By Ashay Abbhi
India’s renewable energy sector witnessed a flurry of policy and regulatory activity during 2018. While the outcomes of the regulatory developments of the previous year began to emerge this year, new regulations were also introduced to put the sector on a target-based growth trajectory. Several policies were released for renewable energy generation, transmission, distribution and storage during the year. These are expected to set the stage for the achievement of the 175 GW of installed capacity target by 2022. The policy changes are aimed at tackling the various pain points in the renewable energy sector in a bid to increase operational and regulatory efficiency. Renewable Watch analyses the policy and regulatory highlights of the year.
Amendments to Electricity Act
In the wake of the changing renewable energy dynamics, the government has floated proposals for several amendments to the Electricity Act, 2003. These include penalty provisions, and stricter enforcement of power purchase agreements (PPAs) and renewable purchase obligations (RPOs). The primary reason for these proposed amendments is the host of issues faced by developers in the offtake of power from projects without long-term PPAs. Moreover, the move is aimed at improving the distribution companies’ (discoms) RPO performance by ensuring that they have PPAs to cover the set targets.
In a significant amendment that would change the status quo of power supply in India, the government has proposed to allow customers to select and change their power suppliers. This move would end the supply-side monopoly by shifting the power point from the suppliers to the buyers. The amendments will be followed by a roadmap prepared by the government in tandem with the states to separate the distribution and supply ends of the business.
Forecasting, scheduling and deviation settlement
Given the focus on grid-integration of renewable power, the centre and states released draft regulations regarding their forecasting and scheduling norms and deviation settlement mechanisms (DSM). To this end, the Central Electricity Regulatory Commission (CERC) has issued draft regulations for 2018 that are aimed at improving power procurement planning by the utilities. The regulations also entail the monitoring of area control error in addition to the deviations. It introduces the concept of “gate closure” for better optimisation of scheduled despatches. Moreover, the CERC has suggested that the DSM price vector should be linked to the discovered prices in the day-ahead market. Also, to provide adequate opportunities to participants, it has been suggested that the number of time slots should be increased in the power exchange market.
Among the states, Haryana and Punjab issued their respective draft regulations for the forecasting, scheduling and deviation settlement of solar and wind power generation. They joined a small list of states that have released these regulations including Andhra Pradesh, Gujarat and Tamil Nadu. According to the regulations, under- and over-injection of power into the grid from the plant will be penalised in the form of deviation charges. All grid-connected wind and solar power generators with 1 MW of generation capacity in Haryana and 5 MW of capacity in Punjab will fall under the purview of the regulations.
In March 2018, the Maharashtra Electricity Regulatory Commission also issued draft regulations for forecasting, scheduling and deviation settlement of solar and wind power generation in the state. This order applies to all wind and solar energy power generators in the state connected to the intra-state transmission system with a minimum capacity of 5 MW. According to the regulation, these charges will also be applicable to captive power and third-party open access power plants. For effective implementation of the mechanism, wind and solar project developers will be required to appoint a qualified coordinating agency for meter reading, data collection, communication and coordination with the discoms, the state load despatch centres and other agencies.
As renewable energy generation becomes increasingly mainstream, open access from solar and wind power generators is gathering steam. To facilitate the market, states have been releasing regulations in addition to their existing open access policies to provide greater clarity as the changing market may lead to ambiguity. In March 2018, the Bihar Electricity Regulatory Commission issued draft regulations pertaining to intra-state open access for 2018, to provide transparency to the previous open access regulation (2006). All consumers with a capacity greater than 1 MW, power generating projects and captive projects of any size will be deemed eligible for intra-state open access upon payment of the necessary charges.
The regulations further clarify that all consumers and projects with a capacity of more than 10 MW will be eligible to obtain intra-state transmission system connectivity. Meanwhile, all projects and consumers with a capacity of less than 10 MW will obtain distribution system connectivity. The regulations also exempt solar and wind energy projects from the payment of open access transmission charges. Bihar has provided a comprehensive preference guideline that will dictate the award of open access capacity in the state. According to it, the discoms will receive first preference during the allotment of open access capacity, followed by long-term (seven years), medium-term (five years) and short-term open access applicants.
In April 2018, Assam followed suit and released its draft open access regulations for 2018. The eligibility of being an open access consumer in the state has been capped at a lower limit of 1 MW and available for the long term (seven years), medium term (five years) and short term. According to the regulations, all generating companies will be required to pay open access charges for using the intra-state transmission system within and outside the state of Assam. The regulations also entail the installation of special energy meters and remote terminal units for energy accounting and real-time monitoring respectively. Meanwhile, the charges for net-metered solar photovoltaic (PV) systems will be in accordance with the Assam Electricity Regulatory Commission’s Grid Interactive Solar Photovoltaic Systems Regulations, 2015.
In May 2018, the Uttarakhand Electricity Regulatory Commission (UERC) released its draft regulations for intra-state open access for 2018, introducing a cross-subsidy surcharge (CSS) component for the customers. The CSS is applicable to consumers availing open access exclusively on the intra-state transmission system as well as on private dedicated transmission lines. Captive projects, however, have been exempted from the CSS. Moreover, the wheeling and transmission charges are applicable to all power generators with no exemptions.
With distributed generation and consumers turning into producers to become “prosumers”, maintaining the integrity of the grid has become a challenge. To this end, the Central Electricity Authority (CEA) has issued a draft amendment to the technical standards and regulations for rooftop solar power systems and electric vehicle (EV) charging stations that are connected to or are seeking grid connection. The draft regulations define an applicant as a generating company, charging station, prosumer, or a person seeking connectivity to the electricity system at a voltage below 33 kV.
