renewable energy policies, regulations, rec and rpo

Renewable Energy Policies, Regulations, REC

and RPO

alka, assistant director,

NPTI, PSTI, BangaloreJune 2011

ENERGY

Then………&

Now…..

Energy use has changed a great deal since people relied solely on the sun, their own strong bodies or beasts of burden as energy resources.

Long ago, people learned how to use water power to turn paddle wheels and wind power for transportation and irrigation

People learned to use the chemical energy stored in materials like wood to cook and heat their homes.

But machines and technologies introduced during the Industrial Revolution of the late 18th century required the use of other energy resources, especially fossil fuels.

Energy distribution –developing and developed countries

Limited Fuels

At present consumption levels-

Crude oil will last only for 40 years.

Gas will last for 60 years.

Coal will be finished in nearly 200 years.

India’s Oil Balance

PROVEN OIL RESERVE/CONSUMPTION

INDIA VS. WORLDWorld99.55%

India0.45%

India World

India

2.72

%Worl

d

97%

World India

Ever thought of life without oil and gas?

PROBLEMS?

Limited fuels available on earth.

Increasing Consumption of energy

Polluted environment

Energy Security

• To be an Energy Secure Nation, best measure is switching to Renewable Energy and persistent Energy Conservation

RENEWABLE ENERGY

Policies for Renewable Energy in India

Background of the MNESEarly 70’s: search for new and renewable energy resources that would ensure sustainable development and energy security.1981: GoI establishes CASE (Commission for Additional Sources of Energy) in the DST1982: CASE formally incorporated in the newly founded DNES (Dept of Non-conventional Energy Sources).1992: DNES became MNES (Ministry of Non-conventional Energy Sources)

Policies, Procedures and Incentives

PoliciesPrime Minister of India has

announced a goal of 10% share for RE or 10,000 MW in the power generation capacity to be added during the period upto 2012.


Renewable Energy PolicyA comprehensive RE Policy for all-round

development of the sector, encompassing all the key aspects, has been formulated by MNES. The broad objectives envisaged in the policy are:

Meeting the minimum energy needs through RE

Providing decentralised energy supply in agriculture, industry, commercial and household sectors in rural and urban areas, and

Providing grid quality power.


Policy for All-round Development of Renewable Energy

Policy measures aim at overall development and promotion of renewable energy technologies (RETs) and applications.

Policy initiatives encourage private as well as FDI including provision of fiscal and financial incentives for a wide range of RE programmes.

Further, the procedures have been simplified, and provide excellent opportunities for increased investment in technology up-gradation, induction of new technologies, market development and export promotion.

Foreign Investment policyForeign investors can enter into a joint venture with an Indian partner for financial and/or technical collaboration and for setting up of RE-based power generation projects

Hundred per cent foreign investment as equity is permissible with the approval of the Foreign Investment Promotion Board (FIPB).

The Government of India also encourages foreign investors to set up RE-based power generation projects on Build, Own and Operate (BOO) basis. Various Chambers of Commerce and industry associations in India provide guidance to the investors in finding appropriate partners

Foreign Investment policyThe Government of India encourages foreign investors to set up power projects on BOO basis. Investors are required to enter into a power purchase agreement with the concerned state government

No prior approval of the government is required to set up an industrial undertaking with Foreign Direct Investment (FDI) by Non-Resident Indians (NRIs) or Overseas Corporate Bodies (OCBS)

The Reserve Bank of India (RBI) has permitted Indian companies to accept investment under the 'automatic route' without obtaining prior approval from RBI. Investors are required to notify the regional office of RBI, of receipt of inward remittances within 30 days of such receipt and file required documentation within 30 days of issue of shares to foreign investors

Industrial policyMNES is promoting medium, small, mini and micro

enterprises for manufacturing and servicing of various types of RE systems and devices.

Industrial clearances are not required for setting-up of an RE industry

No clearance is required from Central Electricity Authority (CEA) for power generation projects up to Rs 1,000 million

A five-year tax holiday is allowed for RE power generation projects

Soft loans are available through IREDA for RE equipment manufacturing

Facilities for promotion of Export Oriented Units (EOUS) are available for the RE industry

Industrial policyFinancial support is available to RE

industries for R&D projects in association with technical institutions

Private sector companies can set up enterprises to operate as licensee or generating companies

Customs duty concession is available for RE spares and equipment, including those for machinery required for renovation and modernisation of power plants. Excise duty on a number of capital goods and instruments in the RE sector has been reduced or exempted

Policies by State GovernmentsA number of states have announced policy

packages including banking, third party sale and buy- back

Some states are providing concessions or exemption in state sales tax. These rates vary widely from state to state and between different technologies.

