3. Computation of Tariff for Small Hydro Power Projects

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GERC | Discussion Paper on Small, Mini and Micro Hydro Tariff Determination 1 Discussion Paper DETERMINATION OF TARIFF FOR PROCUREMENT OF POWER BY DISTRIBUTION LICENSEES AND OTHERS FROM SMALL, MINI AND MICRO HYDRO POWER PROJECTS IN THE STATE OF GUJARAT September 2016 Gujarat Electricity Regulatory Commission 6 th Floor, GIFT ONE, Road 5C, Zone 5, GIFT City, Gandhinagar - 382355, Gujarat

Transcript of 3. Computation of Tariff for Small Hydro Power Projects

Page 1: 3. Computation of Tariff for Small Hydro Power Projects

GERC | Discussion Paper on Small, Mini and Micro Hydro Tariff Determination 1

Discussion Paper

DETERMINATION OF TARIFF FOR PROCUREMENT OF

POWER BY DISTRIBUTION LICENSEES AND OTHERS

FROM SMALL, MINI AND MICRO HYDRO POWER

PROJECTS IN THE STATE OF GUJARAT

September 2016

Gujarat Electricity Regulatory Commission

6th Floor, GIFT ONE,

Road 5C, Zone 5, GIFT City,

Gandhinagar - 382355,

Gujarat

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Executive Summary

The Gujarat Electricity Regulatory Commission (GERC) has initiated the tariff determination

process for determination of tariff for procurement of power by Distribution Licensees and

others, from small, mini and micro hydro power projects to be commissioned from the date of

issue of the tariff order under the powers conferred to the Commission under Sections 3(1),

61(h), 62(1)(a), and 86(1)(e) of The Electricity Act, 2003, and National Electricity Policy, 2005,

and Tariff Policy, 2016. Previously, the Commission had issued a tariff order for procurement of

power by distribution licensees and others, from small, mini and micro hydro power projects in

Gujarat on 14th June 2007 on the basis of MNRE guidelines prevalent at that time. The Commission

presents this discussion paper to initiate the regulatory process for determination of tariff for

procurement of power by distribution licensees and others from small, mini and micro hydro

power projects for the next control period starting from the date of issue of order after receiving

comments from stakeholders on this discussion paper.

While evolving the benchmark operating and financial parameters for determination of generic

tariff for small, mini and micro hydro power projects for the next control period starting from the

date of issue of order following aspects were taken into consideration.

In order to arrive at a benchmark capital cost for small, mini and micro hydro power projects

to be commissioned in the next control period starting from the date of issue of order, the

Commission has examined the approach followed by the Central Electricity Regulatory

Commission (CERC) as well as State Electricity Regulatory Commissions (SERCs) while fixing

benchmark capital cost. The capital cost data of the SHP projects for which DPR has been

submitted with government / work is awarded for EPC in the state has also been studied.

Similarly, A Report titled ‘Benchmark Cost for Small and Large Hydropower Projects’

prepared by AHEC, IIT Roorkee for MNRE has been referred.

The canal operation practices in the State, capacity utilization factor (CUF) obtained by the

installed SHP plants in the state as well as the CUF fixed by the CERC as well as the SERCs in

case of SHP projects has been examined in order to fix the representative CUF for the small,

mini and micro hydro power projects for tariff determination purpose.

While proposing the normative operational parameters like the auxiliary consumption, O&M

expenses etc. the Commission has examined the approach followed by the CERC as well as

SERCs in India and accordingly these parameters are proposed.

In case of financial parameters for tariff determination, the Commission observed that the

current SBI base rate (9.3%) is constant from October 2015. It is proposed to fix the interest

on term loan equal to current SBI base rate plus 250 basis point. Further, based on the

prevailing market practices, the tenure of term loan is proposed as 10 years. The interest on

the working capital is also proposed as 250 basis points above current SBI base rate.

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Based on the above, the Commission proposes the following normative operating and financial

parameters and single part levelized tariff for small, mini and micro hydro power projects to

be commissioned during the next control period starting from the date of issue of order.

Table A: Benchmark parameters for tariff computation of small, mini and micro hydro power

projects

Parameters Proposed for next control period

Below 5 MW 5 – 25 MW Project Cost

Total Project Cost (Land + Plant & Machinery + Erection Cost + Evacuation Infrastructure Cost up to GETCO Sub-station ) (Rs. Lakh/MW)

820 748

Normative O&M Cost for first year (% of project cost)

3.3% 2.5%

Escalation in O&M (per annum from 2nd year) 5.72% 5.72%

Performance Parameters

CUF 42% 42%

Auxiliary Consumption 1% 1%

Project Life in Years 35 35

Financial Parameters

Debt-Equity ratio 70:30 70:30

Term of Loan in Years 10 10

Interest on Term Loan 11.8% 11.8%

Interest on Working Capital 11.8% 11.8%

Depreciation 7% (for first 10 years)

0.8% (from 11 to 35 years) 7% (for first 10 years)

0.8% (from 11 to 35 years) Minimum Alternate Tax 21.34% 21.34% Corporate Income Tax 34.61% 34.61% Return on Equity 14% 14%

Tariff Gross Tariff – Rs 4.35 / kWh AD benefit – Rs 0.39 / kWh Net Tariff – Rs 3.96/ kWh

Gross Tariff – Rs 3.66 / kWh AD benefit – Rs 0.35/ kWh Net Tariff – Rs 3.31 / kWh

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Other Commercial issues

Transmission and Wheeling Charges

1. Third Party Sale

a. Wheeling of Power for third party sale from small, mini and micro hydro projects shall be

allowed on payment of transmission charges, transmission losses, wheeling charges and

losses of the energy fed into grid, as applicable to normal open access consumer.

b. 50% of the cross subsidy surcharge and additional surcharge, as applicable to normal open

access consumer, shall be applicable.

2. Wheeling of power for Captive Use

a. Wheeling of power to consumption site at 66 kV voltage level and above

Wheeling of electricity generated from small, mini and micro hydro projects to the desired

location(s) within the State shall be allowed on payment of transmission charges and

transmission losses as applicable to normal open access consumer.

b. Wheeling of Power to consumption site below 66 kV voltage level

In case the injection of power is at 66 kV or above and drawal is at below 66 kV, wheeling of

electricity generated from small, mini and micro hydro projects to the desired location(s)

within the State, shall be allowed on payment of transmission charges and transmission

losses applicable to normal open access consumers and 50% of wheeling charges and 50%

of distribution losses of the energy fed into the grid as applicable to normal open access

consumers.

c. Wheeling of electricity for injection at 11 kV and drawl at 11 kV and below voltage

level within the same distribution area

When the point of injection is at 11 kV and drawl at 11 kV or below voltage level lies within

the same distribution area, the user shall pay 50% of wheeling charges and 50% of wheeling

losses of the energy fed in to the grid as applicable to normal open access consumers.

d. Wheeling of electricity for injection at 11 kV and drawl at 11 kV and below voltage

level in the different distribution area

When the point of injection is at 11 kV and drawl at 11 kV or below voltage level lies in area

of different distribution licensee, the user shall pay 50% of wheeling charges and 50% of

wheeling losses of the energy fed in to the grid as applicable to normal open access

consumers for each distribution licensee. In addition, transmission charges and transmission

losses as applicable to normal open access consumer shall be payable.

3. Wheeling of power to more than one locations

Small, mini and micro hydro projects owners, who decide to wheel electricity for captive use /

third party sale, to more than one location, shall pay 5 Paisa/kWh on energy fed into the grid to

the distribution company concerned in whose area power is consumed in addition to above

mentioned transmission charges and losses, as applicable.

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4. Wheeling of power below 100 kW

Small, mini and micro hydro projects owners, who decide to wheel electricity for captive use /

third party sale below 100 kW, will be allowed only within the same distribution licensee area

where plant is located.

State Energy Metering

Small, mini and micro hydro power projects shall have to provide availability based tariff

(ABT) compliant meters at the interface points and shall conform to the Central Electricity

Authority (Installation and Operation of meters) Regulations 2014 and its subsequent

amendments, Gujarat Electricity Grid Code 2013 and its subsequent amendments.

The interconnection point will be at the line isolator on outgoing feeder on HV side of

generator transformer and the metering point will be at the receiving end of GETCO substation.

It is proposed that small, mini and micro hydro projects are kept out of the purview of the

intra-State ABT.

Pricing of Reactive Power

10 paise/kVARh– For the drawl of reactive energy at 10% or less of the net energy exported.

50 paise/kVARh– For the drawl of reactive energy at more than 10% of the net active energy

exported.

Sharing of Clean Development Mechanism (CDM) Benefits

Sharing of CDM benefits on net basis, starting from 100% to developers in the first year after

commissioning, and thereafter reducing by 10% every year till the sharing becomes equal

(50:50) between the developers and the consumers, in the sixth year and equal benefits

thereafter.

Banking of Surplus Energy and Purchase of Surplus Power (Non REC projects)

Captive: Small, mini and micro hydro projects set up for captive purpose can set off captive

consumption against the energy generated during peak and normal hours. One-month

banking is proposed with banking charges in kind. Banking charges shall be adjusted in kind

at 2% of energy banked. The surplus energy available is allowed for purchase by the concerned

distribution licensee at the rate of Average Pooled Power Purchase Cost (APPC) of the year of

commissioning of the project as determined by the Commission.

Third party: The energy settlement in case of small, mini and micro hydro projects set up for

third party sale is proposed to be done in 15 minutes time block basis. The surplus energy

available after set off is proposed to be treated as sale to the concerned distribution licensee

at the rate of Average Pooled Power Purchase Cost (APPC) of the year of commissioning of the

project as determined by the Commission.

Renewable Energy Certificates for Third party sale and Captive Use

Third party sale and captive use of power generated from small, mini and micro hydro projects

will be eligible for availing RECs as per CERC REC Regulations 2010 and its subsequent

amendments.

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It is proposed that such projects set up under REC mechanism will be given set off in the 15

minutes time block basis and the surplus power available after set off will be purchased by the

distribution licensee at 85% of the Average Pooled Purchase Cost (APPC) applicable for that

year.

Security Deposit

The project developers are required to furnish bank guarantee of Rs. 5 Lakh/MW as a security

deposit in the form of bank guarantee after entering into PPA with obligated entities (entities

obliged to fulfil the RPO). In case of default, bank guarantee shall be forfeited.

