Balawant Joshi - Feed in Tariff Experience in India

8/6/2019 Balawant Joshi - Feed in Tariff Experience in India

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Asia Clean Energy Forum 2011Asia Clean Energy Forum 2011Manila, PhilippinesManila, Philippines

FeedFeed--in Tariff Experience in Indiain Tariff Experience in India

BalawantBalawant Joshi, DirectorJoshi, Director ABPS Infrastructure AdvisoryABPS Infrastructure Advisory

[email protected]@gmail.com,, [email protected]@abpsinfra.com


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India is at the forefront in harnessing Renewable

RE capacity is ~10% of total generation capacity (164 GW)

RE Generation is approx 6% of total consumption

Large hydro (>25 MW) is not considered in calculation of RE

Including large hydro (37GW), total RE capacity would be 52GW. Total RE capacity including Large hydro ~33% in terms of total generation

capacity and 18% of total consumption

Practical Solutions to Real Life ProblemsABPS Infrastructure Advisory Private Limited

Source: Ministry of Power, Govt. of India, April 2010India has the fifth largest wind

capacity in the World

15691 MW

oun ry n apac y

(GW) (2010)

USA 35.2

China 26.0

Germany 25.8

Spain 19.1

India 12.2

o a apac y


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Key drivers for Renewable Energy Development

8000

10000

12000

14000

16000

18000

20000

MW

PolicyAnnouncement

by CentralGovernment

Policy on HydroPower

Development

Enactment ofElectricity Act,

2003

GenerationBased

Incentive

Emergence ofElectricityRegulatory

Commissions

Enactment ofNational Tariff

Policy

NAPCC,JNNSM


Source : Ministry of New and Renewable Energy

RE capacity (17 GW) forms ~ 10% of total generation capacity (164 GW) in the country

In energy terms, it constitutes ~ 5% of total consumption

0

2000

4000

6000

Wind Biomass Small Hydro Others


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Introduction to Feed In TariffsIntroduction to Feed In Tariffs

A feed-in tariff (FIT), also known as preferential tariff is a policymechanism designed to encourage the adoption of renewable energy(RE) sources.

Under this regime, an obligation is imposed on regional or nationalelectric grid utilities to buy renewable electricity from specified resourcesat a FIT determined by regulators / law makers.


ypica y, it inc u es t ree ey provisions Guaranteed grid access

Long-term Power Purchase Agreements (PPAs) for the electricity produced

Purchase prices that are methodologically based on the actual cost of generation.

The cost-based prices therefore enable investors obtain a reasonablereturn on renewable energy investments.

India has practiced FIT regime for nearly two decades now.


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Period A Period B Period C

Evolution of Market Model & Role of Utility

MNES Preferential TariffsRegulated

Preferential TariffsREC + Pref

Tariffs



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MNRE Preferential Tariff Policy 1994MNRE Preferential Tariff Policy 1994--9595

Way back in 1994-95, Ministry of Non-Conventional Energy Sources(then MNES and now MNRE)

According to Policy, State Electricity Boards were required to purchaseelectricity generated by renewable energy sources at rates prescribed inthe policy

The rate prescribed was Rs. 2.25 per unit for year 1994-95 to be increased

Period A


y per annum or next ten years. Further, Policy provided wheeling and banking at 2% to captive and

thirds party sales transactions.

Various states adopted the guidelines (not uniform) through anexecutive order (by energy department)


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Analysis of MNRE Preferential Tariff PolicyAnalysis of MNRE Preferential Tariff Policy

As can be seen from earlier graph, though MNRE Policy resulted inincreasing renewable energy capacity (4000MW) in the country, primarybusiness driver was Accelerated Depreciation and not FIT.

Reasons for the same were:

Though Policy was issued by MNRE, it was not statutorily binding on eitherstate or utilities within State

Period A


MNRE had very little influence on purchasing utilities

Financial health of utilities was very weak

Confusion existed on some of the provisions of the policy

Awareness about energy security and climate change related issues did notexist at utility and/or consumer level


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Feed In Tariff Under New LegislationFeed In Tariff Under New Legislation

Electricity legislation in India for the first time specifically seeks to

promote the renewable sources of energy

National Policy under the act to take into consideration the need to

promote the renewable.

Period B


Regulator has been entrusted with the task of promotion of renewablesources of energy both as off-grid supplier and grid-connected supplier.

Regulatory entrusted with the responsibility of setting tariffs for various

renewable energy technologies.

Retail tariff to consumers need to take into account renewable sources.


