PXIL.

Market clearing price of solar REC

Demand vs. supply volume of Solar REC

                                                                                                                (Source: http://reconnectenergy.com/blog/)

7.    Loopholes

·         Enforcement of RPO

    From the very beginning this issue is getting attenuation from all the project developers which are interested in the REC scheme. CERC is falling short to convince SERC to comply with the regulations.

·         Banks are going Blackfoot to promote REC projects.

“More than the uncertainty over the Kyoto Protocol, it is the uncertainty over the renewal energy certificate (REC) programmer that is denting the sentiments. The government had started the REC regime under which power distribution companies were mandated to buy the certificates. But there are no buyers for REC now. Lack of strict imposition of the regime is another reason for the lack of interest”. Abhay Anand, business director (infrastructure, energy) of Cipher Capital Advisers said

·         Poor financial conditions of the DISCOMS may lead to the extensions of the RPO ( as happen with Punjab )

·         fulfillment of RPO

Due to annually fulfillment of RPO cash flow is remaining as a major concern. it is leading to the variation of demand at the end of the financial year.

8.    Conclusion

Conclusion is very clear, until and unless strict restriction won’t be applied on the SERC and other obligated entities REC will remain under the shadow of doom.

Brief overview of REC mechanism part_2

5.    Major concerns

Before commissioning the REC mechanism in India, CERC had to make sufficient changes in its regulation without disturbing electricity act 2003.

·         Absence of Legal and Regulatory Framework to Facilitate Purchase of RE from Outside the State

Existing RPO regulations was recognize procurement of renewable energy generated in the State by Obligated Entities for fulfillment of RPO. Procurement of renewable energy generated outside the State had not been recognized by any SERC for the purpose of RPO compliance

·         Percentage specification for only short term period

Short term targets do not create long term market for technologies and products. To provide certainty of market to RE Project developers and equipment manufacturers, it is necessary to demonstrate long term perspective with challenging targets.

·         Weaker Enforcement Methodology

In order to ensure strict compliance with the RPO regulation, it was essential to put an efficient enforcement mechanism in place. However, only few States have included specific provisions for shortfall in RE procurement by Obligated Entities. It has been proved that enforcement mechanism acts as a deterrent and thereby incentivizes the Obligated Entities to proactively seek contracts for procurement of renewable energy. However, due to weak enforcement methodology the objective of promotion of renewable energy through RPO regulation may not have been achieved.

Enforcement of RPO in other countries

The success of REC mechanism is critically dependent on introduction of appropriate mechanism for enforcement.

Australia

If a liable entity does not have enough certificates to surrender then it has to pay renewable energy shortfall charge. Liable entities are required to discharge their liability by surrendering RECs to the Regulator or pay a shortfall charge, which is significantly higher than the average price of REC.

U.K

Buy-out and penalty fund is paid back to liable parties on a pro-rata basis of their surrendered ROCs.

6.    Objectives of REC mechanism

·         Effective implementation of RPO mechanism

·         Increased flexibility for participants

·         Overcome geographical constraints

·         Reduced transaction costs for RE transactions

·         Enforcement of penalty mechanism
                                                                                                   ,,,,,,,,,, to be countinued

Brief overview of REC mechanism

1.    Overview

The journey started with the announcement of national action plan for climate change (NAPCC) by Hon. Prime Minister of India on June 30, 2008. To complete the target of 15% renewable energy proportion in the total energy mix by 2020 it was needed strong policy reforms and regulatory framework and of course investors attractive financial structure. These conditions were derived REC mechanism in India. A mechanism to trade green energy in very cost effective manner.

     To reach the goal of 15% RE by 2020, demand was created by enforcing the RPOs on distribution utilities and to supply that demand REC mechanism was introduced to purchase renewable energy to fulfill those RPOs. As REC is not the only way to do so but it helps to reach there RPOs not only to those part of the nation which are lagging in renewable resources but also for those stares which are enrich by renewable sources. Though the per unit cost of most of the renewable sources are decreasing and expecting grid parity within near future it is still expensive to spend on its R&D, production and regulations. This reason could have been prevented to generate surplus renewable power in those states which has abundant in renewable sources. But the REC mechanism had a solution to this problem. It encourages every state which has surplus renewable sources to generate green electricity and trade it to the deficient state.

2.    Background  

     

   Renewable Energy Certificate mechanism is a market-based mechanism to promote renewable energy and facilitate renewable energy purchase obligations amongst various stakeholders. it had been used in many developed countries like U.K, Australia, Nederland, Japan, U.S to keep balance between supply and demand of the Renewable sources. But in India, conditions were different, basically India is a very huge country also it needs for electricity is far different than those developed nations, after completing 65 years of independence many villages are still unelectrified. Policy structure and regulatory framework is quite different for each states, institutional framework like CERC, SERC, LDC are very alienated and diverse in nature. So all these thing were kept in to the consideration while structuring the customized REC mechanism for India.

   To find out the best solution for Indian condition ABPS infra followed consulting approach rather than regular approach, in which it had consulted by SERCs, SLDCs, State Transmission Utilities (STUs), State Nodal Agencies (SNAs), distribution licensees, RE generators and their associations, CERC, Regional Load Dispatch Centers and Regional Power Committees (RPCs) of the identified states. REC mechanism had to be made in such a way that it should not disturb existing policies regarding to the renewable energies. The evaluation of the features of the REC schemes was carried out in the context of the legal and regulatory framework prevalent in the electricity sector in few countries. Interplay of REC mechanism with other policy instruments for promotion of RE sources was also studied. Section 86 (1) (e) do not express any restriction on the State Commission’s ability to recognize (or take into account) procurement of electricity generated from renewable energy sources outside the State by a person / distribution licensee within the State, so as to fulfill its statutory renewable purchase obligations.

3.    Key considerations

 In other countries REC mechanism is primarily used as an incentive mechanism for improving the financial viability of the renewable energy projects. But in India it is not considered as a fiscal incentive based mechanism.

denomination of REC, eligibility of RE technologies, eligibility of RE generators, pricing of electricity component, pricing of REC component, REC registry, transfer/exchange mechanism, shelf-life, sunset date, etc were taken in to account while designing REC framework.

Primarily Grid connected RE project of capacity 250kw were eligible to account for REC to make it more commercially viable. Shelf life of the REC was decided to 12 months to prevent the threads of artificial shortage in the expectation of extra value for their REC. The shelf life of more than one year may threaten the liquidity and viability of REC market in the short term. But after 1 year of working it is extended to the 24 months. (On 11 Feb 2013 by CERC)

Energy accounting, issuance of REC and monitoring of RPO compliance are critical processes for successful implementation of the REC mechanism. Existing framework + {new institutions such as REC Registry, Exchange platform at national level and Monitoring Committee structure at State level} were essential to operationalise the proposed REC mechanism.

                                                                                 ,,,,,,,,,,,,,,,,,,, to be countinued