Sep 09

RENEWABLE ENERGY – NEW TARIFF

GUIDELINES & REC FRAMEWORK

Saurabh Mehta
Asst. Manager (BD – Projects)
Reliance Power
FLOW OF PRESENTATION

 CERC’s new regulation

 Background
 Salient Features
 Wind Energy
 Solar Energy
 National Solar Mission
 Renewable Energy Certificate (REC)
 Background
 REC Concept
 Operational Framework

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CERC’S NEW REGULATION
Background – Pre regulation scenario
 Wind Energy
 Different Tariff regimes for different states
 Large variations – Rajasthan Rs 4.28 / Unit v/s Tamilnadu Rs.
3.39 / Unit
 Similar tariff for different wind zones in a state
 No clarity for CDM Benefits sharing
 Fixed project cost without any indexing
 Fixed ROE throughout the project life
 Solar Energy
 Different Tariff regimes for different states
 No clarity of tariff determination methodology
 Large portions of tariff (Rs. 10 to 12) to come from GOI as
Generation Based Incentive (GBI)

CERC’s new regulation addresses the issues of Renewable Energy Tariff Determination

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CERC’S NEW REGULATION
Salient Features
 Eligibility criteria

SN. RE Source Criteria

1 Wind Minimum Wind Power Density – 200 w/m2 @ 50 m hub height

2 Solar PV Technologies approved by MNRE

3 Solar Thermal (CSP) Technologies approved by MNRE

4 Biomass Restriction on fossil fuel use up to 15%

5 Small Hydro Power Capacity lower than or equal to 25 MW

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CERC’S NEW REGULATION
Salient Features contd.
 Review Period – 3 years
 Tariff Period –
 Small Hydro Projects : 35 years
 Solar PV & Solar Thermal : 25 years
 Other RE Projects : 13 years
 Useful life –
 Wind Projects : 25 years
 Biomass Projects : 20 years
 Small Hydro Projects : 35 years
 Solar PV / Solar Thermal Projects : 25 years
 Project Specific Tariff –
May be determined by commission on case to case basis for the following;
 Hybrid Solar Thermal Power Plants
 Municipal solid waste projects
 Any other new renewable technology

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CERC’S NEW REGULATION
Salient Features contd.
 Tariff Structure
Single part tariff with following fixed cost components (except for biomass
and non – fossil fuel based cogen plants)
 Return on Equity (ROE)

 Interest on loan capital

 Depreciation

 Interest on working capital

 Operation and maintenance expenses

 Levellised Tariff –
 Discount factor equivalent to weighted average cost of capital (WACC)
 Dispatch Principles –
 “MUST RUN” status for all RE projects except biomass project of 10 MW
and non-fossil fuel based cogen plants.

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CERC’S NEW REGULATION
Financial Principles for Tariff Determination

S.N. Parameter Pre-Regulation As per present regulation

1 Project Cost (Rs. Crs/MW) Fixed Indexed

2 Loan Tenure 10 years 10 Years

3 Debt Equity Ratio 70:30 70:30

4 Interest Rate 12.5 % SBI LTPLR + 150 bps

7% till 10th year.

5 Depreciation 5.28% Balance - spread over remaining
life

19% till 10th year,

6 Return on Equity (ROE) 16% Fixed
24% from 11th year onward

0% in 1st year,
No uniform regulation.
7 CDM Sharing with utility 10% raise till 6th year,
Varying for States
50% -50% thereafter

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CERC’S NEW REGULATION
Financial Principles for Tariff Determination

Capital Cost (Rs O&M Cost Approx PLF Auxiliary

SN. RE Source
Cr/MW) (Lacs/MW) (%) Consumption

1 Wind 5.15 6.5 20% - 30% -

2 Solar PV 17.0 9.0 19% -

3 Solar Thermal (CSP) 13.0 13.0 23% 10%

4 Biomass 4.50 20.25 80% 10%

5 Small Hydro Power 5 to 7# 12 to 21 # 30% & 45% # 1%

Non – fossil fuel based

6 4.45 13.35 45% to 60% # 8.5%
cogen

# - Varying for different states

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CERC’S NEW REGULATION
Levellised Tariff State-wise Comparison
Expected after new regulation
(Wind Zone Wise)
Pre- 1 2 3 4
S.N State
regulation (200 – 250 (250 – 300 (300 – 400 (400 above
W/m2 ) W/m2 ) W/m2 ) W/m2 )
20% 23% 27% 30%

1 Maharashtra 4.39 5.64 4.90 4.18 #

2 Tamilnadu 3.39 5.64 4.90 4.18 3.76

3 Gujarat 3.50 5.64 4.90 # #

4 Rajasthan 4.28 5.64 4.90 # #

5 Karnataka 3.40 5.64 4.90 4.18 #

# - Wind zone not present in the state

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WIND ENERGY
Project IRRs w/o depreciation benefit – comparison