On the other hand, a user is defined as a charging station, prosumer or a person who is connected to the grid system. Moreover, a generator with distributed resources connected to the grid is also considered to be a user. The adequacy and stability studies of the networks are to be carried out by the licensee as per the regulations.
The emerging segment of solar-wind hybrid power plants gained significant traction in May 2018 with the release of the final policy, the draft of which was issued in June 2016. Aimed at reducing the intermittency and variability associated with renewable energy generation, the policy provides a framework for the development of hybrid power plants that take advantage of the complementarity of solar and wind power resources. The hybrid systems also ensure efficient utilisation of transmission infrastructure and address the challenge of land constraints.
The segment saw the commissioning of the first commercial-scale project in April 2018 in Raichur, Karnataka, owned by Hero Future Energies and set up by Siemens Gamesa. The project entailed the addition of 28.8 MW of solar component to the existing 50 MW of wind power. In June 2018, the Solar Energy Corporation of India (SECI) released a tender for 2.5 GW (later reduced to 1.2 GW) of ISTS-connected solar-wind hybrid capacity with a fixed upper tariff ceiling of Rs 2.93 per kWh (later reduced to Rs 2.70 per kWh). In August 2018, the agency tendered the 160 MW Ramagiri wind-solar hybrid plant integrated with energy storage. Meanwhile, NTPC also invited bids for the development of 190 MW of solar-wind hybrid power projects in Kudgi, Karnataka.
Taking the lead among states, Gujarat has announced the Wind-Solar Hybrid Power Policy, 2018. The policy aims at optimum utilisation of land by allowing the setting up of wind power plants on the same land currently used by solar power plants. Conversely, solar plants can be set up on land that is currently being used by wind farms. The existing transmission infrastructure can be used in both cases.
The policy includes the conversion of existing and under construction wind or solar power plants into hybrid plants, or setting up of greenfield hybrid projects that are yet to be registered with the Gujarat Energy Development Agency. The projects falling in the latter category will have to set up dedicated lines for power evacuation up to the receiving station of the Gujarat Energy Transmission Corporation at their own cost.
According to the regulation, the electricity generated from these projects will be exempted from power duty. The new policy also has a provision for 50 per cent electricity duty exemption for the sale of power to a third party. For hybrid captive plants, it provides total exemption from cross-subsidy surcharge and additional surcharge, and 50 per cent relief in wheeling charges and distribution losses. The benefits and rebates will be applicable for a period of 25 years or the life cycle of the project.
The increasing popularity of energy storage amidst decreasing costs has compelled the government to explore its applications in the Indian renewable energy sector. To this end, in June 2018, the Ministry of New and Renewable Energy (MNRE) brought battery energy storage systems under the ambit of the Solar Photovoltaics, Systems, Devices, and Component Goods (Requirement for Compulsory Registration under BIS Act) Order, 2017. The Indian Standard number IS 16270 has now been assigned to storage batteries and has been named ‘Secondary Cells and Batteries for Solar PV Application General – Requirements and Methods of Test’. Meanwhile, the MNRE has amended the national wind-solar hybrid policy to broaden the definition of “battery storage” to include all energy storage technologies by removing the word “battery” from the phrase.
Waiver of transmission charges
To encourage the offtake of renewable power and to keep the landed price competitive with the traditional sources of power generation, the CERC and the Ministry of Power (MoP) have waived the transmission charges and losses for projects using the ISTS network. The policy change is applicable to all solar and wind power projects commissioned by March 31, 2022 and will continue through the entire duration of the PPA, typically 25 years. Earlier, the exemptions applied to wind power projects commissioned until March 31, 2019 and solar projects until December 31, 2019.
Competitive bidding guidelines
While competitive bidding can be deemed as a success for the solar power segment, project developers continue to face challenges. In order to make the process more efficient while addressing the existing issues, the MoP has amended the competitive bidding guidelines for the procurement of power from grid-connected solar power projects.
Land continues to be a major problem area for solar project developers. To address this, the land acquisition period and the time to achieve financial closure have been increased from seven months to 12 months from the date of execution of the PPA. Meanwhile, the time frame for commissioning of projects has been extended to 21 months from 13 months. The time frame for commissioning projects with over 250 MW of capacity, outside of solar parks, has increased from 15 months to 24 months. The extensions aim to ensure the timely execution of projects and reduce the time-based disputes between developers and procurers on account of delayed project commissioning.
The Indian solar manufacturing segment continues to lag behind even as the demand for solar panels is rising. To encourage the setting up of greater capacities, the government is looking to roll out a Rs 80 billion scheme entailing the promotion of 12 GW of local solar cell and panel manufacturing without violating the World Trade Organization (WTO) guidelines.
Public sector units (PSUs) will issue tenders for setting up solar power projects using locally manufactured equipment. As per the WTO, commercial-scale projects feeding into the grid must not have domestic content requirement clauses. The projects set up by these PSUs will therefore use the power generated for their captive consumption. The scheme will be implemented over four years and ensure a minimum manufacturing capacity of 3 GW of solar cells per year.
Implementation is the key
As the deadline for the 2022 targets draws closer, the need for more efficient, targeted development of the sector assumes prime importance, supported by a robust policy and regulatory framework. The market is in constant motion, requiring dynamic policy changes that can be implemented in a short time span. So far, 2018 has been a year of positive policy and regulatory developments aimed at removing bottlenecks from the renewable energy sector.
Challenges in grid infrastructure availability, land acquisition, payments and reneging on PPAs are some of the key hurdles in the renewable energy sector. Moving forward, it is expected that the government will focus on addressing these industry choke-points and create a balanced ecosystem for the growth of developers, manufacturers, investors and consumers alike. However, only effective implementation of these policies and regulations will ensure timely achievement of targets and streamlined growth of the sector.