- The project is introduced in order to meet the future power requirements and fulfill the Renewable Purchase Obligation (RPO) of MSEDCL. The successful bidders will be eligible to fiscal incentives like Accelerated Depreciation, concessional customs & excise duties.
- In case of import of energy in case if intra-state projects the HT industry tariff will be applicable while selling the power to MSEDCL as per the MERC regulations and in case of inter-state projects, all the transmission charges and losses up to delivery point shall be to the account of the successful bidder.
Maharashtra has recently been very active in introducing new schemes for solar PV plants. The state recently tendered 1GW capacity of solar projects to be developed under the Mukhyamantri Saur Krushi Vahini Yojana.
The waiver shall be applicable for 25 years from the date of commissioning of the projects and only on those projects entering into PPAs with distribution licensees for sale of electricity for compliance of their RPO. The order also states that the waiver shall be applicable to projects awarded through competitive bidding process.
This order continues to encompass the same issues present in the previous orders. It is only applicable to solar projects from which the electricity will be sold to the DISCOMs. Secondly, it will only be on those solar projects entering PPAs for the compliance of RPO. ]]>
For generation projects based on solar resources, the waiver will be on projects commissioned till 31/12/2019. The waiver will be available till 25 years of date of commissioning of such projects and on solar ?projects entering PPAs for sale of electricity to DISCOMs for compliance of RPO. The remaining of the terms and conditions remain the same as the 2016 order.
As per our analysis, this order by the MoP has a number of limitations. First of all, it is only applicable to solar projects from which the electricity will be sold to the DISCOMs. Secondly, it will only be on those solar projects entering PPAs for the compliance of RPO.
The order released in 2016 can be accessed here. ]]>
“Solar Purchase Obligation (SPO)”; policy’s main driver of demand, has been confronted with a lot of criticism. Various consumer associations had approached relevant forums against such a binding mandate which required solar energy consumption to be 6% (from Jan 2014) out of total energy consumption. According to an article in The Hindu (dated July 7th 2013), Tamil Nadu Electricity Consumers Association (TECA) went to ApTel in June 2013, saying that consumers will not have the required solar energy capacity. According to submissions in the present order by the appellants, TN requires an installed solar capacity 720 MW in the year 2013 and 1500 MW in 2014, to make solar power available for compliance with SPO and RPO targets.
TANGEDCO as a respondent in the order has said that solar RPO of 0.05 % ceased from being into effect from the time SPO was introduced by the state commission.
TANGEDCO, last year, had floated tenders which has currently around 700 MW of solar projects awaiting execution of power purchase agreements. The solar power price discovered through, competitive bidding mechanism,was Rs. 6.48 per unit. Following this recent ApTel order, TANGEDCO is in a fix whether to scrap solar power purchase obligation or to buy power from solar projects and subsequently move TNERC to raise tariffs, to accommodate additional cost of buying costlier solar power.
A copy of this order can be found here.
Media Articles are available in the following links-
The Hindu? – (dated 6th Nov 2012)
Our relevant blogpost can be read here.
Link to Tamil Nadu’s Solar Policy 2012
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This analysis focuses on the impact and feasibility of Solar RECs as a mechanism to finance and operate solar energy plants. As a significant number of companies and investor consider solar energy opportunities, we present an analysis of how workable solar energy plants are under the REC mechanism.
Solar RPO are included in most state regulations
RPO regulations in each state require fulfilling a separate Solar RPO. At present the solar RPO requirement ranges from 0% to 0.5% of total electricity consumed. It is expected to go upto 3% by 2022. At the same time, a separate Solar REC will be issued to generators who meet the eligibility criterion. These Solar RECs will have a floor price of Rs 12/kwh and a forbearance price of Rs 17/kwh.
Demand for Solar RECs
Our analysis suggests that Solar RECs demand will be robust. Majority of the upcoming capacity in solar energy is either through state feed-in tariffs, or though the NSM. In either case, that capacity will not access the REC market. At the same time, there will be robust demand as every obligated entity will also need to buy Solar RECs. REConnect’s analysis suggests that 2011-12 demand of Solar power for RPO requirements will be in excess of 1,300 million units* (roughly translating into 600MW of capacity). As a result, we expect Solar RECs to sell at a high price.
*Calculated from CEA data : For a detailed analysis please contact us.
Most state regulations provide that in the event for inadequate availability of Solar RECs, the Solar RPO requirement can be fulfilled through Non-Solar RECs. Since Non-solar RECs are significantly cheaper that Solar RECs, this can present issues in the Solar RECs markets – companies may wait for the Solar REC supply to be exhausted so that they can buy non-solar RECs for compliance, and it may result in a downward pressure on Solar REC prices. More clarity is needed on the implementation of this clause is the state RPO regulations.
Floor Price of Solar RECs
As mentioned above, the floor price of Solar RECs is Rs 12/kwh. Compared to this, the tariff offered under the NSM is about Rs 11.18/kwh. In the light of the above, developing solar projects through the REC mechanism seems like a very attractive proposition (even at Rs 2.5/kwh of APPC price, under the Solar REC mechanism a project can make a minimum of Rs 14.5/kwh). However, there are two constraints:
- Market risks: Given the early stages of the REC mechanism, most investors consider the possibility of delayed or inability to sell Solar RECs. In such a scenario, there is a risk of delayed cash flows, and also of significant loss of revenue if Solar RECs remain unsold.
- Change in the floor price of Solar RECs: CERC’s order on floor and forbearance price mentions the method of calculating the floor price as “The highest difference between the minimum requirement for project viability of Solar PV and respective state APPC of previous year (2009-10) has been considered as floor price”
Since the calculation of Solar RECs floor price, due to the NSM’s bidding process, the ‘project viability’ cost can be considered to have moved to Rs 11.18 (the tariff given by NVVN Ltd. under NSM). Given this development, it can be expected that Solar REC floor price will be revised downward in the coming years. Assuming modest growth in APPC, our analysis suggests that Solar REC floor price will be between Rs 8 – 10/ kwh.
The impact of such a downward revision may be limited, as for the foreseeable future, demand for solar energy for RPO purposes will be far greater than supply, thus keeping Solar REC prices above the floor price.
Solar Case Study :
Profit=Profit before Tax
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