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Contents

List of Figures 08 List of Tables 08 Abbreviations 09 1 Introduction 11 2 SHP Potential and Technology Options 21 2.1 Geography 21 2.2 Water Resources 21 2.3 Canal Network and Command Area 22 2.4 SHP Potential in the State 23 2.5 SHP Technology option (Type of SHP Schemes) 24 2.6 Run-of-River Projects 24 2.7 Canal based Projects 25 2.8 Dam Toe based Project 26 3 Computation of Tariff for Small Hydro Power Projects 27 3.1 Approach and Methodology 27 3.2 General Principles 27 3.3 Benchmarking of Capital Cost and Other Performance Parameters 29 3.4 Financial Parameters 35 3.5 Computation of Tariff for Small Hydro Power Projects 38 4 Other Commercial Issues 40 4.1 Transmission and Wheeling Charges 40 4.2 State Energy Metering 41 4.3 Pricing of Reactive Power 42 4.4 Sharing of Clean Development Mechanism (CDM) Benefits 42 4.5 Banking of Surplus Energy and Purchase of Surplus Power from Projects

Opting for Captive Use and Third Party Sale under Open Access (Non REC projects)

43

4.6 Renewable Energy Certificates for Third Party Sale and Captive Use of Electricity generated from Small Hydro Projects

43

4.7 Security Deposit 44 Annexure-I - Tariff for small hydro power projects (Below 5 MW) 45 Annexure-II - Tariff for small hydro power projects (5 - 25 MW) 47

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List of Figures

2.1 Run-of-river scheme 25 2.2 Canal based project 25 2.3 Dam toe based project 26 3.1 Normative total capital cost of SHP Projects (2010-2015) 31

List of Tables

1.1 Renewable purchase obligation in Gujarat for FY 2010-11 to 2012-13 16 1.2 Renewable purchase obligation in Gujarat for FY 2013-14 to 2016-17 17 1.3 Comparison of SHP project tariff 18 1.4 Potential and installed SHP project capacity in Gujarat as on 31 December 2015 19 1.5 Installed SHP projects in Gujarat 20 2.1 SHP projects identified for development by SSNNL 23 3.1 Capital Cost of SHP projects considered by CERC and SERCs 30 3.2 Capital Cost of SHP projects considered by SSNNL 32 3.3 O&M expenses (as % of capital cost) for SHP projects considered by SERCs 33 3.4 Annual Energy Generation and CUF of some of the SHP Plants in Gujarat 34 3.5 State –wise CUF achieved by SHP Power Projects 34 3.6 Normative CUF considered by SERCs for SHP Power Projects 34 3.7 SBI base rates from February 2013 to June 2016 35 3.8 Proposed benchmark parameters for Small Hydro Power Projects 38

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Abbreviations

% Percentage

ABT Availability-Based Tariff

AC Alternating Current

AD Accelerated Depreciation

AHEC Alternate Hydro Energy Center, IIT Roorkee

APERC Andhra Pradesh Electricity Regulatory Commission

APPC Average Pooled Purchase Cost

CDM Clean Development Mechanism

CEA Central Electricity Authority

CERC Central Electricity Regulatory Commission

CFA Central Financial Assistance

CPP Captive Power Producer

CSERC Chhattisgarh State Electricity Regulatory Commission

CSS Cross-Subsidy Surcharge

DPR Detailed Project Report

E&M Electro-Mechanical

EA Electricity Act 2003

FY Financial Year

GEDA Gujarat Energy Development Agency

GERC Gujarat Electricity Regulatory Commission

GETCO Gujarat Energy Transmission Corporation Ltd.

GoG Government of Gujarat

GoI Government of India

HERC Haryana Electricity Regulatory Commission

HPERC Himachal Pradesh Electricity Regulatory Commission

IREDA Indian Renewable Energy Development Agency

KERC Karnataka Electricity Regulatory Commission

kW Kilo Watt

kWh Kilo Watt hours

m Meter

MAT Minimum Alternate Tax

MERC Maharashtra Electricity Regulatory Commission

MNRE Ministry of New and Renewable Energy

MPERC Madhya Pradesh Electricity Regulatory Commission

MT Metric Tonne

MW Mega Watt

MWh Mega Watt hour

MYT Multi Year Tariff

NAPCC National Action Plan for Climate Change

NEP National Electricity Policy

NTP National Tariff Policy

NWRWSK Narmada, Water Resources, Water Supply and Kalpsar Department

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O&M Operation and Maintenance

PDD Project Design Document

PPA Power Purchase Agreement

PSERC Punjab State Electricity Regulatory Commission

PU Per Unit (kWh)

RBI Reserve Bank of India

RE Renewable Energy

REC Renewable Energy Certificate

RERC Rajasthan Electricity Regulatory Commission

RoE Return on Equity

RPO Renewable Purchase Obligation

RPS Renewable Purchase Standards

Rs. Rupees

SBI State Bank of India

SERC State Electricity Regulatory Commission

SHP Small Hydro Power

SLDC State Load Dispatch Centre

SSNNL Sardar Sarovar Narmada Nigam Ltd

STU State Transmission Utility

T&D Transmission and Distribution

UERC Uttarakhand Electricity Regulatory Commission

UNFCCC United Nations Framework Convention on Climate Change

V Volt

WACC Weighted Average Cost of Capital

WDV Written-down Value

WPI Wholesale Price Index

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1. Introduction

1.1 Background

In exercise of the powers conferred under Sections 3 (1), 61 (h), 62 (1) (a), and 86 (1) (e) of the

Electricity Act, 2003 the National Electricity Policy (NEP) 2005 and Tariff Policy (TP) 2016 and

all other powers enabling it in this behalf, the Gujarat Electricity Regulatory Commission (GERC)

presents this Discussion Paper for determination of tariff for procurement of power by

Distribution Licensees and others from small, mini and micro hydro power projects to be

commissioned in the control period starting from the date of order. The small, mini and micro

hydro power tariff proposed under this discussion paper is based on the broad principles

contained under the (i) GERC (Multi Year Tariff) Regulations, 2016, (ii) GERC (Procurement of

Energy from Renewable Sources) Regulations, 2010 and amendments thereto and (iii) CERC

(Terms and Conditions for Tariff Determination from Renewable Energy Sources) Regulations,

2012 and amendments made thereto.

The Commission earlier had issued generic tariff order for procurement of power by distribution

licensees and others from small, mini and micro hydro power projects in Gujarat on 14 June 2007

in Petition No. 853/2005. The tariff was determined as per the provision under the MNRE

guidelines prevalent at that time. The control period of the small, mini and micro hydro power

projects tariff order was ten years. The Commission has decided to initiate the fresh tariff

determination process for procurement of power by Distribution licensees and others from small,

mini and micro hydro power projects to be commissioned during the new control period to be

specified in the new tariff order.

1.2 The Electricity Act, 2003

The following provisions of the Electricity Act, 2003 provide the enabling legal framework for

promotion of renewable sources of energy by the State Electricity Regulatory Commissions

(SERCs):

1.2.1 The Section 86(1)(e) of the Act mandates promotion of co-generation and generation of

electricity from renewable sources of energy which reads as under:

“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 licensee;”

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1.2.2 Section 61(h) of the Act provides that, while specifying the terms and conditions of

determination of tariff, the Commission shall be guided by the objective of promotion of co-

generation and generation of electricity from renewable sources of energy.

1.2.3 The Section 62(1)(a) of the Act provides for determination of tariff for supply of electricity

by a generating company to a distribution licensee as under:

“Supply of electricity by a generating company to a distribution licensee: Provided that the

Appropriate Commission may, in case of shortage of supply of electricity, fix the minimum and

maximum ceiling of tariff for sale or purchase of electricity in pursuance of an agreement, entered

into between a generating company and a licensee or between licensees, for a period not exceeding

one year to ensure reasonable prices of electricity”

1.2.4 Section 3 (1) of the Act requires the Central Government to formulate, inter alia, the

National Electricity Policy in consultation with the Central Electricity Authority (CEA) and State

Governments. The provision is quoted below:

"The Central Government shall, from time to time, prepare the National Electricity Policy and tariff

policy, in consultation with the State Governments and the Authority for development of the power

system based on optimal utilization of resources such as coal, natural gas, nuclear substances or

materials, hydro and renewable sources of energy."

1.3 National Electricity Policy (NEP)

Clause 5.12 of the NEP stipulates several conditions for promotion and harnessing of renewable

energy sources. The salient features of the said provisions of NEP are reproduced below.

“5.12.1: Non-conventional sources of energy being the most environment friendly, there is an urgent

need to promote generation of electricity based on such sources of energy. For this purpose, efforts

need to be made to reduce the capital cost of projects based on non-conventional and renewable

sources of energy. Cost of energy can also be reduced by promoting competition within such projects.

At the same time, adequate promotional measures would also have to be taken for development of

technologies and a sustained growth of these sources.

5.12.2: The Electricity Act, 2003 provides that co-generation and generation of electricity from non-

conventional sources would be promoted by the SERCs by providing suitable measures for

connectivity with the grid and sale of electricity to any person and also by specifying, for purchase

of electricity from such sources, a percentage of the total consumption of electricity in the area of a

distribution licensee. Such percentage for purchase of power from non-conventional sources should

be made applicable for the tariffs to be determined by the SERCs at the earliest. Progressively, the

share of electricity from non-conventional sources would need to be increased as prescribed by State

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Electricity Regulatory Commissions. Such purchase by distribution companies shall be through

competitive bidding process. Considering the fact that it will take some time before non-conventional

technologies compete, in terms of cost, with conventional sources, the Commission may determine

an appropriate differential in prices to promote these technologies.”

1.4 Tariff Policy (TP), 2016

In compliance with the Section (3) of the Act, the Central Government has notified the revised

tariff policy on 28 January 2016. The tariff policy elaborates the role of regulatory commissions,

the mechanism for promoting renewable energy, the time-frame for implementation, etc. Clause

6.4 of the tariff policy addresses various aspects associated with promoting and harnessing

renewable sources of energy generation including Co-generation from renewable energy sources.

The provisions stated under Clause 6.4 of TP are given below.

“(1) Pursuant to provisions of section 86(1)(e) of the Act, the Appropriate Commission shall fix a

minimum percentage of the total consumption of electricity in the area of a distribution licensee for

purchase of energy from renewable energy sources, taking into account availability of such

resources and its impact on retail tariffs. Cost of purchase of renewable energy shall be taken into

account while determining tariff by SERCs. Long term growth trajectory of Renewable Purchase

Obligations (RPOs) will be prescribed by the Ministry of Power in consultation with MNRE.

Provided that cogeneration from sources other than renewable sources shall not be excluded from

the applicability of RPOs.

(i) Within the percentage so made applicable, to start with, the SERCs shall also reserve a minimum

percentage for purchase of solar energy from the date of notification of this policy which shall be

such that it reaches 8% of total consumption of energy, excluding Hydro Power, by March 2022 or

as notified by the Central Government from time to time.

(ii) Distribution Licensee(s) shall compulsorily procure 100% power produced from all the Waste-

to-Energy plants in the State, in the ratio of their procurement of power from all sources including

their own, at the tariff determined by the Appropriate Commission under Section 62 of the Act.

(iii) It is desirable that purchase of energy from renewable sources of energy takes place more or

less in the same proportion in different States. To achieve this objective in the current scenario of

large availability of such resources only in certain parts of the country, an appropriate mechanism

such as Renewable Energy Certificate (REC) would need to be promoted. Through such a mechanism,

the renewable energy based generation companies can sell the electricity to local distribution

licensee at the rates for conventional power and can recover the balance cost by selling certificates

to other distribution companies and obligated entities enabling the latter to meet their renewable

power purchase obligations. The REC mechanism should also have a solar specific REC.