Pre-regulation
As per
S.N State
Regulation
MH RJ GJ KA TN

1 Wind Zone 1 8.2% 7.8% 4.9 % 4.6 % - 12.9%

2 Wind Zone 2 10.4 % 10.2% 7.0% 6.5% 6.4% 13.1%

3 Wind Zone 3 13.2 % 13.2 % 9.7% 9.2% 9.2% 13.2%

4 Wind Zone 4 - - - 11.1% 11.0% 13.4 %

Capex @ Rs. 6.0 Crs / MW

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WIND ENERGY
Equity IRRs w/o depreciation benefit – comparison

Pre-regulation
As per
S.N State
Regulation
MH RJ GJ KA TN

1 Wind Zone 1 6.3 % 5.4 % 1.2 % 0.7 % - 13.8%

2 Wind Zone 2 9.7 % 9.2 % 4.0 % 3.3 % 3.3 % 13.9 %

3 Wind Zone 3 14.1 % 14.3 % 8.3 % 7.5 % 7.4 % 14.2 %

4 Wind Zone 4 - - - 10.6 % 10.5 % 14.4 %

Capex @ Rs. 6.0 Crs / MW

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SOLAR ENERGY
Levellised Tariff State-wise Comparison

Pre-regulation
PPA
Tenure Present
S.N. State
(Pre- Solar PV Solar Thermal Regulation
regulation)

Rs. 3.0 /Unit Rs. 3.0 /Unit Solar PV –

1 Maharashtra* 20 Years (May qualify for GBI benefit (May qualify for GBI Rs.18.81
of Rs. 12 /Unit) benefit of Rs. 10 /Unit)
/Unit
Rs. 3.15 /Unit Rs. 3.15 /Unit
2 Tamilnadu* 10 Years (May qualify for GBI benefit (May qualify for GBI
of Rs. 12 /Unit) benefit of Rs. 10 /Unit) Solar
Rs. 13.00 / Unit (till 12th Rs. 10.00 / Unit (till 12th Thermal –
3 Gujarat 25 Years
year) year) Rs. 13.71
Rs. 3.00 / Unit (13 to 25
th th
Rs. 3.00 / Unit (13th to 25th /Unit
year) year)
4 Rajasthan 20 Years Rs. 15.78 /Unit Rs. 13.78 /Unit For 25 years
5 Uttar Pradesh 20 Years Rs. 15.0 /Unit Rs. 13.0 / Unit

* - Projects are under GBI policy with cap of 50 MW

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NATIONAL SOLAR MISSION
OBJECTIVES

 To make India Global leader in solar energy through -

 20,000 MW Generation Capacity by 2020
 100,000 MW Generation Capacity by 2030
 200,000 MW Generation Capacity by 2050
 Cost reduction for solar power to grid parity (Rs 4-5 / kWh) by 2020
 To achieve parity with coal based Thermal Power by 2030
 Mandatory setting of solar plants equivalent to 5% of thermal power plant capacity to
be set by the generation utilities.
 4 – 5 GW of solar manufacturing capacity by 2017

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NATIONAL SOLAR MISSION
MISSION – 20 GW BY 2020

Phase
Phase 11 (2009
(2009 –– 12)
12)

 Consolidating
Consolidating ongoing
ongoing efforts
efforts on
on off
off grid
grid applications
applications

 Demo
Demo utility
utility scale
scale projects
projects (CSP
(CSP –– Solar
Solar Thermal)
Thermal)

 To
To achieve
achieve 11 –– 1.5
1.5 GW
GW during
during this
this phase
phase

Phase
Phase 22 (2012
(2012 –– 17)
17)

 Scaling
Scaling up
up across
across applications
applications &
& Rapid
Rapid cost
cost reduction
reduction

 Deployment
Deployment ofof new
new technologies
technologies –– Concentrating
Concentrating PV,
PV, storage
storage technologies
technologies

 To
To achieve
achieve 66 –– 77 GW
GW during
during this
this phase
phase

Phase
Phase 33 (2017
(2017 –– 20)
20)

 Rapid
Rapid scale
scale up
up across
across all
all applications
applications

 Reduction
Reduction in
in capital
capital subsidies
subsidies

 To
To achieve
achieve the
the target
target of
of 20
20 GW
GW of
of installed
installed capacity
capacity

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NATIONAL SOLAR MISSION
ROAD MAP FOR 20 GW BY 2020

Utility connected power 12000 MW

Rooftop PV
3000 MW
(Captive & Grid connected)
Rural Installation
3000 MW
(Rural grid plants + stand alone)
Other PV applications
2000 MW
(eg telecom towers etc)
Lighting for 20 mn households
Solar lighting, heating & others
Solar collection area for 20 mn sq mtrs for heating

Resource Mobilization

 Funds of Rs. 80,000 – Rs. 100,000 Crs required over 30 years for incentives like GBI
 Proposed to be supplemented through cess on fossil fuel and thermal projects
 May not be required after the recent regulation of CERC.

