Accountability of regulators a serious crisis in India: Goyal

Stating that accountability of regulators was a very serious crisis that the country was facing, Union Minister Piyush Goyal today said very often they are not even able to justify many of their decisions.
“The one very, very serious crisis that the nation is facing today is the accountability of regulators. There is almost no accountability of regulators. And in the garb of independence of regulation, it occasionally goes to another extreme,” the Union Minister of State for Power, Coal, New and Renewable Energy and Mines said.
He was speaking at a seminar on ‘Ease of Doing Business- Regulators as Facilitators’ at Vibrant Gujarat Global Summit 2017 here.Pointing at regulation of environment sector as a case in point, he said the sector suffered due to “over regulation as regulators are not able to justify many decisions”.

“The environment sector has suffered due to over regulation and very often regulators are not able to justify many decisions. So, you have a situation, where there is nothing like forest for an area called forest, no satellite image, no ground report says there is a single tree in that area,” he said adding that seeking building permission or regulatory permission for such areas causes a lot of trouble.

Attending the seminar were chairman of Food Safety and Standards Authority of India (FSSAI) Ashish Bahuguna, chairman of Competition Commission of India (CCI) Devendra Kumar Sikri, and chairman of Central Electricity Regulatory Commission (CERC) Gireesh Pradhan, among others.

“Transparency is another area, when we look at the regulatory process. Regulators should be open about their working, hearings should as far as possible be more and more in public domain, and speaking orders, with a logical approach, should be available in public domain so that others should benchmark their business process to whatever is decided by regulators,” he told the audience.

“And regulators should also be user-friendly rather than being under the shroud of what really was the intent of regulators and intent of law. Lastly, it is important to target regulation on what the problem is, so that we don’t tend to go haywire and over-exceed our brief,” Goyal said.

“If we can keep the side effects of regulations minimum, it can help make regulators truly a facilitator person and help economic growth. We can then have a situation where people are not fearsome of regulators, we have to get fear out of regulation,” he said.

“In that sense, policy makers and regulators should work hand in hand. You can’t have a situation, where policy makers and regulators think differently,” he added.

View original post on Business standard: http://www.business-standard.com/article/pti-stories/accountability-of-regulators-a-serious-crisis-in-india-goyal-117011101448_1.html

Has India’s Energy Sector Really Transformed?

SL Rao

Most importantly, Piyush Goyal, the Union Minister for Power and Renewable Energy, Coal, and Mines has cleared the coal sector’s Augean Stables, which were riddled with corruption, theft, and inefficiency. Coal is easily available today, imports have fallen, and global prices have fallen along with those of oil and gas.

Falling domestic demand has sent coal prices lower as well. Power is surplus despite power plants working at a low average plant load factor of 60 percent. But at the same time, around 30 crore people remain without electricity.

Does This Indicate A Transformation?

Not so much. On the positive side is the coal availability and price situation, increasing but still inadequate interstate transmission capacity, some reduction in transmission and collection losses.

But state-owned power distribution companies do not generate enough of their own funds to buy power from within the state or from outside. This is because tariffs remain uneconomical for the distribution companies.

States have violated the law that permits open access for distribution companies to purchase cheaper power from other states. Instead, they buy expensive power from within the state.

Ruling parties treat power as a public good which must be available to all, irrespective of their ability to pay. This has meant that power is given free or below cost to many households, for agriculture in many states, and to some other favoured consumers. Agricultural use of free or cheap power has led to a surge in water-intensive crops like rice and sugarcane, often on soil that is unsuitable. Outcomes range from saline soil to depleting groundwater and river water levels.

The government just ends up accumulating large stockpiles of rice. Compounding that, the Government of India has a minimum support price policy that encourages cereals even when the demand is falling. It has no relation to water availability and use for the crops.

There has been no improvement in gas supplies to operate stranded power generation capacity. Even when gas is available, demand may not be sufficient. Gas generation is flexible and can usefully back-up variable generation from renewables.

Renewable Energy And Efficient Appliances

Wind and solar renewable energy capacities have gone up significantly, as have some small hydro-electric projects. Governments incur subsidy expenditure in promoting renewable energy, but regulators have failed to enforce renewable energy obligations, resulting in a loss of revenue for the generators of clean power. State power distribution companies have not been compelled to meet renewable energy obligations in their total power supply mix.

Progress has been made on energy efficiency. The distribution of LED light bulbs has helped conserve a significant amount of power, as have other measures initiated by the Bureau of Energy Efficiency. This may well have resulted in some decline in demand for generated electricity.