Incentives Incentives for Investing in RETs MNES provides financial incentives, such as interest and

capital subsidy Soft loans are provided through:

IREDA, a public sector company of the MinistryNationalised banks and other financial institutions for identified technologies/systems

The government also provides various types of fiscal incentives for the RE sector, which include:Direct taxes - 100 per cent depreciation in the first year of the installation of the projectExemption/reduction in excise dutyExemption from Central Sales Tax, and customs duty concessions on the import of material, components and equipment used in RE projects

Incentives Direct TaxesConcession under Income Tax RulesUnder Income Tax Rules number of concessions

are available to the non-conventional energy sector

Financial IncentivesDetails of various schemes on financial incentives

and promotional measures provided for different renewable energy technologies categorised asEnergy from Waste, Solar Photovoltaic Power, Solar Thermal Systems, Biogas Plants

EA 2003The Act 2003 has several enabling provisions, with a

view to promote accelerated development of non-conventional energy based power generation

Section 86(1) (e), “The State Commission shall promote co-generation and generation of electricity from renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any person, and also specify, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licence”

EA 2003Section 3 (1), Government of India (GoI) shall,

from time to time, prepare the National Electricity Policy and Tariff Policy, in consultation with the State Governments for developing the power system based on optimal utilisation of resources such as coal, natural gas, nuclear, hydro, and renewable sources of energy.

Section 4, GoI shall, after consultation with the State Governments, prepare a national policy, permitting stand-alone systems (including those based on renewable sources of energy) for rural areas.

Legal Frame Work for Renewable Energy

Section 61 (h) of the Act - SERC may specify the terms and conditions for the determination of the Tariff for co-generation and generation from the Renewable Energy Sources

• May be guided by the Central Commission.

The National Action Plan on Climate Change (NAPCC) – aims at increasing the share of Renewable Sources of Energy from 5% of the total Energy Mix in 2010 to 15% by 2020

•Ministry of Power, GoI Resolution dated 20.01.2011 – SERCs shall also reserve a minimum percentage for purchase of Solar Energy from the date of Notification in the Official Gazette (22.01.2011) which will go up to 0.25% by end of 2012-12 and further upto 3% by 2022.

Policy and Regulatory Frame Work for Renewable Energy

Quantum of RE required to meet NAPCC target (BU)

Technology wise capacity addition required (MW)

Implementation and Delivery mechanism

Ministry: encouraging the setting up of grid-interactive power projects based on renewable energy through private investment route.

State Nodal Agencies: are responsible for promotion and development of private sector projects by way of providing necessary clearances, allotment of land, allotment of potential sites in case of SHP projects and facilitating power purchase agreements etc.

SERCs: determining tariffs. Leading financial institutions and banks: financing

renewable energy based power projects.

CERC (Terms & Conditions for recognition & issuance

of REC for RE Generation)Regulations,

2010

2. Definitions and Interpretation

‘Act’ means the Electricity Act, 2003

‘Certificate’ means the renewable energy certificate issued by the Central Agency in accordance with the procedures laid down by it and under the provisions specified in these regulations

‘eligible entity’ means the entity eligible to receive the certificates under these regulations


‘floor price’ means the minimum price as determined by the Commission in accordance with these regulations at and above which the certificate can be dealt in the power exchange

‘forbearance price’ means the ceiling price as determined by the Commission in accordance with these regulations within which only the certificates can be dealt in the power exchange

‘obligated entity’ means the entity mandated under clause (e) of subsection(1) of section 86 of the Act to fulfill the renewable purchase obligation


‘preferential tariff’ means the tariff fixed by the Appropriate Commission for sale of energy, from a generating station using renewable energy sources, to a distribution licensee

‘renewable purchase obligation’ means the requirement specified by the State Commissions under clause (e) of sub-section (1) of section 86 of the Act, for the obligated entity to purchase electricity from renewable energy sources;

‘State Agency’ means the agency in the concerned state as may be designated by the State Commission to act as the agency for accreditation and recommending the renewable energy projects for registration and to undertake such functions as may be specified under clause (e) of subsection (1) of section 86 of the Act;

RPO & RECThe Electricity Act, 2003, the policies framed under the Act, as also the National Action Plant of Climate Change (NAPCC) provide for a roadmap for increasing the share of renewable in the total generation capacity in the country.

However, RE sources are not evenly spread across different parts of the country. In some states there are avenues for harnessing the RE potential beyond the RPO level fixed by the SERCs. However, the high cost of generation from RE sources discourages the local distribution licensees from purchasing RE generation beyond the RPO level mandated by the State Commission.

It is in this context that the concept of REC assumes significance. This concept seeks to address the mismatch between availability of RE sources and the requirement of the obligated entities to meet their renewable purchase obligation. It is also expected to encourage the RE capacity addition in States where there is potential for RE generation as the REC framework seeks to create a national level market for such generators to recover their cost.

