Fresh Initiatives

Andhra Pradesh’s new renewable policies reflect changing market dynamics

Andhra Pradesh has emerged as a front runner in the country’s renewable energy sector with 2,591 MW of solar power and 4,057 MW of wind power capacity installed as of September 2018. Owing to rich resource availability, the state has the potential to develop 38 GW of solar and 44 GW of wind power.

The key to the state’s success in the renewable energy sector is the government’s proactive policymaking. Andhra Pradesh has been quick to adapt to the changing solar and wind market dynamics in the country by introducing favourable initiatives and policies in a timely manner. The state has a target of achieving 18 GW of renewable energy capacity by 2021-22. To this end, the New and Renewable Energy Development Corporation of Andhra Pradesh (NREDCAP) has recently released new solar, wind and solar-wind hybrid power policies. The key features of these policies are highlighted below…

Solar power policy

The Andhra Pradesh Solar Power Policy, 2018 is the third edition of the state’s solar policy, the others being in 2012 and 2015. Given the high cost of solar power generation in the formative years of the segment, the previous policies had provided strong fiscal incentives to developers. With the fall in capital costs, the new policy has shifted focus to the overall promotion and sustainable development of the solar segment. The following are some of the key highlights of the solar power policy:

  • The policy has an operative duration of five years during which it is targeting the addition of 5,000 MW of solar power.
  • It also targets the deployment of distributed generation, agricultural pump sets and solar manufacturing facilities in the state.
  • The incentives announced as part of this policy will be available to developers for a period of 10 years.
  • Power from projects developed via the competitive bidding procedure under this policy can be used for captive purposes or be sold to Andhra Pradesh’s discoms. The discoms will procure 2,000 MW of solar power in a phased manner from solar power plants through a power purchase agreement of 25 years.
  • The state government will develop 4,000 MW of solar parks with the necessary infrastructure in place. Special purpose vehicles will be established to facilitate engagement with developers.
  • Solar rooftop has also been encouraged for domestic, commercial, industrial and government establishments. The consumer will be free to choose either net or gross metering for trade of the power thus generated, at a tariff equivalent to the average power purchase cost (APPC) determined by the Andhra Pradesh Electricity Regulatory Commission (APERC). NREDCAP has been appointed as the nodal agency for the disbursement of subsidies for net metering, as available under the National Solar Mission.
  • The policy targets the deployment of 50,000 solar pump sets over the next five years to ease the power burden on farmers. These pump sets will replace conventional pumps, with subsidy support as provided by the central government.
  • Incentives provided to solar power project developers:
  • Transmission and wheeling charges will be exempted for connecting the solar plant to the nearest central transmission utility (CTU) via the state transmission utility (STU) network for interstate wheeling of power.
  • Banking of 100 per cent power from these plants will be permitted during all months of the year at a charge of 5 per cent of the energy at the point of drawal. However, drawal will not be permitted from April 1 to June 30 and from February 1 to March 31 of each year. Moreover, drawals during peak time of day hours will not be applicable.
  • Intra-state open access will be permitted for the tenure of the project or 25 years, whichever is earlier.
  • All projects are eligible for renewable energy certificate (REC) benefits.
  • The developer will bear the cost of constructing the power evacuation facilities up to the interconnection point or the substation from where the power will be evacuated.
  • Solar power plants coming up under this policy will be given deemed status of public-private partnership (PPP) projects. Must-run status will also be accorded to solar power plants.
  • Land acquisition for the project will be the responsibility of the developer. In case the land is owned by the revenue department, it will be allotted as per the government policy.
  • To encourage solar manufacturing activity in the state, the policy provides the following incentives for new manufacturing facilities:
  • Solar parks will be allotted land on priority on a long-term basis.
  • The facility will be exempted from paying electricity duty for a period of 10 years.
  • Time-bound statutory clearances can be obtained from a single desk portal.
  • Solar power plants developed by manufacturers will be given preference in the offtake of power, power evacuation connectivity, and extension for energy banking facilities.

Wind power policy

The Andhra Pradesh Wind Power Policy, 2018 is driven by two objectives: clean energy and use of sustainable mediums to meet the growing power demand in the state. To this end, the policy aims to be a facilitator to attract private investment for large wind power projects and manufacturing facilities. The key highlights of the wind power policy are as follows:

  • The policy will be operative for a period of five years and the projects thus developed will be eligible for incentives for 10 years.
  • There are three categories of projects as per the new policy:
  • Category I: Projects that are set up on government or private land, selling power within or outside the state
  • Category II: Projects that are set up for captive or group captive use or third-party sale within or outside the state
  • Category III: Projects that sell power at APPC and avail of the REC benefit.
  • NREDCAP is responsible for the allotment of projects with a capacity of up to 40 MW and for recommending capacity allotment of projects of over 40 MW to the Andhra Pradesh government.
  • The projects would need to be completed within 24 months of the date of signing of the agreement between the developer and NREDCAP.
  • The developers would be required to ensure the availability of wind resources through micrositing in order to optimally utilise the potential of the site.
  • Developers are encouraged to replace the lower capacity, lower hub height wind turbines already installed with high capacity, high hub height turbines with improved technology.
  • The developer will bear the cost of connecting the wind farm with the grid for power evacuation.
  • Wind power evacuation to the nearest CTU via the STU network for interstate wheeling of power will be exempted from transmission and distribution charges.
  • As with solar power plants, banking of 100 per cent energy from wind power plants in the state will be permitted during all months of the year, at a charge of 5 per cent of the energy at the point of drawal.
  • Intra-state open access clearance will be granted for the tenure of the project or 25 years, whichever is earlier.
  • Wind power plants that draw reactive power up to 10 per cent of the net energy generated will be charged Re 0.25 per kVARh. For more than 10 per cent drawn, the generator will be liable to pay Re 0.50 per kVARh.
  • Wind power projects in the state have been accorded PPP and must-run status.
  • NREDCAP will function as the designated nodal agency for wind power plants to facilitate single-window clearance for concerned activities.
  • To promote manufacturing of wind turbines in the state, the policy aims to extend the same incentives to manufacturers as those for solar manufacturers.

Solar-wind hybrid policy

The central government released a solar-wind hybrid policy in May 2018 with the objective of developing the hybrid system for effective utilisation of the country’s limited land and transmission resources. Andhra Pradesh has released its own policy to encourage the combined use of its solar and wind power resources, and achieve better grid stability. The state’s solar and wind power potential is concentrated in the Rayalaseema belt, where most of these projects will be developed. The policy also aims to encourage the use of new technologies to combine multiple power sources along with energy storage and other emerging technologies. The following are some of the key highlights of the state’s solar-wind hybrid policy:

  • The policy will remain in force for a period of five years. The projects set up as part of it will be eligible for incentives for 10 years.
  • As per the policy, a solar-wind plant will be recognised as a hybrid power plant only if the rated capacity of one source is more than 25 per cent of the other. Further, each MW of the plant will achieve a minimum of 40 per cent capacity utilisation factor.
  • The power generated from the hybrid plant may be used for captive purposes or for sale to third parties through open access, at a tariff determined through the bidding process. It could also be sold to discoms at APPC under the REC mechanism.
  • In case existing wind or solar projects are being hybridised under this policy, no additional transmission charges will be levied. However, for additional transmission access required, subject to availability at the substation, transmission charges will be applicable. In this case, the augmentation of transmission capacity will be the responsibility of the developer.
  • The banking of 100 per cent power from such projects is permitted during all 12 months of the year. It will attract banking charges of 5 per cent of the energy delivered at the point of drawal.
  • Any unutilised banked energy will be deemed purchased at 75 per cent of APPC by the discoms. Payment for the deemed purchase will, however, be capped at 10 per cent of the total banked energy during the year.
  • As per the policy, any energy storage technology may be added to the projects to reduce the variability of power output from the hybrid plant and ensure availability of firm power for a particular period.
  • All fiscal incentives available to new wind and solar power projects as per the respective policies will also be applicable to the solar-wind hybrid plants, in addition to the following:
  • Only 50 per cent transmission and distribution charges will be applicable for wheeling the power generated through solar-wind hybrid projects. There will be no charges for transmission to the CTU via the STU for inter-state wheeling of power.
  • For solar-wind hybrid projects in the state, 50 per cent of the applicable electricity duty will be exempted for captive consumption, sale to discoms or third-party sale.
  • For third-party sale, 50 per cent of the cross-subsidy surcharge will be paid.
  • All solar-wind hybrid power plants will have deemed PPP status and be accorded must-run status, as per the policy.

Conclusion

According to Anmol Jaggi, founder, Gensol Engineering, “The policy has laid special emphasis on solar parks by targeting a capacity of 4,000 MW in the next five years. A key feature of these parks is that they will consist of various zones such as solar power projects, manufacturing zones, research and development zones, and training centres. This appears to be a good measure that will help develop solar parks into manufacturing hubs, thus giving them the colour of an industrial development zone, albeit restricted to solar. The policy also seems to have given equal emphasis to the proliferation of rooftop solar projects by allowing both gross and net metering systems of energy accounting. Another good measure is the freedom given to groups of persons or societies to set up rooftop solar power projects that would be treated as collective generation for the supply of power to households in each society/ group member. An important highlight of this policy is the clear intent to streamline and standardise the approval process, with ceilings being set for approval timelines for various clearances, beyond which go-aheads would be deemed as given.”

The solar, wind and solar-wind hybrid policies released by Andhra Pradesh are clear in their objective of encouraging sustainable ways of meeting the growing demand for power. Energy storage, while present in the solar-wind hybrid policy, is conspicuous by its absence in the wind and solar power policies. Given the emergence of storage technologies and their increasing application in renewable energy generation, it should have been included in these policies in order to provide a basis for competitive bidding of projects along with energy storage. Meanwhile, the policies address the challenges of manufacturing by providing strong incentives to manufacturers. This will help attract significant investments in solar and wind power projects in the state.

Net, net, these policies are comprehensive in nature and capture the shift in dynamics in the overall renewable energy sector.

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