UDAY Scheme: A Stop-Gap Fix

The power sector benefited from the Ujwal DISCOM Assurance Yojana (UDAY) scheme, which reduced debt on the books of state distribution companies by getting the corresponding state government to take over the debt. This, however, has not made any of the distribution companies profitable, but the saving in interest costs has freed some cash.

The UDAY scheme is the best that the Centre can do since electricity is a concurrent subject in the Constitution.

The scheme needs to be seen, not as a solution, but as short-term relief. Power distribution is a state subject, and ruling parties are populist about electricity pricing as they are able to woo large electoral voting blocs.

This is made possible via the appointment of state regulators who are mostly compliant, often from the community of retired bureaucrats who have served in the same state. Until regulators are appointed for their independence, courage, and lack of subservience to ruling governments, there can be little change in the dire financial position of power distribution companies.

It is apparent that fundamental change still eludes the power sector.

UDAY is merely transferring some distribution debt to state governments. It does not tackle the problem of below-cost tariffs and significant inefficiency caused by government ownership.

The only way state governments can indefinitely continue taking on power distribution debt as it accumulates, is via the annual budgetary exercise. But doing so will divert funds from vital state spending – on human capital, law and order, and the building of infrastructure.

There is no option but to charge users a tariff that is remunerative to the company.

Regulate Well, Build Capacity, Store Better

Regulators must have the authority to punish those responsible for below-cost tariffs, and delays in Aggregate Revenue Requirement filings. Transmission and distribution losses, poor collection, and theft of electricity must be targeted, monitored and failures severely penalised.

Interstate and intrastate transmission capacities are grossly inadequate. Governments are the primary investors in this space, more so because private investors are put off by long and frequent government delays, and the consequent costs.

Delays in giving government clearances on land, environment, forest and others have held up many a project, keeping out subsequent private investment.

While India is taking rapid strides in renewable energy, and there are heavy government subsidies involved, there is little investment in backup storage capacity to make up for a shortfall when there is no sun or little wind.

This storage can be of water, batteries or as flexible generation capacities in gas or coal.

In sum, the energy and especially the power sector in India has experienced an uncoordinated set of policies that have left this vital sector largely in government hands and running at a loss. Foreign investment is most unlikely in such a sector. The domestic investment that has taken place is not very profitable. Their supply is either confined to large users or use other means to cover costs.

Huge investment has been made in the power sector, but it needs more. The present surplus is artificial and not due to demand satisfaction, as much as to poor revenues. The energy sector must be approached in its entirety, policies must be integrated for the private as well as public sector to run it in a way that is remunerative.

SL Rao is a Distinguished Fellow Emeritus at The Energy and Resources Institute (TERI), and was the first chairman of the Central Electricity Regulatory Commission.

(This article was originally published in BloombergQuint.)

 

View original Post on: https://www.thequint.com/environment/2017/04/03/energy-sector-transformation-renewable

Infrastructure: As far as private power producers are concerned, no light at the end of the tunnel

With around 45,000 MW of power capacity running at sub-60% Plant Load Factor (PLF), servicing their staggering debt of `1.9 trn has become a challenge for India’s thermal power producers.

With around 45,000 MW of power capacity running at sub-60% Plant Load Factor (PLF), servicing their staggering debt of `1.9 trn has become a challenge for India’s thermal power producers. To make matters worse, state discoms have been unwilling to sign power purchase agreements (PPAs) with private producers, opting for central and state power utilities instead. The PLF of the private sector’s coal-based plants fell to 56.45% in the ten months to January 2017 from 83.9% in FY10, as per data available with the Central Electricity Authority. The figure stood at 62.60% in January 2016.

The authority estimates that another 50,000 MW capacity would get commissioned over the FY18-22 period. The central and state utilities would account for 50% of this capacity and the private sector for 40%. Unfortunately, things are unlikely to get any better in the near future. “As the short-term power prices are likely to remain benign and discoms are unwilling to sign PPAs, capacities are unlikely to see an increase in PLF going forward,” Salil Garg, Director Corporate at India Ratings, says.

An analysis of the financials of power producers like GMR Infrastructure, GVK Power & Infrastructure, Lanco Infratech, KSK Energy, and Jindal India Power Ltd reveals the state of affairs as far as private power producers are concerned. GMR Infrastructure suffered a loss of `381 crore in the third quarter of FY17 compared with a profit of `40 crore a year ago. Two of its coal-based power plants—GMR Warora Energy Venture Ltd and GMR Kamalanga Energy Ltd—registered an accumulated loss of `3,022 crore as of December 31, 2016. GMR Chhattisgarh Energy, another subsidiary, saw lenders taking control of the project in February by converting `2,992 crore of the `8,800 crore debt into equity.