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RENEWABLE ENERGY CERTIFICATE
BACKGROUND

 National Action Plan for Climate Change (NAPCC) announced by the Hon. PM of India on
June 30, 2008
 Principles
 Protecting the poor and vulnerable sections through sustainable growth
 Achieving national growth through ecological sustainability
 Demand side management
 Deploying appropriate technology for adaptation and mitigation of GHG
 Engineering new and innovative forms of markets
 Envisages several measures to address global warming

Increases the share of renewable energy in total electricity consumption

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RENEWABLE ENERGY CERTIFICATE
NAPCC PROMOTING RENEWABLE ENERGY

 Target of mandatory 5% Renewable Energy Purchase (RPO) for FY 2009-10 against

current level of around 3.5% by Discoms, Open Access consumers and captive
consumers.
 Target will increase by 1% for next 10 years
 Constitute approx. 15% of the energy mix of India
 Need for innovative financing instruments
 Policy instrument prescribed in NAPCC is Renewable Energy Certificate (REC)
Mechanism to enable RPO implementation.
 Report on Development of Conceptual Framework for REC Mechanism for India - ABPS
Infrastructure Advisory Private Limited submitted to MNRE, June 09

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RENEWABLE ENERGY CERTIFICATE
REC CONCEPT
Electricity generated from RE sources can be divided into two components:
 Electricity component
 Environmental component

The environmental component associated with renewable energy can be carved out as a separate
component and used for the purpose of REC mechanism

SCHEMATIC OF REC CONCEPT

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RENEWABLE ENERGY CERTIFICATE
SALIENT FEATURES OF REC FRAMEWORK

 NOT an incentive scheme. Enable sale and purchase of renewable component

across the State boundaries
 Scheme to come into force on April 1, 2010
 Coexist with all current incentive based schemes
 1 MWhr  1 REC
 Purchase of REC would be considered as purchase of RE
 Not related to carbon credits
 RE generators with capacity untied in PPA will have an option to sell electricity
and REC separately
 REC will be issued to RE Generators only
 Validity of 25 years for REC Framework
 Carry forward allowed for maximum of 25% of REC issued .

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RENEWABLE ENERGY CERTIFICATE
ELIGIBILITY CRITERIA

 Eligible

 RE technologies recognized by MNRE

 Grid connected RE generators of at least 250 KW capacity

 Not eligible

 RE project with existing PPA

 If RE sale at preferential Tariff

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RENEWABLE ENERGY CERTIFICATE
PROPOSED PROCESS OF REC MECHANISM

 Step 1: Electricity Generation and Feeding to the Grid

 Step 2: Request for issuance of REC

 Step 3: Confirmation of Electricity Generation

 Step 4: Creation and Issuance of RECs

 Step 5: REC Sale by RE Generator

 Step 6: Surrender/Redeeming of RECs

 Step 7: Compliance Reporting

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RENEWABLE ENERGY CERTIFICATE
OPERATIONAL FRAMEWORK OF REC MECHANISM - COMPREHENSIVE
Accreditation of RE power plants
1
(State nodal agency: SNA)

Registration of Eligible entities Information related to accreditated RE

2 (Central level agency) plants for registered entities sent to REC
registry

4 5

Issuance of REC exchange

RE Generator REC Central REC
Registry (NLDC)

Information
3
related to
RE
Sale of electricity at par Auditing Panel
generation
with conventional power

6
Discom issuing
RE injection State Load
certificate Despatch Centre
(SLDC) Information on REC
Electricity purchase/redemption
Energy
accounting SERC: Compliance State Nodal
based on SNA Report Agency SNA

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RENEWABLE ENERGY CERTIFICATE
RECOMMENDED METHODOLOGY

 Link the electricity component with normative RE tariff

 REC component with notional fixed price

ISSUES
 Additional benefit to the RE developer …..?
 Whether registration with national registry is mandatory for RE developer ….?
 Price for REC component - Market driven or notional fixed ....?

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RENEWABLE ENERGY CERTIFICATE
SALE AND PURCHASE FOR REC

 Not only obligated entities (Discoms, Open Access Consumers, Captive consumers) but
also other persons shall be allowed to buy RECs
 Redemption of RECs by obligated entities shall be reported to monitoring committee
 Redemption by voluntary buyers will be reported to only Central Regulator
 REC Exchange Platform is expected to provide the services for sale and purchase of
RECs
 The Task Force has agreed with the proposal that ‘one single market’ shall be created in
the country for exchange/transfer of REC
 FOR should undertake the assessment of market, liquidity requirements, costs involved
in setting up of the market and necessary fee structure

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THANK YOU