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(iv) Appropriate Commission may also provide for a suitable regulatory framework for encouraging

such other emerging renewable energy technologies by prescribing separate technology based REC

multiplier (i.e. granting higher or lower number of RECs to such emerging technologies for the same

level of generation). Similarly, considering the change in prices of renewable energy technologies

with passage of time, the Appropriate Commission may prescribe vintage based REC multiplier (i.e.

granting higher or lower number of RECs for the same level of generation based on year of

commissioning of plant).

(2) States shall endeavour to procure power from renewable energy sources through competitive

bidding to keep the tariff low, except from the waste to energy plants. Procurement of power by

Distribution Licensee from renewable energy sources from projects above the notified capacity, shall

be done through competitive bidding process, from the date to be notified by the Central

Government.

However, till such notification, any such procurement of power from renewable energy sources

projects, may be done under Section 62 of the Electricity Act, 2003. While determining the tariff from

such sources, the Appropriate Commission shall take into account the solar radiation and wind

intensity which may differ from area to area to ensure that the benefits are passed on to the

consumers.

(3) The Central Commission should lay down guidelines for pricing intermittent power, especially

from renewable energy sources, where such procurement is not through competitive bidding. The

tariff stipulated by CERC shall act as a ceiling for that category.

(4) In order to incentivize the Distribution Companies to procure power from renewable sources of

energy, the Central Government may notify, from time to time, an appropriate bid-based tariff

framework for renewable energy, allowing the tariff to be increased progressively in a back-loaded

or any other manner in the public interest during the period of PPA, over the life cycle of such a

generating plant. Correspondingly, the procurer of such bid-based renewable energy shall comply

with the obligations for payment of tariff so determined.

(5) In order to promote renewable energy sources, any generating company proposing to establish

a coal/lignite based thermal generating station after a specified date shall be required to establish

such renewable energy generating capacity or procure and supply renewable energy equivalent to

such capacity, as may be prescribed by the Central Government from time to time after due

consultation with stakeholders. The renewable energy produced by each generator may be bundled

with its thermal generation for the purpose of sale. In case an obligated entity procures this

renewable power, then the SERCs will consider the obligated entity to have met the Renewable

Purchase Obligation (RPO) to the extent of power bought from such renewable energy generating

stations.

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Provided further that in case any existing coal and lignite based thermal power generating station,

with the concurrence of power procurers under the existing Power Purchase Agreements, chooses to

set up additional renewable energy generating capacity, the power from such plant shall be allowed

to be bundled and tariff of such renewable energy shall be allowed to be pass through by the

Appropriate Commission. The Obligated Entities who finally buy such power shall account towards

their renewable purchase obligations.

Provided also that scheduling and despatch of such conventional and renewable generating plants

shall be done separately.

(6) In order to further encourage renewable sources of energy, no inter-State transmission charges

and losses may be levied till such period as may be notified by the Central Government on

transmission of the electricity generated from solar and wind sources of energy through the inter-

state transmission system for sale.

(7) Appropriate Commission may provide regulatory framework to facilitate generation and sale of

electricity from renewable energy sources particularly from roof-top solar system by any entity

including local authority, Panchayat Institution, user institution, cooperative society, Non-

Governmental Organization, franchisee or by Renewable Energy Service Company. The Appropriate

Government may also provide complementary policy support for this purpose.”

1.5 Government of Gujarat Policy Hydro Power Policy 2016

Government of Gujarat has notified the ‘Small Hydel Policy 2016’ on 28th March 2016 for

development of small, mini and micro hydel projects in the State. Some important provisions of

this Policy are listed below:

The operative period of this policy is five years from the date of notification of the policy.

The classification of the hydel projects as per the policy is – up to 100 kW is Micro hydel,

100 kW to 2 MW (unit size of up to 1 MW) is Mini hydel and 2-25 MW (unit size up to 5

MW) is Small hydel projects.

Any individual, company or corporate body or association or body of individuals will be

eligible for setting up the projects for the purpose of self-consumption (captive use), third

parry sale or sale to obligated entities to meet their Renewable Purchase Obligation

(RPO).

The developer may select suitable site after consultation of concerned authorities and

prepare the Detailed Project Report (DPR) taking into account the detailed study of past

record of availability of water from the reservoir / canal and feasibility of the site.

Afterwards, he can submit the proposal to the concerned agency for allotment and the

allotment will be done as per the relevant provisions of the Gujarat Infrastructure

Development Act, 1999.

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Alternatively, Narmada, Water Resources, Water Supply & Kalpsar Department or such

other Government Department may identify suitable sites, prepare DPR and offer the

same to the developers through competitive bidding process.

Gujarat Energy Development Agency (GEDA) shall be the nodal agency for

implementation of the project. All projects should be registered with GEDA.

Interconnection voltage should be governed by Gujarat Electricity Grid Code-2013 and

GERC orders.

The evacuation facility shall be approved by GETCO / DISCOM after conducting the system

studies. The developer shall establish the dedicated transmission lines for evacuation up

to nearest GETCO substation/ DISCOM network at their own cost. ABT compliant meter

is required to be installed at interface points.

Obligated entities may purchase power to fulfil their RPO at the tariff determined by GERC

or rate determined through competitive bidding.

Upon entering the PPA, the developer shall require to furnish the bank guarantee of Rs 5

lakh per MW or part thereof.

The open access charges have been specified in the policy.

Electricity generated from SHP projects is exempted from payment of Electricity Duty in

case of captive and third party sale. Exemption is given from demand cut to the extent of

50% of installed capacity of SHP project in case of captive and third party sale within the

state.

The release of water in canals shall be controlled by Narmada, Water Resources, Water

Supply & Kalpsar Department or SSNNL, as the case may be, and the availability of canal

water for hydro-electricity generation shall be solely incidental to the requirement of

water for drinking, irrigation etc. The developer shall have no right to claim release of

water for the purpose of hydel generation.

1.6 Renewable Purchase Obligation in Gujarat

The Gujarat Electricity Regulatory Commission (Procurement of Energy from Renewable

Sources) Regulations, 2010, (Notification No. 3 of 2010) dated 17 April, 2010 has specified the

minimum renewable power purchase by the obligated entities for the financial year (FY) 2010-

11 to 2012-13 as shown in Table No. 1.1 below.

Table No. 1.1 Renewable purchase obligation in Gujarat for FY 2010-11 to 2012-13

Year Total RPO Non Solar RPO Solar RPO Wind Biomass

bagasse and other

Solar

2010-11 5% 4.5% 0.25% 0.25% 2011-12 6% 5% 0.5% 0.5% 2012-13 7% 5.5% 0.5% 1%

(Note: RPO specified for FY 2012-13 shall be continued beyond 2012-13 till any revision)

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As per this regulation, the obligated entities have the obligation to purchase electricity (in kWh)

from specified RE sources. The said purchase shall be at a defined minimum percentage of the

total consumption of its consumers including T&D losses during a year.

This renewable purchase obligation applies to:

distribution licensees; and

any other captive and open-access users consuming electricity (i) generated from

conventional captive generating plant having capacity of 5 MW and above for their own use

and/or (ii) procured from conventional generation through open access and third party sale.

The Regulations recognise the certificates issued within the scope of Central Electricity

Regulatory Commission’s (CERC) Notification No. L-1/12/2010-CERC dated 14 January 2010 as

the valid instruments for the discharge of the mandatory obligations set out in these regulations

for the obligated entities to purchase electricity from renewable energy sources termed as

Renewable Energy Certificates (RECs).

Subsequently, the Commission has amended the Principal GERC (Procurement of Energy from

Renewable Sources) Regulations, 2010 on 4 March 2014 as GERC (Procurement of Energy from

Renewable Sources) (First Amendment) Regulations, 2014 (Notification No. 2 of 2014) and

specified the RPO targets for FY 2013-14 to FY 2016-17. The RPO targets specified under the

regulations are given in the Table No. 1.2 below.

Table No. 1.2 Renewable purchase obligation in Gujarat for FY 2013-14 to 2016-17

Year Total RPO Non Solar RPO Solar RPO Wind Biomass

bagasse and other

Solar

2013-14 7% 5.5% 0.5% 1.00% 2014-15 8% 6.25% 0.5% 1.25% 2015-16 9% 7.00% 0.5% 1.50% 2016-17 10% 7.75% 0.5% 1.75%

Applicability of RPO on Captive power users: Fossil fuel based CPPs Gujarat have approached

the Hon’ble High Court of Gujarat and filed petition on the issue of applicability of RPO on the CPP

and Open Access consumers in Gujarat. Hon’ble High court of Gujarat in its judgement (Special

Civil Application No. 171 of 2011) dated 13 March 2015 ruled in favour of the GERC and upheld

the applicability of RPO on CPPs as well as open access consumers and co-generation plants with

fossil fuel as proposed by the Commission under its RPO Regulations. Subsequently , the

Commission vide notification No. 2 of 2015 dated 1 July 2015 notified that Renewable Purchase

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Obligation as per GERC (Procurement of Energy from Renewable Sources) Regulations, 2010

(Notification No.3 of 2010) and amendments shall become applicable to Captive and Open Access

User(s)/Consumer(s) from the date of notification i.e. 1 July 2015, subject to final orders by the

Hon’ble High Court..

1.7 Small, Mini and Micro Hydro Tariff Order in Other States

The prevailing small, mini and micro hydro power tariffs in different states are tabulated in Table

No. 1.3. The Central Electricity Regulatory Commission (CERC) under its RE Tariff Regulations

2012 has adopted a single part tariff for small, mini and micro hydro power projects. CERC in its

tariff order has calculated a single part tariff for two groups of states (first group – hilly and north-

eastern states, second group – other states) by considering the geographical locations of the

projects. The tariff has been specified by CERC separately for below 5 MW capacity of projects

and 5-25 MW capacity of projects. The Maharashtra Electricity Regulatory Commission (MERC)

also provides single part tariff for small, mini and micro hydro power projects set up in the state

of Maharashtra. MERC has decided the small hydro power (SHP) project tariff for 1-5 MW capacity

of projects and 5-25 MW capacity of projects separately. However, for smaller capacity hydro

projects (less than 1 MW), MERC has provided a higher tariff than other SHP projects of capacity

greater than 1 MW. The Uttarakhand Electricity Regulatory Commission (UERC), considering the

possibilities of installation of different capacities of SHP power projects and their cost variation,

determines the tariff for below 5 MW, 5-15 MW and 15-25 MW capacity of projects separately.

Similarly, Himachal Pradesh Electricity Regulatory Commission (HPERC) has decided the tariff

for 100 kW – 2 MW, 2-5 MW and 5-25 MW capacity of SHP projects separately.