Lanco Infratech, an infrastructure-cum-power company, incurred a loss of `813 crore for the third quarter ended Dec 31 compared with a profit of `35.19 crore a year ago. The earnings before interest and tax (EBIT) for its power segment dropped 47.24% to `232.10 crore and the revenues fell around 20% to `1,190 crore. The company is looking at options to sell its operational assets. As for GVK Power & Infrastructure, it incurred a net loss of `71 lakh in Q3, compared to a loss of `6.80 crore a year ago. For its single coal-based power plant in the Taran Taran district of Punjab, the company is facing fuel supply issues.

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Another Hyderabad-based power producer, KSK Energy Ltd, saw its losses growing to `17 crore in the third quarter from `14 crore a year ago. The company is believed to be in talks with lenders to refinance its Mahanadi project debt—`11,691 crore of the total `19,000 crore—under the 5/25 scheme of the Reserve Bank of India.

The fall in tariffs in solar and wind segments has compounded problems for thermal power producers. “The drop in tariff for solar projects to `2.97 per unit in the latest bidding in Madhya Pradesh and the levellised tariff of `3.34 per unit would be an additional burden for conventional power generators, as their cost of production has gone up due to cost overruns on fuel supply and environmental clearances,” an analyst with a Mumbai-based foreign brokerage says. The renewable segment is likely to see consolidation going ahead as the government’s target of attaining 175,000 MW of renewable energy capacity by 2022 approaches closer, he adds. As much as 15,000 MW of solar and 9,000 MW of wind capacity creation is likely to be targetted in the new financial year (FY18).

 

View original post on Financial Express: http://www.financialexpress.com/industry/infrastructure-as-far-as-private-power-producers-are-concerned-no-light-at-the-end-of-the-tunnel/612437/

India Focus: Financing the renewables dream

India has surprised many with the speed and government commitment of its renewable energy programme. But what are the financial challenges behind taking the country’s clean energy ambitions to the next stage. 

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There are few countries in the world – and arguably none in the so-called developing world – that have renewable energy targets as ambitious as those of India.

When the country announced in 2015 that it was planning to have an installed renewable energy capacity of 175 GW by 2022, many industry observers believed this was simply undeliverable.

And yet the country is on track to beat that target by a couple of years, thanks to a raft of policy initiatives and financial backing, not least from domestic investors.

“India is absolutely committed to renewable energy targets and clean energy growth and nothing will stop that,” said Piyush Goyal, minister of state for Power, Coal New and Renewable Energy and Mines at the World Future Energy Summit in Abu Dhabi in January.

He said that today, “renewable energy stands on its own feet”.

“Gone are the days when governments need to provide support. It makes good economic sense to invest in clean energy and energy efficiency.”

Kishor Nair, chief operating officer of Welspun Energy, says that when Goyal took charge, “particularly in the first six months, he was having a lot of discussions with industry to understand the problems of developers in executing projects. The tariffs have come down because of a lot of enabling policies. A lot of initiatives were taken in cutting down the project costs, optimizing the projects earlier.”

Vikram Kailas is managing director of Mytrah Energy, which was formed in 2010, when it raised $80 million from institutional investors such as Capital Group, Blackrock and Henderson.

“So we have seen the transformation of the industry,” said Kailas at the World Future Energy Summit. “When we started the company, a seven-year loan was standard and interest rates were about 13 per cent. Today, 18-20 year loans are standard in India and interest rates have down to about 10 per cent.”

Mytrah Energy presently has a total wind portfolio capacity of 1000 MW across 15 wind farms in eight states – Rajasthan, Gujarat, Madhya Pradesh, Maharashtra, Andhra Pradesh, Telangana, Karnataka and Tamil Nadu.

Kailas says “India is going through a transformation” with, for the first time, 1000 MW of wind having been tendered. “It’s a good move for two reasons. One, it opens up the boundaries beyond state level and increases the demand, and I believe that it leads to transparent pricing. It’ll lead to a better price realization both for the state and for the industry.”

Vinjay Rustagi is managing director of Bridge to India, a renewables consulting and research company working with “everybody across the whole value chain”.

He said: “When you talk to major international investors about the Indian renewables sector, the fundamentals for the sector are compelling.”

