Madhya Pradesh made headlines recently when a tariff of Rs 1.38 per unit for the first year was quoted by a developer under a rooftop tender released by the state’s renewable energy agency. Prior to that, the state made a mark by developing a successful open access-based utility-scale solar power model. In an interview with Renewable Watch, Manu Srivastava, principal secretary and commissioner, New and Renewable Energy Department, Government of Madhya Pradesh, talks about the state’s progress in renewable energy development and its plans to further improve the policy and regulatory scenario for sector growth…
What have been the highlights of the renewable energy sector in Madhya Pradesh over the past year?
Madhya Pradesh is one of the fastest growing renewable energy states in the country. In less than six years, we have achieved eightfold growth in installed renewable energy capacity. As of December 2012, we were at around 492 MW, and by October 2018, we reached an installed capacity of 4,023 MW.
The notable achievements of Madhya Pradesh in the renewables space include the development of the 750 MW Rewa project and several kilowatts of rooftop solar projects. The state government ensures risk mitigation and appropriate risk allocation to bring down the price of renewable energy and make it acceptable to a larger category of customers. The projects have been carefully structured so that risk is allocated to the party that is in the best position to bear it. Further, we have attempted to prepare robust projects that are more bankable and viable.
This has led to the 750 MW Rewa project getting a first-year tariff of Rs 2.97 per kWh, at a time when the government was giving viability gap funding to achieve the target tariff of Rs 4.50 per kWh. In the rooftop solar space, we have achieved a first-year tariff of Rs 1.38 per kWh under the renewable energy service company (RESCO) mode.
These low prices have led to renewable energy being accepted by a wider cross-section of customers. Rewa has opened up an entirely new chapter in the utilisation of renewable energy in the country. With this, large institutional open access consumers can start procuring inexpensive renewable energy, not on account of regulatory directions, but for commercial considerations. The Delhi Metro Rail Corporation (DMRC) is procuring power from Rewa, not because it is mandated to do so, rather because it is a commercially prudent decision. Similarly, Madhya Pradesh’s rooftop project under the RESCO mode has enabled government buildings all over the state to get rooftop solar installations without making any capital investment whatsoever. These include 291 government colleges, 158 police establishments, 154 engineering colleges, polytechnics, etc., 12 medical colleges, among others – organisations that would normally never have the financial resources or the interest to go in for the installation of rooftop solar projects.
What is the current installed capacity in the utility-scale and rooftop solar segments in the state? What are some of the upcoming projects?
Currently, there is an installed capacity of 1,507 MW and 47 MW in the utility-scale solar and rooftop solar segments, respectively. However, in the next few months, the 750 MW Rewa ultra mega solar power project will be commissioned (around 280 MW has been commissioned so far). This will take the state’s total installed utility-scale solar capacity to more than 2,000 MW.
Further, rooftop capacity is expected to grow at a rapid pace given the enormous interest shown in the RESCO mode by government organisations. It does not require any capital investment and the beneficiaries generate savings from day one. The interest of various government organisations in RESCO mode was generated after Phase I of the RESCO project, which included only three medical colleges. As soon as the results of Phase I were declared and the Department of Medical Education was informed that it would be getting solar power at Rs 1.74 in the first year without any capital investment, the remaining 11 medical colleges also evinced interest in the installation of rooftop solar in RESCO mode. Consequently, Madhya Pradesh Urja Vikas Nigam Limited (MPUVNL) was forced to tender out RESCO Phase II within 10 days of Phase I results for these 11 medical colleges, among others. The sites selected were mostly government buildings along with a few private ones.
What steps has the state government taken to promote the rooftop solar segment?
The state aims to achieve the target of 2,200 MW of solar rooftop projects by 2022. As a part of this mission, MPUVNL has approached various state departments, central government institutions and private institutions, inviting their interest for the installation of solar rooftop systems on their premises in opex mode.
MPUVNL has completed preliminary diligence of identified project sites by conducting site visits, well before the last date of bid submission, to determine the available shadow-free area. It has has also assessed month-wise actual electricity requirement from past electricity bills and premise-conditions. A first-of-its-kind data room has been created and tagged with tender documents for aiding the participating bidders. The data room hosts information on site-specific technical assessment and electricity consumption history, etc.
What is the current status of the decentralised solar policy?
The Madhya Pradesh Policy for Decentralized Renewable Energy Systems was released in October 2016 and the first amendment to the policy was released in November 2017. The policy allows grid-connected rooftop solar systems under three categories:
i. On a net metered basis
ii. For consumption within/outside the premises through wheeling and banking, and
iii. For consumption within the premises with no export of power
The key features of the Madhya Pradesh Policy for Decentralized Renewable Energy Systems are:
- No limit on system size based on contracted demand. Thus, beneficiaries can install a rooftop system much larger than their contracted demand to enhance the benefit of cheaper power, if the rooftop size and distribution transformer capacity permits.
- A list of distribution transformers and their capacity.
- In case the installation of a decentralised renewable energy system for low tension (LT) consumers requires system augmentation, the entire cost will be borne by the discoms and will be claimed through average realisable revenue.