Table No 1.3 Comparison of SHP project tariff

CERC

(29.04.2016) for FY

2016-17

MERC

(29.04.2016)

for FY 2016-

17

UERC

(15.04.2013)

HPERC

(17.12.2012 )

PSERC

(24.07.2015)

for FY 2015-

16

Himachal Pradesh, Uttarakhand and North Eastern States: below 5 MW - Rs 4.70/ kWh, 5-25

MW – Rs 3.99/kWh; Other states: below 5

MW – Rs 5.54/ kWh, 5-25 MW – Rs 4.69/kWh

1 – 5 MW:

gross tariff Rs

4.75 / kWh

and net tariff

Rs 4.26 / kWh

5-25 MW:

gross tariff Rs

4.08 / kWh

and net tariff

Rs 3.68 / kWh

500 kW and below: gross tariff Rs 5.75 / kWh and net

Up to 5 MW:

gross tariff Rs

4.75 / kWh

and net tariff

Rs 4.40 / kWh

5-15 MW:

gross tariff Rs

4.52 / kWh

and net tariff

Rs 4.17 / kWh

15-25 MW: gross tariff Rs

4.21 / kWh and net tariff

Rs 3.86 / kWh

100 kW - 2

MW: gross

tariff Rs 3.34 /

kWh and net

tariff Rs 3.04 /

kWh

2- 5 MW: gross

tariff Rs 3.27 /

kWh and net

tariff Rs 2.98 /

kWh

5-25 MW: gross tariff Rs

3.17 / kWh

Below 5

MW– Rs

5.47/ kWh,

5-25 MW –

Rs 4.65/kWh

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CERC

(29.04.2016) for FY

2016-17

MERC

(29.04.2016)

for FY 2016-

17

UERC

(15.04.2013)

HPERC

(17.12.2012 )

PSERC

(24.07.2015)

for FY 2015-

16

tariff Rs 5.26 / kWh

500 kW – 1 MW: gross

tariff Rs 5.25 / kWh and net

tariff Rs 4.76 / kWh

(all above tariff is

applicable up to 40% CUF)

and net tariff Rs 2.89 / kWh

1.8 GERC SHP Tariff Order 2007

The GERC, in its Order in Petition No. 853/2015 dated 14 June 2007, determined generic tariff for

procurement of power by Distribution Licensees and others from small, mini and micro hydel

projects in the state of Gujarat. The tariff was decided by the Commission on the basis of the then

prevailing guidelines of the Ministry of Non-Conventional Energy Sources (MNES), Government

of India (now renamed as Ministry of New and Renewable Energy) issued in 1995 and the

proposal given by the Government of Gujarat (GoG) . Although MNES prescribed tariff for non-

conventional energy sources was Rs 2.25/kWh (as base price of 1995-96) with a minimum 5%

escalation every year; the GoG under their proposal suggested SHP tariff as base price of Rs 2.60

/ kWh (at 1999-2000) with 3% annual escalation subject to the condition that escalation would

be applicable only for the commissioning period specified in the project schedule. Accordingly, by

taking into consideration the proposal submitted by GoG, the Commission have fixed the SHP

tariff as Rs 3.29/ kWh for FY 2007-08 which could be escalated at 3% per annum till the

Commercial Operation Date (COD). The tariff so arrived at the time of COD shall prevail

throughout the life of the SHP project. In accordance of the GoG SHP Policy of 2005, the control

period of the tariff order was ten years.

1.9 Small, Mini and Micro Hydel Project Developments in Gujarat

The installed capacity of small, mini and micro hydel power projects in Gujarat is 16.6 MW as on

31 December 2015. Only six projects have been installed in the state. The potential and

achievement of SHP projects in the State of Gujarat is given in the table below.

Table No. 1.4 Potential and installed SHP project capacity in Gujarat as on 31 December 2015

Potential Projects Installed Nos Total Capacity (MW) Nos Total Capacity (MW)

292 201.97 6 16.6 (Source: Ministry of New and Renewable Energy (MNRE)

The details of installed SHP projects in the State of Gujarat developed through government and

private sector are given in the following table.

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Table No. 1.5 Installed SHP projects in Gujarat

Sl No Name of the SHP Project Capacity Ownership

1 Ukai (canal based) 5 MW (2.5 MW X 2) Govt

2 Panam canal head 2 MW Govt

3 Karjan canal head 3 MW Pvt

4 Damanganga (canal and river bed) 5.6 MW (3 MW + 2.6 MW) Pvt

5 Wanakbori river bed 1 MW Pvt

Total 16.6 MW

:: End of Chapter 1::

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2. SHP Potential and Technology Options

2.1 Geography

Gujarat state is situated on the west coast of India. The state has an area of 1, 96,024 sq. km., the

seventh largest state in terms of area in India. While the sea encircles the state right from the

southern parts to the extreme north in the peninsula, the state mostly consists of plain land

interspersed with low hills or small mountains extending from Rajasthan, Madhya Pradesh and

Maharashtra. Aravalli ranges are extended from Rajasthan and in the east there is Satpura hills.

Aravalli ranges forms the Pavagadh region, near Baroda and merges itself with the Vindhyas. The

state has mainly three geographical regions - the mainland; the peninsular region of Saurashtra

and the Kutch region, which has not only a large area of desert land, known as Rann of Kutch. The

mainland has black and fertile soil and alluvial soil. The Saurashtra soils formed of deccan lava

and in Kutch we find alluvial sandy soil.

Narmada, Sabarmati, Mahi, Tapi are the main rivers. Sabarmati has its origin in Dhebar Lake in

Rajasthan. The state's biggest city Ahmedabad is situated on the bank of this river. It has several

tributaries like the Hathmati, Vatrak and Meshwo. Mahi and Narmada originated from Madhya

Pradesh. Mahi has several tributaries like Bhadar, Anas, Panam and Meshro and Narmada has

only one tributary namely the Karjan. The famous city Surat is located on the bank of river Tapi.

Apart from this there are rivers like Hirni, Kapila, Ojhat, the Kamb and Surekh in the Gir forest

area, Brahmani, Machchu in Kutch are. The rivers in the Kutch area flowing north disappear into

desert and those flowing southwards fall into the sea. The state has a long coastline of over

1,600 km.

Stream flow constitutes the principal source of fresh water in Gujarat. River flows are

concentrated in the relatively short monsoon season. There are 17 rivers in Gujarat mainland, 71

in Saurashtra and 97 in Kutch region. Narmada, Tapi and Purna are perennial rivers.

2.2 Water Resources

The main source of water for Gujarat is surface water. The State has 185 river basins and the

available quota of water in the State is 55608 million cubic meters, out of which, 38100 million

cubic meters is surface water, which is only 2% of the entire quota of surface water of the

country. Moreover, the available quota of surface water is also not distributed properly. Gujarat,

Saurashtra and Kutch have water resources of 89%, 9% and 2% respectively, against this, the

total geographical area of these regions is 45%, 31% and 24% respectively. The underground

water resources of State are 17508 million cubic meters.

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2.3 Canal Network and Command Area

The canal network in the state of Gujarat can be divided into (a) Canals in Gujarat (b) Canals

in Kachchh Region (c) Canals in Saurashtra Region (d) Canals of Sardar Sarovar , Narmada

river

Canals in Gujarat

Ukai Umariya Aedalwada Kelia Khambhda Kabutri Kadana Karjan Kakdiamba Guhai Chopadvav Juj Jojwa Wadhvan Doswada Damanganga Dantiwada Dev Dharoi Dholi Patadungri Panam Pigut Mukteshvar Waidy Ver-2 Harnav-1 Harnav-2 Heran Vasna berej Baldeva Bhadar(5) Machannala -1 Mahi(Vipar) Mazam Meshwo Rami Pigut Mukteshvar Waidy Ver-2 Harnav-1 Harnav-2 Heran Vasna berej Baldeva Bhadar(5) Machannala -1 Mahi(Vipar) Mazam Meshwo Rami Lakhigam Watrak Vakleshvar-Bhe Saraswati berej Sipu Sukhi Hadaf Hathmati

Canals in Kachchh Region

Kalaghogha Kasawati Godhatad Don Gajod Jangdiya Tapar Niruna Nara Fategadh Berachia Mathal Sannadro Suvi Miti Kalaghogha Kasawati Godhatad Don Gajod Jangdiya Tapar Niruna Nara

Canals in Saurashtra Region Kankavati Bhadar Shetrunji Ambajal Aji-2 Aji-3 Ishwariya Und-1 Und-2

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Uben(PW) Uben Ozat(PW) Karmal Kalindri Kalubhar Kharo Khodiyar Goma Gondli Ghelo(Itarya) Ghelo(PW) Ghelo(Somnath) Chaprwadi(Lunivav) Chaprwadi(Jetpur) Dai-minsar Dhatarwadi Ghi Dhrafad Nyari-2 Puna Fulku Fulgar-1 Fulgar-2 Phophal-2 Bagad Brumhani Bhimdad Bhogavo-1 Bhogavo-2 Machchu-1 Machchu-2 Machchundri Machchundri-2 Madhuvanti Malgadh Malan Munjiyasar Moj Motisar Rangmati Ranghola Rajaval Raydi Raval-2 Raval(pw) Rojki Lakhanka Limbali Limbdi bhogavo Vadia Vartu Venu-2 Shingoda Sapda Sasoi Sani Sankroli Sukhbhadar Surajwadi Sonmati Sorthi Hamirpra Hiren-1 Hiren-2 Demi-2 Demi-1

2.4 SHP Potential in the State

The MNRE official website indicates SHP potential in the Gujarat State as 201.97 MW which

includes the SHP schemes identified by the government agencies as well as private developers.

As per the information provided by Sardar Sarovar Narmada Nigam Ltd (SSNNL) the total

estimated potential of small, mini and micro hydro power projects on Narmada branch canals, is

around 105.71 MW. SSNNL has already awarded the EPC work for development of SHP projects

of capacity of 85.46 MW on various branch canals of Narmada canal. The details of SHP schemes

being developed by SSNNL is provided in Table No 1.6 below. Besides these schemes, SSNNL has

estimated an additional potential of hydro power development of 6 MW (2X3 MW) at

Garudeshwar weir and 4 MW (2X2 MW) at Sabarmati escape hydro project.

Table No. 2.1 SHP projects identified for development by SSNNL

Sl No Name of the Branch Canal

Potential (MW) Work Awarded (MW)

1. Miyagam 13.37 12.00 2. Vadodara 12.00 5.15 3. Saurashtra 48.34 45.00 4. Kachchh 20.00 23.31 5. Mandava 0.33 6. Amleshwar 0.38 7. Luwara 0.78 8. Vehlal 0.44 9. Dholka 6.25

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Sl No Name of the Branch Canal

Potential (MW) Work Awarded (MW)

10. Sanand 0.38 11. Goriya 0.35 12. Kharaghoda 0.34 13. Zinduwada 3.35 14. Rajpura 0.40

Total 105.71 85.46

2.5 SHP Technology option (Type of SHP Schemes)

Small Hydro Power Projects can be broadly categorized in two types as: small hydro power

projects in the hills, where small streams are exploited for power generation and small hydro

projects in the other areas where water regulated for other purpose is utilized. The projects in

the hills are mostly medium / high head project with low discharge. The water is diverted by

weir/ diversion / barrage and intake is conveyed to the forebay using head race channel / tunnel

pipe which has penstock intake. Thereafter penstock conveys the water to the turbine kept in the

power house building to generate electricity. These projects may be further categorized as run-

of-river schemes with or without diurnal storage.