“When you look at the imperative to reduce carbon emissions, the growing power demand, the desire to reduce energy costs, as well to provide power to people 24/7 across India, the fundamentals are so strong that we see a strongly growing renewable power sector for one or two or more decades in the future.”

Rustagi says that the key in India is that the renewables market “provides visibility, growth and strong government support which are huge positives for financiers in the sector”.

To deliver India’s big renewables ambitions is going to take big money. “We think that the total financing requirement for the sector is about $120 billion based on today’s cost of installing and setting up these systems,” says Rustagi. “That is spread between equity and debt in the ratio of 25 and 75 per cent. Most of that investment is geared towards power generation, which is being dominated by the private sector. And of course there needs to be a lot of ancillary investment in transmission and distribution and upgrading of the grid, which is currently led by the public sector.”

The scale and pace of India’s renewables rollout is vast and fast. “The key thing is, historically, the sector has been about 5 GW a year – going forward we want to scale that up to 10-15 GW a year,” explains Rustagi. “Is India and investors ready to make this sustainable on a long-term basis? Is there enough appetite in the financing market to support this growth?”

He said “the biggest risk for any entity that is setting up a renewable project is the ability of the grid to absorb and sell the power to consumers. A huge amount of work needs to go into making the grid strong and resilient enough to cope with the growing renewables capacity in the country.”

“If the Indian government wants to attract enough private investments, it needs to make sure that developers don’t have to take risks and that the transmission grid is capable of coping with the extra supply of renewables.”

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Minister Piyush Goyal: “It makes good economic sense to invest in clean energy.”

Credit: IRENA

Another risk which international investors are worried about in India is the country’s distribution companies. “There are companies which still by and large are government-owned and they have various pressures – political and regulatory – to keep tariffs low,” says Rustagi. “Their balance sheets are not very strong, so the question really is: can distribution companies make sure that they can absorb all this growing capacity in the country.”

A further concern – though perhaps less so now than in past years – is the Rupee risk. He said PPAs were all structured in Rupees and “when you’re coming from outside, there’s a genuine concern over what happens when the Rupee depreciates. The Rupee has been volatile over the last six-to-seven years. But I think over a period of time, driven by the attractiveness of the market, many international investors have got comfortable with the Rupee depreciation risk. This is something that you can build into your financial model – you can quantify it.”

The financial players

So who is playing in the Indian market? There is huge interest from both the international and the Indian community to finance projects: international developers, private equity and Indian corporates.

“The interesting thing,” says Rustagi, “is that it is the Indian corporates and private equity funds who have dominated the market. International investors bring big balance sheets, and cheaper cost of money, but we see that the India players have been the most aggressive in the market.”

However, he poses the question: “What happens to these investors over a period of time. Most Indian investors don’t arguably have a long-term view – they want to churn their assets, recycle their funding – so is there enough debt in the market to be able to absorb their funding on a long-term basis?”

Rustagi says debt for the sector is “mainly coming from Indian lenders who seem to have a huge appetite”.

“The India renewables market is very attractive. It offers multiple-decade growth and strong policies from the government. On the equity side, the key issue if scale of capital.”

Daanish Varma, director of Sustainable Investment Banking at Yes Bank, says “lenders have become much more comfortable with the solar story – they understand the technology”.

But he adds that once other capital-intensive infrastructure projects in India start picking up, renewables will have to compete for capital, “so we will have to watch out for that”.

He too says India is a bank-driven debt market. So how does the sector bring in the big bucks of the bond and pension markets. “Once we address the risk portion of it,” says Varma. “Once we are able to say that operating renewable assets in India is as secure as you can get, then you get the bond market and the pension investors coming into the process. You need to move from a private-equity play to a pension play for renewable assets.”

But Anand Rohtagi, managing director of Synergy Consulting, warns: “I don’t think India is ready for the equity capital needed for the quantum of solar technology you are looking at. If you see where India stands today, we have had domestic developers look at the market, international investors are standing behind the domestic developers – there is not a single international developer looking at the market. That’s where the issue lies.

“India today does not have access to long-term equity capital. Most of the capital you see is short term. For the sector to grow it needs long-term capital – it needs players who can hold equity for 15-to-20 years. So India is a long way from the equity-funding cycle.”

View original post on: http://www.powerengineeringint.com/articles/print/volume-25/issue-3/features/financing-the-renewables-dream.html

Wind power bids seem unrealistic

To operate at a tariff of, say, ₹3.50 a unit, projects need to achieve a plant load factor of 35 per cent, which is a tall order

The recent bid by the Solar Energy Corporation of India (SECI) to set up 1000 MW wind power plants saw tariffs drop to ₹3.46 per unit. This has set a new benchmark for wind power in India, bringing the overall cost of power down in a rapidly growing economy.