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Many States have taken actionMany States have taken action

Armed with legislative powers, many State ElectricityRegulatory Commissions took constructive action forpromotion of renewable energy:

Issued Feed In Tariff Orders for technologies operational in their areaof jurisdiction.

Period B


Determined various charges applicable for undertaking transaction ofrenewable energy

Determined / approved principles of long term energy purchase


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For exampleFor example wind tariffs across Stateswind tariffs across StatesPeriod B

States Wind Energy Tariff Rs. Per Unit

Madhya Pradesh (Order dtd. 21/11/07)Rs 4.03 in first year, gradually reduced to 3.36 in 5th

years and thereafter upto 20 years (to be revised)

AndhraPradesh (Order dtd. 1/5/2009) Rs 3.50 for 10 years

Gujarat (Order dated 30/1/2010) Rs.3.56 fixed for 25 years

Karnataka (Order dated 11/12/2009) Rs. 3.70 fixed for 10 year

Rajasthan (Order dated 16/7/2009)Rs. 3.83 : Jaisalmer, Jodhpur, Barmer Distric


. .

Maharashtra (Order dated 24/11/2003)Rs. 3.50 for the first year and thereafter 15 paise

escalation every year: for 13 years (to be revised)

Kerala (Order dated 27/02/2008) Rs 3.14 for 20 years

Tamil Nadu (Order dated 20/03/2009) Rs 3.39 for 20 years

Haryana (Order dated 15/05/2007) Rs 4.08 applicable for 5 yearswith annual escalation of 1.5% from 2008-09

Punjab (Order dated 13/12/2007)Rs. 3.49 (Base Year 2006-07) with annual escalations

@ 5% upto 2011-2012

West Bengal (Notification dtd. 25/3/08) Rs. 4.00 fixed for 5 years and as cap


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RPO Compliance in IndiaRPO Compliance in IndiaPeriod B



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Analysis of Period B ActionsAnalysis of Period B Actions

During this Period, i.e. 2004 2010, significant renewablecapacity (~13000MW) was added in country.

While FIT played a key role, Several new challenges haveemerged for large scale renewable deployment.

RE sources are not spread evenly across the country

Period B


As a result, RPO targets are significantly different

Mechanism for inter-state purchase of RE is required

Low transaction cost mechanism for OA/Captive consumers

SERCs have assumed different parameters for determination of FIT

Consequently, some times perverse incentives have got created

As a result, new innovative mechanisms were required.


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Efforts to normalize Feed In TariffsEfforts to normalize Feed In Tariffs

CERC is authorized to determine the tariffs for interstatesale of energy.

Further, National Tariff Policy required CERC to come upwith guidelines for purchase of infirm power.

Under these powers, CERC has developed tariffs for various

Period C


renewable energy technologies operating in India. It is envisaged that the norms/methodologies used by CERC

will be adopted by SERCs to develop feed-in tariffs in their

area of jurisdiction. This would help bring synergies in feed-in tariffs across the

country.


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CERC tariffs for Wind & HydroCERC tariffs for Wind & HydroPeriod C



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CERC tariffs for Biomass PowerCERC tariffs for Biomass PowerPeriod C



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CERC tariffs for Solar PowerCERC tariffs for Solar PowerPeriod C



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Renewable Energy Certificate MechanismRenewable Energy Certificate Mechanism

In order to address following problems, CERC inconsultation with State Regulators has developed andimplemented REC mechanism.

Effective implementation of RPS

Increased flexibility for participants

Overcome geographical constraints

Period C


Re uce transaction costs or RE transactions

Enforcement of penalty mechanism

Create competition among different RE technologies

Development of all encompassing incentive mechanism

Reduce risks for local distributor by limiting its liability to energy purchase

Mechanism has been implemented with effect from April 1,

2010 and the trading of RECs has started since March 2011.


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Challenges during Period CChallenges during Period C

REC mechanism is a market based mechanism while FeedIn Tariff is a strong regulatory mechanism.

Theoretically both mechanisms can not co-exist.

Given evolution of market over last 7-8 years, it is felt thatFITs are not required.

Period C


However, sudden withdrawal of FIT mechanism wouldcause RE Market to collapse.

Therefore, it is necessary that timeline is set for phased

withdrawal of FIT and competitive environment compatiblewith REC mechanism is developed.


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ABPS Infrastructure AdvisoryPractical Solutions to Real Life Problems

ABPS Infrastructure Advisory

A-309, Kohinoor City

Kirol Road, off LBS Marg

Kurla (West), Mumbai 400 070

Ph: +91 22 6124 0400/ 6124 0444

Fax:+91 22 6124 0499

Email: [email protected]

Balawant Joshi - Feed in Tariff Experience in India

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