Projects in the other regions utilize the water regulated for other purposes like irrigation,

drinking water or small dam. These projects are low head project with availability of large

discharge. These projects can be further categorized as canal based projects and dam toe based

projects.

2.6 Run-of-River Projects

In run-of-river projects water is diverted from a stream without creating any storage in the river.

In these projects power is generated from flowing water and available head defined as difference

in elevation from diversion to tailrace. The output of a run-of-river project is subject to the

instantaneous flow in the stream.

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Figure 2.1: Run-of-river scheme

2.7 Canal based Projects

Canal based hydro power project are planned to generate electricity by using the fall available in

the canal / barrage and flow in the canal. These schemes can be planned in the canal itself or in

the bypass channel.

Figure 2.2: Canal based project

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2.8 Dam Toe based Project

The dam based project can be developed by utilizing the water from the dam storage. Water is

stored in the river by constructing a dam across the river and power is generated from the

controlled water available from the dam. In dam toe project intake system forms the part of the

main dam. Water is conveyed to the turbine through penstock installed directly through the body

of the dam.

Figure 2.3: Dam toe based project

:: End of Chapter 2 ::

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3. Computation of Tariff for Small Hydro Power Projects

3.1 Approach and Methodology

3.1.1 The Commission notes that the revised Tariff Policy notified by the Central Government on

28 January 2016 in pursuance of the Section 3 of the Act has stipulated that the Appropriate

Commission may determine preferential tariff for procurement of power by distribution licensees

from non-conventional sources of energy till issue of notification for procurement of power from

renewable energy sources through competitive bidding by Central Government. The relevant

extract of para 6.4 of the Tariff Policy is given below.

“......... (2) States shall endeavor to procure power from renewable energy sources through

competitive bidding to keep the tariff low, except from the waste to energy plants. Procurement of

power by Distribution Licensee from renewable energy sources from projects above the notified

capacity shall be done through competitive bidding process, from the date to be notified by the

Central Government.

However, till such notification, any such procurement of power from renewable energy sources

projects, may be done under Section 62 of the Electricity Act, 2003. While determining the tariff from

such sources, the Appropriate Commission shall take into account the solar radiation and wind

intensity which may differ from area to area to ensure that the benefits are passed on to the

consumers.

(3) The Central Commission should lay down guidelines for pricing intermittent power, especially

from renewable energy sources, where such procurement is not through competitive bidding. The

tariff stipulated by CERC shall act as a ceiling for that category.”

3.1.2 In view of above, the Commission proposes to determine the tariff on cost-plus basis as

followed for other renewable energy technologies.

3.2 General Principles

In this section, the general principles for small hydro power project tariff determination such as

control period, tariff period, tariff structure, tariff design, plant life, etc., has been discussed.

3.2.1 Control period: Since the control period of previous SHP order dated 14 June 2007 was 10

years, it is decided that the new control period of the tariff order under discussion will be from

the date of order up to 31.03.2019.

3.2.2 Useful life of plant: The CERC in its RE Tariff Regulations 2012 and all other SERCs have

considered project life of 35 years for small hydro power projects. In view of above, it is proposed

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to consider 35 years as useful life for the small hydro power projects for tariff determination

purpose.

3.2.3 Tariff period: The tariff period for the tariff determined by the Commission for

procurement of electricity from small hydro power projects by the distribution licensees in the

state will be 35 years.

3.2.4 Tariff structure & design: It is preferred to award a single part levellized tariff for

procurement of electricity from small hydro power projects commissioned during the next

control period by the distribution utilities. The levellization will be done on the basis of discount

rate as specified in this discussion paper over life of the small hydro power projects. Levellization

shall be carried out for the ‘useful life’ of the SHP project while tariff shall be specified for the

period equivalent to ‘Tariff Period’. However, considering the special characteristics of the small

hydro power projects, separate tariff will be decided for projects less than 5 MW and for projects

with capacity 5 – 25 MW.

3.2.5 Eligibility criteria: The small hydro power projects using new plant and machinery and

commissioned after the issue of this tariff order will be eligible to sell power to distribution

licensees of Gujarat at tariff determined by the Commission under the tariff order during the new

control period. The installed capacity of the small hydro power plant will be lower than or equal

to 25 MW at single location.

Classification of SHP projects: As per the definition of CEA, SHP projects up to 100 KW capacity

shall be terms as micro hydro; hydro project from 101 KW up to 2 MW capacity shall be termed

as mini hydro and hydro projects beyond 2 MW to 25 MW capacity shall be termed as Small

hydro.

3.2.6 Scheduling of power: All small hydro power projects are proposed to be not covered under

the ambit of Intra-state ABT order in the next control period. Therefore, no scheduling is required

from the small hydro power projects.

3.2.7 Applicability of merit order despatch principle: All small hydro power projects shall be

treated as ‘MUST RUN’ power projects and shall not be subjected to ‘merit order despatch’

principles.

3.2.8 Metering point and interconnection point: The interconnection point will be at the line

isolator on outgoing feeder on HV side of generator transformer and the metering point will be at

the receiving end of GETCO substation.

3.2.9 Subsidy or incentive by the Central/State Government: The Commission while

calculating the tariff shall take into account any incentive or subsidy offered by the Central and

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State Government, including the accelerated depreciation (AD) benefit if availed by the small

hydro power projects. However, while deciding the tariff the Commission has proposed to

include only the benefits accrued due to AD benefit; any other benefits offered by the Central or

State Government or their agencies like capital subsidy if availed will be deducted by the

distribution utilities in subsequent bills raised by the small hydro power project owner towards

sale of electricity in suitable instalments or within such period as may be stipulated by the

Commission.

3.3 Benchmarking of Capital Cost and Other Performance Parameters

3.3.1 Benchmarking of the Capital Cost

The capital cost is one of the most important parameters for SHP tariff determination. The cost of

a small hydro projects are site specific and depend on the terrain conditions and layout of SHP

scheme (Run of river, dam toe based, canal based scheme). In a cost plus approach the benchmark

capital cost fixed for tariff determination need to represent the cost of the type of SHP schemes

envisaged to be developed in future. Benchmark pricing approach typically adopts a

representative SHP station for tariff determination. The study of geography of Gujarat and the list

of potential sites identified for SHP development in the state underline that most of the SHP

projects are going to be developed on the irrigation canal utilizing the discharge and gradient of

canal. Therefore the benchmark capital cost determination analysis presented in the discussion

paper factor - in these aspects carefully.

Low head scheme on Canal: These schemes utilize the canal fall and the flow available in the

canal to generate power. In the new canals the power potential is generally exploited

concurrently at the time of construction of the canal. In case of development of SHP plant in

existing canal fall, the civil works would involve a construction of a bypass channel adjacent to

the fall structure with powerhouse located in the bypass structure. The bypass canal takes off

from the irrigation canal upstream of the fall structure leading to the power house. In case of the

new irrigation canal the powerhouse could be located adjacent to the fall structure by suitable

widening of the canal at the fall structure.

In low head small hydro projects the mechanical equipment represents an important part of the

total cost. As the canal based SHP schemes by its nature require accommodating higher discharge

to generate equal amount of power in comparison of high head SHP schemes. This ultimately

results in use of larger runner diameter and higher civil cost.

Major component of Capital Cost

Cost of civil work: The cost of civil works includes cost of intake structure, water conductor

system and power house building machine foundation and tailrace channel. The cost of civil work

associated with the power house station building is largely depends on the head. Higher head

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needs less expensive power house building. For same installed capacity, the physical size of the

power house building and cost for higher head installation tend to reduce.

Cost of Electromechanical work: The cost of E&M equipments is determined by the operating

head on the hydraulic plants and selection of turbine type to optimize the generation. As the head

falls, not only the size of the runner diameter increases but also cost of generator increases due

to reduction in shaft speed. The cost of electro-mechanical equipment includes cost of turbine,

generator, valves, control switchyard and other accessories but excluding cost of transmission

line.

Cost of power evacuation line: The cost of power evacuation line depends on the amount of

power to be evacuated from the powerhouse, voltage level, types of conductor, types of poles and

the length of transmission line.

3.3.1.1 Under the Regulatory Approach the commission has studied the approach followed

by the CERC and other State Electricity Regulatory Commissions under the recent tariff orders

notified by them. The capital cost approved by CERC and other SERCs under the regulatory

approach are presented in the table below:

Table No. 3.1 Capital Cost of SHP projects considered by CERC and SERCs

Name of ERC FY Capital cost of SHP (Cr/MW) Below 5 MW 5-25 MW

CERC 2016-17 6.46 5.92 MERC 2016-17 6.05 5.50 HERC 2010-11 5.50 5 PSERC 2016-17 6.46 5.92 CSERC 2015-16 6.46 5.92 MPERC 2013-16 6.5 6.35 KERC 2015-16 6.20 6.20 UERC 2013-16 7.85 7.50

Average 6.56 6.18

The Commission noted the capital cost benchmark for SHP projects fixed by CERC under RE tariff

Regulation 2012 and the subsequent tariff order for FY 2016-17. The Commission noted that the

CERC and most of other SERCs have specified separate capital costs for SHP projects for SHP

stations below 5MW capacity and 5-25 MW station capacity.

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3.3.1.2 Alternate Hydro Energy Center (AHEC), IIT Roorkee under MNRE sponsored study titled

“Benchmark cost for Small and Large Hydropower Projects”, August 2015 had studied the cost

data of 167 SHP stations covering 18 states including the state of Gujarat. The costing benchmark

monogram prepared by AHEC indicating the normative total capital cost of SHP plant for different

combination of head and installed capacity is shown in the following figure:

Figure 3.1: Normative total capital cost of SHP Projects (2010-2015)

In case of canal based SHP considering a 3 m and 10 m head curve as given above, total cost of

SHP projects between 0 to 5 MW capacity worked out to be Rs 8.04 Cr/MW and 8.27Cr/MW

respectively. Whereas for the SHP projects between 5-25 MW the total cost works out to be Rs

7.32 Cr/MW and 7.55Cr/MW respectively. Average total SHP cost of these two curves for projects

between 0-5 MW capacity and 5-25 MW capacity shall be worked out as Rs 8.15 Cr/MW and 7.43

Cr/MW respectively.