3. Central Agency and Functions

CERC has designated National Load Dispatch Center( NLDC) to undertake the functions of Central Agency under the CERC REC Regulations.The CERC REC Regulations envisage functions of the Central Agency as follows:1. Registration of Eligible Entities,2. Issuance of Certificates,3. Maintaining and Settling Accounts in respect of certificates,4. Repository of Transactions of Certificates and5. Other function incidental to the implementation of Renewable Energy Certificate Mechanism as may be assigned by the Commission.

State Load Despatch Centrea. Follow Indian Electricity Grid Code and State Grid

Code for the purpose of accounting renewable energy injected into the grid.

b. In case the Eligible Entity is connected to the transmission network, maintain the record of meter readings and communicate the energy injection report for each accredited RE project of the registered Eligible Entity within State to the Central Agency on monthly basis.

c. In case the Eligible Entity is connected to the distribution network of Distribution Utility, establish protocol for receipt of information and maintenance of the record of meter readings for such RE projects.

Further, arrange to communicate injection report for each accredited RE project of the registered Eligible Entity within the State to the Central Agency on monthly basis.

State Load Despatch Centred. In case the Eligible Entity is CPP and is connected to

the transmission/distribution network of Transmission/Distribution Utility, SLDC shall establish protocol for receipt of information and maintenance of the record of meter readings including self consumption for such RE projects.

Further, SLDC shall arrange to communicate injection report for each accredited RE project of the registered Eligible Entity within the State to the Central Agency on monthly basis.

e. Communicate renewable energy injected into the grid for each accredited RE project of the registered Eligible Entity within State to the State Agency.

4.Category of Certificates

Solar and Non-Solar certificates

5. Eligibility and Registration of Certificates

Eligiblity conditions:Obtained accreditation from state agencyNo PPA to sell at preferential tariffSell electricity to distribution lecensee at a price not

exceeding the pooled cost of power purchase of that licensee

6. Revocation of Certificates7. Denomination and Issuance of Certificates8. Dealing in certificates: only through power exchanges9. Pricing of Certificates10. Validity and extension of Certificates11. Fees and Charges12. Funding for capacity building of state Agency13. Appointment of Compliance Auditors14. Power to give Directions15. Power to relax

Salient Features of REC framework

Renewable Energy Certificate (REC) mechanism is a market based instrument to promote renewable energy and facilitate renewable purchase obligations (RPO)

REC mechanism is aimed at addressing the mismatch between availability of RE resources in state and the requirement of the obligated entities to meet the renewable purchase obligation (RPO).

Cost of electricity generation from renewable energy sources is classified as cost of electricity generation equivalent to conventional energy sources and the cost for environmental attributes.


RE generators will have two options i) either to sell the renewable energy at preferential tariff or ii) to sell electricity generation and environmental attributes associated with RE generations separately.


The environmental attributes can be exchanged in the form of Renewable Energy Certificates (REC).REC will be issued to the RE generators for 1 MWh of electricity injected into the grid from renewable energy sources.REC would be issued to RE generators only.REC could be purchased by the obligated entities to meet their RPO under section 86 (1) (e) of the Act. Purchase of REC would be deemed as purchase of RE for RPO compliance.Grid connected RE Technologies with minimum capacity of 250 KW and approved by MNRE would be eligible under this scheme.RE generations with existing PPAs are not eligible for REC mechanism.


SERC to recognize REC as valid instrument for RPO compliance.

SERC would define open access consumers, captive consumers as obligated entities along with distribution companies.

SERC to designate State agency for accreditation for RPO compliance and REC mechanism at State level.

CERC to designate Central Agency for registration, repository, and other functions for implementation of REC framework at national level.

Only accredited project can register for REC at Central Agency.


Central Agency would issue REC to RE generators for specified quantity of electricity injected into the grid.REC would be exchanged only in the CERC approved power exchanges. Price of electricity component of RE generation would be equivalent to the weighted average power purchase cost of the discom including short term power purchase but excluding renewable power purchase.REC would be exchanged within the forbearance price and floor price. This forbearance and floor price would be determined by CERC in consultation with Central agency and FOR from time to time.


In case of default SERC may direct obligated entity to deposit into a separate fund to purchase the shortfall of REC at forbearance price.

However, in case of genuine difficulty in complying with the renewable purchase obligation because of non-availability of certificates, the obligated entity can approach the Commission for carry forward of compliance requirement to the next year.

Schematic for REC Implementation

Procedures

Model Guidelines / Procedure for

Accreditation

Procedure for Registration

Procedure for Issuance

Procedure for Redemption

MODEL GUIDELINES FOR ACCREDITATION BY

STATE AGENCY

Model Guidelines: Contents

Objective Applicability & Scope Step wise description Functions, roles and responsibilities of entities involved Information requirement – application form & content Report: format for accreditation certificateTimelines Fees and charges Event of default and consequences thereofPowers to remove difficulties

Model Guidelines: Applicability &

Scope Applicable to all Generating Companies Using RE sources for generation as recommended by MNRE.