- A standard format for net metering application forms, application acknowledgement, net metering approval, etc. is provided in the annexure of the policy. The objective is to standardise the documentation process of all three state discoms.
- Electricity duty has been waived for renewable energy producers consuming renewable energy from such systems for a period of 10 years from the date of commencement of supply. Renewable energy beneficiaries connected at the LT level will enjoy electricity duty exemption for the life of the renewable energy system.
- Installation of a renewable energy system on the premises of the renewable energy beneficiary will not be considered in the eligible floor area ratio (FAR) calculation. It will also allow these beneficiaries an additional FAR for construction on the premises. Further, the height of the system will not be considered in computing the total height of the building.
What steps need to be taken to promote the sale of solar pumps in the state?
The state’s solar pumps programme was launched in March 2017. It involves the procurement of 18,000 solar pumps of 10 kinds and 24 configurations. The project is innovative on several fronts. The life cost of a solar pump is almost one-third of that for an electric pump.
This would lead to a lifetime saving of Rs 0.518 million per pump for the state government as well as the farmers.
The scope to scale up this programme is huge, since the state has more than 2.5 million electric and diesel pumps used for irrigation purposes. Conventional electric pumps have a bundle of challenges. Agricultural tariffs are kept low with high direct subsidies from the government and high cross-subsidies by charging industrial and commercial consumers higher tariffs. This accounts for a large share of the government budget, apart from making power supply to the private sector more expensive. Providing electricity to farms involves a substantial expansion of the power infrastructure, which leads to an adverse HT:LT ratio and higher discom losses.
Electricity for agriculture is supplied during night hours, whereas farming is done during the daytime. This, coupled with sometimes unreliable grid power at the tail end, adds to the difficulties of the farming community. Solar-based irrigation pumps are a solution for these problems.
Will the record low tariffs for the solar segment hit the uptake of wind energy projects?
In the last few bids, solar and wind tariffs have been at the same level. In the auction conducted by GUVNL, the lowest wind tariff was actually 1 paise lower than the lowest solar tariff. Moreover, wind and solar are complementary in nature. Therefore, for a state that is also considering grid security while preparing the power procurement plan, it is necessary to have a mix of different renewable energy sources rather than depending on a single source of power. Recently, Madhya Pradesh has signed a power sale agreement with the Solar Energy Corporation of India for the procurement of 400 MW of wind power from projects installed mainly in Tamil Nadu and Gujarat. Hence, it is difficult to say whether lower tariffs in the solar segment will hit the uptake of wind power. While both sources are competitive with each other, they are, at the same time, complementary as well.
It is good to see that wind and solar have almost comparable tariffs for commercial sustainability. Their complementary resource profiles can help roll out wind-solar hybrid solutions in the country. This might be a solution to India’s grid stability concern associated with renewable energy integration when it crosses 25 per cent share of the total capacity mix.
What is the current status of renewables-based open access projects in the state? How much capacity has been set up under this mode in Madhya Pradesh?
Currently, the installed capacity under open access mode, including projects commissioned under the renewable energy certificate mechanism, stands at 318 MW, which is less than 8 per cent of the total installed renewable energy capacity in the state. Due to the recent introduction of open access charges on renewable open access transactions, including a rather high cross-subsidy surcharge and additional surcharge, it makes it unviable for a consumer to adopt renewable energy-based open access.
While regulatory constraints come in the way of expanding open access in Madhya Pradesh for smaller capacities, open access is delivering results for utility-scale projects. Madhya Pradesh has been the first state to have successfully undertaken an interstate open access transaction with a big institutional customer. In this transaction, DMRC, a commercial consumer, will buy power from the Rewa ultra mega solar plant, along with Madhya Pradesh Power Management Company Limited. It will be the first instance of solar energy being injected directly into the national grid (interstate transmission system) for supply outside the generating state. In terms of the electric map of the country, Rewa (Madhya Pradesh) is in the western region, while DMRC is in the northern region. This is the first case in the country of renewable power being scheduled outside the region to an interstate open access customer, involving coordination with the western and northern region load despatch centres and the National Load Despatch Center.
What are the provisions to promote open access (third-party and captive) projects? What are the major challenges and bottlenecks faced by these projects?
Currently, the state is providing an electricity duty waiver for 10 years from the date of commissioning, along with a 4 per cent waiver on wheeling charges.
The recent introduction of cross-subsidy surcharge and additional surcharge on renewable energy-based open access transactions is a challenge. We are seeking waiver of these from the Madhya Pradesh Electricity Regulatory Commission.
The state government has invested in developing green corridor projects for facilitating the evacuation of non-conventional power from the state. It is funded with 20 per cent equity, 40 per cent grant from the National Clean Energy Fund and 40 per cent soft loan.
What are the potential challenges in achieving the state’s renewable energy targets?
The state’s renewable energy targets are much higher than its RPO targets. Hence, efforts have to be made to supply renewable energy from Madhya Pradesh to other states, as has been done in the Rewa ultra mega solar project. Similarly, the upcoming 1,500 MW solar project will supply power to Indian Railways. Apart from this, the regulatory framework has to facilitate open access transactions within the state by determining open access charges at a level that can be absorbed by the consumers.