3.3.1.3 The SSNNL has awarded EPC contracts for development of SHP projects of total 85.46 MW

capacity on various locations of Saurashtra, Kachchh , Miyagam and Vadodara Branch Canals to

different agencies. It has been reported that the energy generated from these SHP projects shall

be utilized for the captive purpose of SSNNL pumping scheme on Saurashtra & kachchh branch

canal. The EPC cost discovered in the tendering process as provided by the authority is presented

in the following table:

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Table No. 3.2 Capital Cost of SHP projects considered by SSNNL

Name of Canal Project Capacity Total EPC Cost EPC cost/MW O&M Cost

Saurashtra

Branch Canal

9 X 4 MW = 45 MW 411.13 Cr 9.13 Cr 10.64 Cr

Kachchh Br

Canal

7 X 3.33 MW =

23.31MW

221.14 Cr 9.48 Cr 8.98 Cr

Miyagam Br

canal

16X0.75MW=12MW 141.99 Cr 11.83 Cr 7.47Cr

Vadodara Br

Canal

5.15 MW 82.50 Cr 16.01 Cr 5.78 Cr

The weighted average Capital cost as discovered by SSNNL is comes out to be Rs 10.02Cr/MW

3.3.1.4 The Commission has also observed the capital cost related data of some of the SHP

projects for which the Detailed Project Reports have been submitted with Narmada, Water

Resources, Water Supply and Kalpsar Department, Government of Gujarat. The DPR submitted

for SHP projects planned on Vadodara branch canal, Kachchh branch canal, Ukai high level canal,

Kadana LBC and Mahi canal fall totalling 35.4 MW have been examined. The variance in the capital

cost data of above SHP projects under consideration by the Water resource department is in the

range of 6.64 Cr/MW to 13.32 Cr/MW. As the capacity SHP station decreases the capital cost get

increased.

Considering all above findings and the potential for canal based low head SHP schemes in the

state, the Commission propose fix a benchmark total cost of Rs 8.20 Cr/MW for SHP projects

between 0 to 5 MW capacity and Rs 7.48 Cr/MW for SHP projects between 5-25MW capacity

including cost on account of evacuation infrastructure from project site to GETCO substation.

3.3.2 Operations and maintenance cost: Operations and Maintenance (O&M) cost consists of

the statutory charges, spares, employee cost, administrative and general expense, consumables,

repairs and maintenance, and insurance expenses, etc. The O&M expenses as given by CERC and

other SERCS are given below.

Table No. 3.3 O&M expenses (as % of capital cost) for SHP projects considered by SERCs

CERC (Other states)

MERC HPERC UERC

Below 5 MW: 3.3%

5-25 MW: 2.5%

1-5 MW: 3.6% 5-25 MW:

2.8%

100 kW - 2 MW – 3.2%, 2-5 MW

– 2.9%, 5-25 MW – 2.6%

Up to 5 MW – 3.4%, 5-15 MW – 3.03%, 15-25 MW – 2.6%

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The O&M charges specified by the CERC as well as other SERCs are in the range of 2.6% to 3.6%

of the capital cost, and it get changes depending on the capacity of SHP plant. The Commission

proposes following O&M charges for small hydro power projects of below 5 MW capacity and

SHP projects between 5to 25 MW capacity during the new control period

Below 5 MW: 3.3 % of Capital cost

5 – 25 MW: 2.5% of capital cost

Further, in line with the GERC MYT Regulations, the annual O&M escalation for small hydro power

projects shall be @ 5.72%.

3.3.3 Capacity Utilization Factor

The Capacity Utilization Factor (CUF) can be defined as the estimated energy likely to be

generated as a percentage of maximum energy that could have been generated with full capacity

utilization of the installed capacity of the project.

As seen from experience of different states, the CUF differs from canal based projects to the run-

off river projects. The CUF is indeed less in the case of run-off river projects since there is daily

variation in the flow. The SHP projects that are set on irrigational canal falls may have a better

CUF, since the canal carries discharge depending upon the Irrigation rotation and crop water

requirement in the command area. The PLF of a project may also vary with the location, i.e.

situated in Hilly or plain area.

In order to fix up the normative CUF for the state of Gujarat, it is imperative to examine the

potential and the type of SHP schemes going to be developed in the state. The SHP potential

assessment exercise and data collected from government shows ample scope for canal based SHP

project development in the state. The canal network in the state of Gujarat mainly constitute of

(a) Canals on West flowing rivers (b) Canals in Kachchh Region (c) Canals in Saurashtra Region

(d) Canals of Sardar Sarovar, Narmada river. The Narmada water resource department, GoG and

SSNL are responsible for releasing the water in the canal as per the rotation decided based on the

crop water requirement and demand received from the command areas. It has been observed

that the water is released from the dam in canal on seasonal basis to cater the need of Kharif,

Rabbi, hot weather and some time perennial crops. It has also been noted that Most of the canal

carries flow during Kharif and Rabbi Season, whereas some canals carry discharge throughout

the year.

3.3.3.1 The annual energy generation data of some of the SHP plants commissioned in the state

is given below:

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Table No. 3.4 Annual Energy Generation and CUF of some of the SHP Plants in Gujarat

Oreva Energy Pvt Ltd ( 3 MW) Karjan SHP project (3 MW) Tarini Infra Ltd SHP (3MW) / (5.6 MW) from FY 2012-13

FY Annual Energy Generation (MU)

CUF FY Annual Energy Generation (MU)

CUF FY Annual Energy Generation (MU)

CUF

2010-11 1.865 58% 2011-12 18.15 69.06 2010-11 15.74 92% 2011-12 18.156 69% 2012-13 10.23 38.93 2011-12 19.31 73% 2012-13 10.23 39% 2013-14 18.01 68.53 2012-13 21.74 66% 2013-14 18.01 69% 2014-15 19.08 72.60 2013-14 29.02 59% 2014-15 19.28 73% Up to Dec

2015 10.88 55.97 2014-15 29.69 61%

2015-16 14.33 55% 61% 2015-16 30.48 62%

Source : GUVNL, NWRWSK

3.3.3.2 Alternate Hydro Energy Center (AHEC), IIT Roorkee under MNRE sponsored study titled

“Benchmark cost for Small and Large Hydropower Projects” has reported that they have collated

the data from 76 operating SHP projects in the country wherein the CUF variance is in the range

of 17 to 61%. The State –wise CUF achieved as reported in the study report are shown in following

table:

Table No. 3.5 State –wise CUF achieved by SHP Power Projects

Arunachal

Pradesh

Chhattisgarh HP Kar MH Telangana MP Punjab Odisha AP

61% 20% 48% 31% 51% 38% 41% 52% 47% 30%

3.3.3.3 Under the Regulatory approach, the SERCs of various states have fixed the normative CUF

for Tariff determination purpose as given in the following table:

Table No. 3.6 Normative CUF considered by SERCs for SHP Power Projects

CERC AP Assam CH HP J&K Kar MH Odisha MP Tripura UK

30% 45% 45% 30% 55% 45% 30% 30% 35% 30% 45% 40%

The Commission observed that the CUF of the SHP projects planned in north and north east states

are comparatively on higher side.

Considering all above aspects, the it is proposed to fix the normative CUF of 42% for tariff

determination purpose.

3.3.4 Auxiliary consumption: It has been observed that the auxiliary consumption considered

by the CERC as well as different state electricity regulatory commissions (SERCs) in their tariff

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orders for small hydro power projects is 1% of gross generation. As there is not much auxiliary

load requirement in a SHP plant, the Commission proposes to consider auxiliary consumption as

1% of gross energy generation.

3.4 Financial Parameters

3.4.1 Debt-equity ratio: GERC Multi Year Tariff (MYT) Regulations 2016 provide the

normative debt-equity ratio of 70:30 for Generating Company/Licensees. The Commission

proposes to consider the debt-equity ratio as 70:30.

3.4.2 Loan tenure: GERC, in its earlier wind and biomass and bagasse based co-generation

tariff order had stipulated the loan tenure as 10 years. It is noticed that RE investors did not face

any problems in obtaining the loan with 10 years repayment period. Therefore, it is proposed to

consider loan tenure equal to 10 years while determining the tariff during the next control period.

3.4.3 Interest on term loan: The financial institutions approved the term loan at an interest

rate determined on the basis of base rate. However, the SBI base rate can be considered for

generic tariff determination purpose. The Commission has observed the movement of SBI base

rate from FY 2013-14 onwards. The details are given in the table below:

Table No. 3.7 SBI base rates from February 2013 to June 2016

Period SBI Base Rate

4 February 2013 to 18 September 2013 9.70%

19 September 2013 to 06 November 2013 9.80%

07 November 2013 to 09 April 2015 10.00%

10 April 2015 to 07 June 2015 9.85%

08 June 2015 to 04 October 2015 9.70%

05 October 2015 to 30 June 2016 9.30%

The SBI base rate is un-changed from October 2015. The Commission considers the existing SBI

base rate of 9.3% with a spread of 250 basis points to arrive at the interest on term loan for tariff

determination purpose. Hence, the interest rate on term loan for tariff determination is

determined at 11.8%.

3.4.4 Rate of depreciation: CERC, in its (Terms and Conditions for Tariff determination from

Renewable Energy Sources) Regulations, 2012 had considered the capital cost of the asset

admitted by the Commission as value base for the purpose of determination of depreciation.

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Further, the salvage value of the asset considered as 10% and depreciation is allowed up to a

maximum of 90% of the capital cost of the asset. Depreciation per annum shall be based on

‘Differential Depreciation Approach’ over loan tenure and the period beyond loan tenure over

useful life computed on ‘Straight Line Method.’

The Commission has in its earlier RE tariff orders considered a higher rate of depreciation during

first ten years of the project equating with the loan tenure, and then the remaining depreciation

is spread over the remaining useful life. In the first ten years, depreciation at a higher rate will be

allowed to pay the principal of term loan. In view of the above, the Commission decides to

continue the same approach for the tariff order under discussion.

Hence depreciation @ 7% per annum is considered for the first 10 years, and 0.8% from

11th year to 35th year.

3.4.5 Working capital: The Commission considered the components of working capital as

follows for wind and solar power projects.

1) O&M expenses for one month.

2) Receivables of one month charges for sale of electricity.

It is proposed to consider the above components as the part of working capital for determination

of tariff of small hydro power projects for the next control period. .

3.4.6 Interest on working capital: The Commission has specified the interest on working

capital as SBI base rate plus 250 basis point under the GERC MYT Regulations. It has been noticed

that requirement of working capital is recurring and is for shorter time period. Hence, the

Commission decides to consider the interest on working capital equal to the SBI base rate plus

250 basis points.

Hence, the interest rate on working capital is considered as 11.80%.

3.4.7 Return on Equity: The equity base for computing return will be 30% of the project capital

cost considered by the Commission. If the equity employed by the project developer is more than

30%, the amount of equity for the purpose of determining the tariff will be limited to 30% only

and the rest is to be treated as loan. In case the equity employed is less than 30%, the actual equity

employed will be considered. However for generic tariff determination purpose, equity has been

considered as 30% of capital cost decided by the Commission.

The GERC Multi Year Tariff Regulations, 2016, notified by the Commission provides norms for the

Return on Equity as 14% per annum. Any further enhancement in the RoE will burden the

consumers. Hence, the Commission has considered the return on equity as 14% for the next

control period. Also the tax payment in the form of MAT for first 10 years and corporate tax for

the next 25 years has been considered as cost in tariff calculation for small hydro power projects.

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3.4.8 Discount rate:

The discount rate has been considered by CERC and other SERCs as weighted average cost of

capital (WACC). The formula for computation of WACC is given below.