State Commission to designate State Agency to recommend the accreditation of RE Generators.

State Agency to undertake accreditation six months earlier than from commissioning date.

Validity of accreditation: 5 years

Model Guidelines: Information

Requirement OwnerOperatorRE StationConnectivityMetering Statutory Clearance General Fees & Charges Declaration

Online generation of Application, print & submit to State Agency along with enclosures

Model Guidelines: Timelines, Fees &

Charges

Timelines: Undertake accreditation of those generating facilities which are

proposed to be commissioned within period not exceeding 6 months from the date of application.

State Agency to inform the applicant with regard to the incompleteness of the application within 2 working days.

Applicant to respond within 7 working days.

Fees & Charges for State Agency One time application processing fees One time accreditation charges Annual charge for accreditation Accreditation charges for re-validation/extension

REGISTRATION BY CENTRAL AGENCY

Registration: Applicability and Scope

Applicable to all RE Generating companies who have received the Certificate of accreditation

Undertake registration Not earlier than 3 months prior to proposed date of commissioning After receipt of Certificate of Accreditation

Validity of Registration: 5 Years

Registration: Information Requirement Application for Registration as per the format specified Should contain

Owner detailsRE Generation Station detailsCertificate of Accreditation by the state agencyGeneration facility commissioning scheduleAny other relevant information as specified Non-refundable registration fees/charges and annual fee/charges shall be accompanied Declaration

Separate applications in case of multiple RE generation projects

Online generation of Application, print & submit to Central Agency along with enclosures

Registration: Time Line

Registration: Fees and Charges

One time Registration processing fees

One time registration Charges

Annual charges for Registration

Registration Charges for Revalidation/ extension of validity

ISSUANCE OF RECs BY CENTRAL AGENCY

Issuance of RECs Applicability & Scope

Eligible Entities, who have received ‘Certificate of Registration’ from the Central Agency

Central Agency while issuing the REC’S to Eligible Entities

Information Requirement

Renewable Energy Injection Report

The Registration Number issued by Central Agency

Details of Fee and Charges

Compliance Auditor report, if any

Denomination

1 REC = 1 MWh

Issuance of RECs: Timelines

Eligible Entity to apply for issuance of renewable energy certificates within three (3) months of energy injection

The application for issuance of Renewable Energy Certificates may be made on a fortnightly basis

Central Agency to issue the REC to the Eligible Entities within fifteen (15) days from the date of application

REDEMPTION OF RECs AFTER TRADE IN

POWER EXCHANGE(s)

Redemption of RECs Validity of RE Certificates : 365 days

Applicable to the Eligible Entity that chooses to place the RECs for dealing on the Power Exchange(s)

Bidding in the Power Exchange(s)

Central Agency to verify quantity of valid RECs available with the concerned eligible entity

Extinguishing of the RECs based on the succesful trades culminated in the Power Exchange(s) First-in-first-out order for extinguishing

Thank You

Till non-conventional technologies compete with conventional sources of procurement by Distribution Companies shall be done at preferential tariffs by the Appropriate Commission.

• CERC, in January, 2010, issued Notification on “Terms andConditions for recognition and issuance of REC for

Renewable Energy Generation”• National Load Despatch Centre (NLDC) has been

appointedas Central Agency for implementation of RECs. The CentralAgency has prepared Detailed Procedures for Registration,Accreditation, Issuance and Redemption of RECs• REC market is expected to be operationalised during thiscalendar year 2011• Most of the SERCs have specified RPO in percentages forpurchase of electricity from Renewable Sources of Energy

Policy and Regulatory Frame Work for Renewable Energy

Key Legislation & Policy

04/21/23

74

Impact of Policy Frame work on RE (Contd.)

The Tariff for Coal- Fired Power Plants has increased from an average of Rs.2 per KWH in 2004-05 to Rs.3.05 per kwh in 2010-11 and it is estimated that in FY 2011-12 it will be about Rs. 3.40 per kwh due to hike in power grade coal by Rs. 90 per tonne by Coal India Limited w.e.f. 01.04.2011.

Recent Case : competitive bids have also discovered tariff above Rs 3 per kwh in the following cases :

Adani Power in Rajsthan Rs. 3.25/kwhAdani Power in Maharastra Rs. 3.30/kwhIndia bulls in Mahasrastra Rs. 3.27/kwhEssar Power in Gujurat Rs. 3.13/kwh

• Wind Power is now almost competitive with conventional Thermal Power

renewable energy policies, regulations, rec and rpo

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