WACC = Cost of Debt + Cost of Equity

Where, Cost of Debt (For first 10 Years) =0.70 x (Market Rate of Interest) x (1- MAT)

Cost of Debt (11th Year to 35th Year) =0.70 x (Market Rate of Interest) x (1- Corporate tax)

Cost of Equity = 0.30 x Return on Equity (i.e. 14%)

Resulting WACC = {(WACC For first 10 Years X 10) + (WACC 11th Year to 35th Year X 10)}/ (10 +

25)

Cost of Debt (For first 10 Years) = 0.70 x 11.8% x (1- 21.34%) = 6.5%

Cost of Debt (11th Year to 35th Year) = 0.70 x 11.8% x (1- 34.61%) = 5.4%

Cost of Equity = 0.30 x 14% = 4.2%

Keeping in view the above calculation of WACC, the Commission proposes to consider the

discount rate of 9.91% for determination of levellized tariff of small hydro power projects to be

commissioned during the control period as stated in this discussion paper.

3.4.9 Incentives for small hydro power projects: The incentives available for small hydro

power projects are as follows.

3.4.9.1 Accelerated depreciation:

Following principles have been considered for ascertaining the Income Tax benefit on account of

accelerated or additional depreciation for the purpose of tariff determination:

a. The assessment of benefit shall be based on normative Capital Cost, accelerated and

additional depreciation rate as per the relevant provisions of the Income Tax Act and the

Corporate Income Tax rate;

b. Capitalisation of RE Projects for the full financial year;

c. Per-unit benefit shall be derived on levellized basis at a discounting factor equivalent to

the post-tax weighted average cost of capital.

Presently, small hydro power project owners can avail accelerated depreciation at the rate of

80% in the first year on a written-down value (WDV) basis. In addition to this 80%

depreciation, the amendment in the Finance Act has allowed an additional depreciation of

20% to the power projects during first year of project commissioning. With this, the small

hydro power projects can avail 100% depreciation in the first year of commissioning. The

Commission has considered the above depreciation rate while calculating per unit AD benefit.

3.4.9.2 Central Financial Assistance (CFA):

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The Commission shall take into consideration any grant / subsidy offered by the Central or State

Government or their agencies, particularly Central Financial Assistance (CFA) from MNRE, if

availed, while determining the tariff for small hydro power projects. While determining the

present tariff the Commission has not considered availing of any such benefit like grant / subsidy.

The State Nodal Agency shall inform the distribution utility regarding any such grant /subsidy

received by a project developer. Further that such grant /subsidy, if availed by a project

developer, shall be deducted by the distribution utility in subsequent bills raised by the particular

project developer towards sale of electricity in suitable installments or within such period as may

be stipulated by the Commission.

3.5 Computation of Tariff for Small Hydro Power Projects

The benchmark parameters proposed for tariff determination during the control period starting

from the date of the tariff order have been given in the table below.

Table No. 3.8 Proposed benchmark parameters for Small Hydro Power Projects

Parameters Proposed for next control period

Below 5 MW 5 – 25 MW Project Cost

Total Project Cost (Land + Plant & Machinery + Erection Cost + Evacuation Infrastructure Cost up to GETCO Sub-station ) (Rs. Lakh/MW)

820 748

Normative O&M Cost for first year (% of project cost)

3.3% 2.5%

Escalation in O&M (per annum from 2nd year) 5.72% 5.72%

Performance Parameters

CUF 42% 42%

Auxiliary Consumption 1% 1%

Project Life in Years 35 35

Financial Parameters

Debt-Equity ratio 70:30 70:30

Term of Loan in Years 10 10

Interest on Term Loan 11.8% 11.8%

Interest on Working Capital 11.8% 11.8%

Depreciation 7% (for first 10 years)

0.8% (from 11 to 35 years) 7% (for first 10 years)

0.8% (from 11 to 35 years) Minimum Alternate Tax 21.34% 21.34% Corporate Income Tax 34.61% 34.61% Return on Equity 14% 14%

Tariff Gross Tariff – Rs 4.35 / kWh AD benefit – Rs 0.39 / kWh Net Tariff – Rs 3.96/ kWh

Gross Tariff – Rs 3.66 / kWh AD benefit – Rs 0.35/ kWh Net Tariff – Rs 3.31 / kWh

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The detailed tariff calculations for small hydro power projects are enclosed in Annexure I and II

:: End of Chapter 3::

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4. Other Commercial Issues

4.1 Transmission and Wheeling Charges

The Commission in its tariff order on wind power projects, solar power projects and biomass

power and bagasse based co-generation projects, had specified transmission and wheeling

charges and transmission and wheeling losses for wheeling of power. Government of Gujarat

announced Small Hydro Power Policy – 2016 has also specified transmission and wheeling

charges and losses for small hydro power projects to be installed in the state.

Considering the open access charges Specified in the SHP policy as well as the provisions for

other renewable energy technologies , following norms are proposed for the open access

transaction for wheeling of power from small, mini and micro hydro projects for third party sale

and captive use during new control period.

Third Party Sale

a. Wheeling of Power for third party sale from small, mini and micro hydro projects shall be

allowed on payment of transmission charges, transmission losses, wheeling charges and

wheeling losses of the energy fed into grid, as applicable to normal open access consumer.

Set off of wheeled energy at recipient unit(s) shall be carried out in the same 15 –minutes

time block.

b. Small hydro project owners who desire to wheel electricity for third party sale to more

than one location shall pay 5 paisa per unit on energy fed in the grid to the Distribution

company concerned in whose area power is consumed in addition to above mentioned

transmission charges and losses as applicable.

c. 50% of the cross subsidy surcharge and additional surcharge, as applicable to normal

open access consumer, shall be applicable.

Wheeling of power for Captive Use

a. Wheeling of power to consumption site at 66 kV voltage level and above

Wheeling of electricity generated from small, mini and micro hydro projects to the desired

location(s) within the State shall be allowed on payment of transmission charges and

transmission losses as applicable to normal open access consumer.

b. Wheeling of Power to consumption site below 66 kV voltage level

In case the injection of power is at 66 kV or above and drawal is at below 66 kV, wheeling of

electricity generated from small, mini and micro hydro projects to the desired location(s)

within the State, shall be allowed on payment of transmission charges and transmission

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losses applicable to normal open access consumers and 50% of wheeling charges and 50%

of distribution losses of the energy fed into the grid as applicable to normal open access

consumers.

c. Wheeling of electricity for injection at 11 kV and drawl at 11 kV and below voltage

level within the same distribution area

When the point of injection at 11 kV and drawl at 11 kV or below voltage level lies within the

same distribution area, the user shall pay 50% of wheeling charges and 50% of wheeling

losses of the energy fed to the grid as applicable to normal open access consumers.

d. Wheeling of electricity for injection at 11 kV and drawl at 11 kV and below voltage

level in the different distribution area

When the point of injection at 11 kV and drawl at 11 kV or below voltage level lies in area of

different distribution licensee, the user shall pay 50% of wheeling charges and 50% of

wheeling losses of the energy fed to the grid as applicable to normal open access consumers

for each distribution licensee. In addition, transmission charges and transmission losses as

applicable to normal open access consumer shall be payable.

Wheeling of power to more than one locations

Small, mini and micro hydro projects owners , who decide to wheel electricity for captive use , to

more than one location, shall pay 5 Paisa/kWh on energy fed into the grid to the distribution

company concerned in whose area power is consumed in addition to above mentioned

transmission charges and losses, as applicable.

Wheeling of power below 100 kW

Small, mini and micro hydro projects owners, who decide to wheel electricity for captive use /

third party sale below 100 kW, will be allowed only within the same distribution licensee area

where plant is located.

Small mini, micro hydro power projects availing open access for captive use/third-party sale and

willing to register under REC mechanism should be governed as per CERC REC Regulations in

force. Renewable Energy projects installed for captive use will have to meet the eligibility criteria

specified in CERC REC Regulations (Fourth Amendment), 2016 for availing RECs on total

generation including self-consumption. Provided that such projects have to forego the

concessional transmission and wheeling charges/losses and banking benefit.

4.2 State Energy Metering

Energy metering and communication facility shall be provided by the project developers of small,

mini and micro hydro power projects in accordance with the following regulations/codes/orders

and their subsequent amendments.

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1) Central Electricity Authority (Installation and Operation of meters) Regulations 2006 and

its subsequent amendments

2) Gujarat Electricity Grid Code 2013 and its subsequent amendments

3) GERC (Terms and Conditions of Intra-State Open Access) Regulations, 2011 and its

subsequent amendments

4) GERC Distribution Code 2004 and its subsequent amendments

However, for the purpose of energy accounting, all projects shall have to provide ABT compliant

meters at generators and if the power is to be wheeled to consumer’s premises, then ABT

compatible meter is to be installed at the consumer premises also. It is proposed that small, mini

and micro hydro projects are kept out of the purview of the intra-State ABT.

4.3 Pricing of Reactive Power

In the earlier tariff order on renewable energy projects, the Commission had decided that the

reactive energy pricing should be uniform for all types of renewable sources. The Commission

proposes the reactive energy tariff as follows:

“10 paise/kVARh – For the drawl of reactive energy at 10% or less of the net energy exported.

50 paise/kVARh – For the drawl of reactive energy at more than 10% of the net active energy

exported”.

4.4 Sharing of Clean Development Mechanism (CDM) Benefits

In case of sharing of CDM benefit, the Commission in its earlier tariff orders of renewable energy

projects has adopted the recommendations made by the Working Group on Renewable Energy

Generation constituted by the Forum of Regulators. The relevant clause of the previous Tariff

Order is as below:

“100% of net proceeds through sale of CER generated from the energy generation in the first year

after the date of commercial operation of the project shall be retained by the developer.

In the second year, the share of the beneficiary shall be 10% which shall be progressively increased

by 10% every year till it reaches 50% in the sixth year; thereafter the proceeds shall be shared in

equal proportion by the power generating company and the beneficiary.”

The Commission proposes to retain the above provisions for sharing of CDM benefits for the next

control period for small, mini and micro hydro projects. However, such projects availing CDM

benefit shall share the net CDM proceeds annually as per above, by 31st March of every year with

an affidavit stating the annual energy generation (date of commissioning as starting point of the

first year), CER generated, gross receipts, and net receipts.

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4.5 Banking of Surplus Energy and Purchase of Surplus Power from Projects Opting for

Captive Use and Third Party Sale under Open Access (Non REC projects)

Captive: Small, mini and micro hydro projects set up for captive purpose can setting off captive

consumption against the energy generated during peak and normal hours. Such projects are

proposed to be allowed for only one month banking for the electricity generated during the

month. The captive consumers are eligible to utilize the same during the month in proportion to

the energy generated during peak and normal hour period. However, considering the fact that the

intra-State ABT and UI mechanism has been adopted in the State, banking of energy for limited

period also have financial impact on utility. It is proposed to levy banking charges in kind. Banking

charges shall be adjusted in kind at 2% of energy banked.

It is proposed that in case of such small, mini and micro hydro captive consumers are unable to

utilize the surplus energy within a month it is considered as sale to the concerned distribution

licensee. The surplus energy available is allowed for purchase by the concerned distribution

licensee at Average Pooled Power Purchase Cost of the year of the commissioning of the project

as determined by the Commission.

Third party sale: The energy settlement in case of small, mini and micro hydro projects set up

for third party sale is proposed to be done in 15 minutes time block basis. There will be no

banking facility for such projects. In case of open access transactions for third party sale of small,

mini and micro hydro projects not registered under REC mechanism, the surplus energy available

after set off with open access consumer’s consumption in the same 15 minutes time block is

proposed to be treated as sale to the concerned distribution licensee at Average Pooled Power

Purchase Cost of the year of the commissioning of the project as determined by the Commission

Energy Accounting of Renewable Energy Attribute by the SHP Generator

a. If the consumer does not take renewable attribute for meeting its RPO, energy generated

by SHP power project shall be set off against the consumption during the consumers

billing cycle. Surplus power after giving set off shall be purchased by DISCOM at APPC of

the year of commissioning of project and entire generation shall be credited to DISCOM’s

account for meeting RPO.

b. If the consumer takes renewable attribute of SHP energy for meeting its RPO, energy

accounting shall be based on 15 minutes’ time block. Surplus power after giving set off

shall be purchased by DISCOM at APPC of the year of commissioning of project. Surplus

SHP energy purchased by DISCOM shall be considered for meeting RPO of DISCOM.

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4.6 Renewable Energy Certificates for Third Party Sale and Captive Use of Electricity

Generated from Small Hydro Projects

Power generated from small, mini and micro hydro projects if wheeled to third party or for

captive use will be eligible for availing the Renewable Energy Certificates under the CERC REC

mechanism. Qualification of such projects preferring open access for sale of electricity / captive

use for availing REC benefit shall be governed by the CERC (Terms and Conditions for Recognition

and Issuance of REC for Renewable Energy Generation) Regulations, 2010 and the subsequent

amendments till date. Provided further that a Captive Power Producer (CPP) based on RE sources

shall be eligible for the entire energy generated from such plant, including self consumption for

participating in the REC scheme, if eligible as per CERC REC Regulations (Fourth amendment)

dated 28.03.2016, subject to the condition that such CPP has not availed or does not propose to

avail any benefit in the form of concessional/promotional transmission or wheeling charges and

banking facility benefit. It is proposed that such projects set up under REC mechanism will be

given set off in the 15 minutes time block basis. Also, the surplus power available after set off for

such projects will be purchased by the distribution licensee at 85% of the Average Pooled

Purchase Cost (APPC) of the year of commissioning of the project.

4.7 Security Deposit

In order to assure about the project developer’s seriousness, the project developers are required

to furnish bank guarantee of Rs. 5 Lakh/MW as a security deposit in the form of bank guarantee

after entering into PPA with obligated entities (entities obliged to fulfil the RPO). Project

developers are required to commission the project within the time period mentioned in the

power purchase agreement. In case of default, bank guarantee shall be forfeited.

Applicability of the order: The provisions under this order shall be made applicable to the SHP

projects to be installed and commissioned on or after the date of issuance of the order for which

PPAs would be signed with GUVNL on or after the date of the order. However, the provisions

under this order shall not be made applicable for the projects already awarded under Gujarat

Infrastructure Development Act. Those projects shall require to file separate tariff petition giving

techno-financial details of the project for project specific tariff determination by the Commission.

GERC presents this discussion paper to initiate the regulatory process for determination of small,

mini and micro hydro power project tariff for the next control period starting from the order on

this discussion paper after considering comments received from stakeholders. GERC invites

comments from potential stakeholders for determination of SHP project tariff in new control

period. The performance and financial parameters and tariff proposed in this discussion paper

are indicative and will be finalised with the tariff order.

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Stakeholders may offer their views / objections / suggestions as per the procedure prescribed in

the GERC (Conduct of Business) Regulations, 2004 on or before 26/9/2016.

Public hearing in this regard shall be held on 3/10/2016 at 11.30 a.m. in the Commission’s office.

Stakeholders either in person or through their authorized representative may remain present.

Sd/- [Mr. Roopwant Singh, IAS]

Secretary GERC

Place: Gandhinagar

Date: 06/09/2016

:: End of Chapter 4::

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Annexure I

Tariff for small hydro power projects (Below 5 MW)

Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Net Energy sold (lakh kWhs)

36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42

Costs (Rs lakh)

O&M 27.06 28.61 30.24 31.97 33.80 35.74 37.78 39.94 42.23 44.64 47.20 49.89 52.75 55.77 58.96 62.33 65.89 69.66 73.65 77.86

Depreciation 57.40 57.40 57.40 57.40 57.40 57.40 57.40 57.40 57.40 57.40 6.56 6.56 6.56 6.56 6.56 6.56 6.56 6.56 6.56 6.56

Interest on term loan

64.35 57.57 50.80 44.03 37.25 30.48 23.71 16.93 10.16 3.39 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Interest on working capital

2.16 2.13 2.09 2.06 2.03 2.00 1.97 1.95 1.92 1.91 1.46 1.52 1.57 1.63 1.70 1.76 1.83 1.91 1.99 2.07

Return on Equity

34.44 34.44 34.44 34.44 34.44 34.44 34.44 34.44 34.44 34.44 34.44 34.44 34.44 34.44 34.44 34.44 34.44 34.44 34.44 34.44

Tax on equity 7.35 7.35 7.35 7.35 7.35 7.35 7.35 7.35 7.35 7.35 11.92 11.92 11.92 11.92 11.92 11.92 11.92 11.92 11.92 11.92

Fixed cost (Rs lakh)

192.76 187.49 182.32 177.25 172.27 167.40 162.65 158.01 153.50 149.12 101.58 104.33 107.24 110.32 113.57 117.01 120.65 124.49 128.56 132.85

Tariff Tariff (Rs / kWh)

5.29 5.15 5.01 4.87 4.73 4.60 4.47 4.34 4.21 4.09 2.79 2.86 2.94 3.03 3.12 3.21 3.31 3.42 3.53 3.65

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GERC | Discussion Paper on Small, Mini and Micro Hydro Tariff Determination 47

Year 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Net Energy sold (lakh kWhs)

36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42

Costs (Rs lakh)

O&M 82.31 87.02 92.00 97.26 102.83 108.71 114.92 121.50 128.45 135.80 143.56 151.77 160.46 169.63 179.34

Depreciation 6.56 6.56 6.56 6.56 6.56 6.56 6.56 6.56 6.56 6.56 6.56 6.56 6.56 6.56 6.56

Interest on term loan 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Interest on working capital

2.16 2.25 2.35 2.46 2.57 2.68 2.81 2.94 3.08 3.22 3.38 3.54 3.71 3.89 4.09

Return on Equity 34.44 34.44 34.44 34.44 34.44 34.44 34.44 34.44 34.44 34.44 34.44 34.44 34.44 34.44 34.44

Tax on equity 11.92 11.92 11.92 11.92 11.92 11.92 11.92 11.92 11.92 11.92 11.92 11.92 11.92 11.92 11.92

Fixed cost (Rs lakh) 137.39 142.20 147.27 152.64 158.31 164.31 170.65 177.36 184.44 191.94 199.86 208.23 217.09 226.45 236.34

Tariff

Tariff (Rs / kWh) 3.77 3.90 4.04 4.19 4.35 4.51 4.69 4.87 5.06 5.27 5.49 5.72 5.96 6.22 6.49

Tarff :

Levellized Tariff Tariff in Rs./kWh

Gross tariff (1 to 35 years) 4.35

AD Benefit 0.39

Net tariff (1 to 35 years) 3.96

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GERC | Discussion Paper on Small, Mini and Micro Hydro Tariff Determination 48

Annexure II

Tariff for small hydro power projects (5 - 25 MW)

Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Net Energy sold (lakh kWhs)

36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42

Costs (Rs lakh)

O&M 18.70 19.77 20.90 22.10 23.36 24.70 26.11 27.60 29.18 30.85 32.61 34.48 36.45 38.54 40.74 43.07 45.54 48.14 50.89 53.81

Depreciation (SLM) 52.36 52.36 52.36 52.36 52.36 52.36 52.36 52.36 52.36 52.36 5.98 5.98 5.98 5.98 5.98 5.98 5.98 5.98 5.98 5.98

Interest on term loan

58.70 52.52 46.34 40.16 33.98 27.80 21.62 15.45 9.27 3.09 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Interest on working capital

1.85 1.81 1.77 1.74 1.70 1.67 1.63 1.60 1.57 1.54 1.13 1.16 1.20 1.24 1.29 1.33 1.38 1.44 1.49 1.55

Return on Equity 31.42 31.42 31.42 31.42 31.42 31.42 31.42 31.42 31.42 31.42 31.42 31.42 31.42 31.42 31.42 31.42 31.42 31.42 31.42 31.42

Tax on equity 6.70 6.70 6.70 6.70 6.70 6.70 6.70 6.70 6.70 6.70 10.87 10.87 10.87 10.87 10.87 10.87 10.87 10.87 10.87 10.87

Fixed cost (Rs lakh)

169.73 164.58 159.49 154.47 149.52 144.64 139.85 135.13 130.50 125.96 82.01 83.92 85.93 88.06 90.30 92.68 95.19 97.85 100.66 103.63

Tariff

Tariff (Rs / kWh) 4.66 4.52 4.38 4.24 4.11 3.97 3.84 3.71 3.58 3.46 2.25 2.30 2.36 2.42 2.48 2.54 2.61 2.69 2.76 2.85

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GERC | Discussion Paper on Small, Mini and Micro Hydro Tariff Determination 49

Year 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

Net Energy sold (lakh kWhs)

36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42 36.42

Costs (Rs lakh)

O&M 56.88 60.14 63.58 67.21 71.06 75.12 79.42 83.96 88.77 93.84 99.21 104.89 110.88 117.23 123.93

Depreciation 5.98 5.98 5.98 5.98 5.98 5.98 5.98 5.98 5.98 5.98 5.98 5.98 5.98 5.98 5.98

Interest on term loan 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Interest on working capital

1.61 1.67 1.74 1.81 1.89 1.97 2.06 2.15 2.24 2.34 2.45 2.56 2.68 2.81 2.94

Return on Equity 31.42 31.42 31.42 31.42 31.42 31.42 31.42 31.42 31.42 31.42 31.42 31.42 31.42 31.42 31.42

Tax on equity 10.87 10.87 10.87 10.87 10.87 10.87 10.87 10.87 10.87 10.87 10.87 10.87 10.87 10.87 10.87

Fixed cost (Rs lakh) 106.77 110.08 113.59 117.30 121.22 125.37 129.75 134.38 139.28 144.46 149.93 155.72 161.84 168.31 175.15

Tariff

Tariff (Rs / kWh) 2.93 3.02 3.12 3.22 3.33 3.44 3.56 3.69 3.82 3.97 4.12 4.28 4.44 4.62 4.81

Tarff:

Levellized Tariff Tariff in Rs./kWh

Gross tariff (1 to 35 years) 3.66

AD Benefit 0.35

Net tariff (1 to 35 years) 3.31