Despite being India’s first wind power project tender, SECI was oversubscribed 2.6 times. Bids were concentrated in three States; with Tamil Nadu receiving the highest share of 1794 MW, followed by Gujarat with 700 MW and Karnataka with 100 MW.

The tender was floated by the SECI to help non-windy States access wind power by linking them to the inter-state transmission system. Project developers will sign a 25-year PPA with the Power Trading Corporation of India, which, in turn, shall sign back-to-back arrangements with discoms /bulk customers of non-windy States. Waiver of inter-State transmission charges and compensation for system losses till the interconnection point by allowing for construction of 5 per cent additional capacity were also provided as part of the tender.

Until now, wind energy in India followed the feed-in-tariff (FIT) route with tariffs for long-term PPAs with State discoms ranging from ₹4- 6 per unit. With the SECI tender mitigating key risks of off-take, evacuation and payment and going by the recent solar bidding process which witnessed tariffs fall below the ₹3 mark, the level of interest observed shouldn’t come as a surprise.

But, having lived through a situation where aggressive bidding in infrastructure projects has not worked in the industry’s favour, it does make us wonder about the strength of the underlying assumptions made in these bids.

A basic number crunching carried out with a tariff of ₹3.46 per unit at prevalent industry conditions – Central Electricity Regulatory Commission (CERC) estimated project cost of about ₹6.2 crore per MW, debt to equity of 70:30, financing at 9.5-10 per cent – indicates that Plant Load Factors (PLFs) of about 33-35 per cent may be required to fetch investors reasonable returns of 15-16 per cent.

Standing on shaky ground

Going by the historically available PLF data of wind power plants in India and limited availability of high wind density sites, achieving such PLFs consistently for the 25-year life of the plant seems far-fetched. Unlike solar energy, wind farms in India are concentrated in a few high wind States such as Tamil Nadu, Maharashtra, Karnataka, Andhra Pradesh, Gujarat and Rajasthan. Even within these States, only selective sites offer high wind energy potential.

The Indian market is moving towards adopting higher capacity wind energy generators (WTGs) with hub height of more than 100 metres. Global players such as GE have come out with advanced technology turbines designed to offer increased swept area, facilitating higher generation in low wind density sites. While this will improve the project economics for developers, implementation remains largely untested.

Alternatively, lower PLFs need to be compensated by either cutting down the project cost substantially, or by obtaining best deals for operation and maintenance (O&M) of the wind turbines, or by locking-in low cost funds, most often a combination of all of these. Clearly, higher capacity wind turbines are going to come at a cost and there are limitations to the concessions that can be obtained from O&M players.

Despite the interest rate cuts and falling MCLRs of banks, securing low cost funding in today’s market will largely depend on promoter strength and credit rating. Without a substantial database of PLFs of 35 per cent available in India today and given the first time deployment of next generation wind turbines, lenders, having burnt their fingers more than once, might choose to play it safe this time around.

Solar was a different story

Unlike Ultra Mega Solar Parks (UMSP), for the SECI wind projects, project land and evacuation infrastructure up to the point of interconnection at the ISTS need to be put up by the developers. In India, these things come at a cost. Right or wrong, these unstated costs need to be factored in the project cost estimates.

Further, the drop in prices of WTGs has been very different from what has been seen in solar power. Since 2009, solar PV module prices have fallen by 80 per cent as compared to a 30-40 per cent fall in wind turbine prices. Solar module costs fell by about 26 per cent in 2016 alone and are likely to fall further this year, due to oversupply in the Chinese and European markets. Considering the low lead time in procuring solar panels and low time required for commissioning, the bidders for Rewa UMSP would have had sufficient buffer to factor in another round of drop in solar module prices.

No such cushion is available for wind. Bidders would have had to rely upon pre-bid tie ups with WTG manufacturers to work out their project cost estimates. In a way, the aggressive bidding would have trickled backwards and caused a fair share of competition among turbine manufacturers.

More uncertainties loom

From April 1, 2017, the tax relaxation for infrastructure projects under 80IA shall cease. Further, wind power plants commissioned after this financial year will not be eligible for generation based incentives. Accelerated depreciation will reduce from 80 per cent to 40 per cent.

Also, the cloud of uncertainties that the implementation of GST poses needs to be factored for any reasonable viability assessment. Most wind turbines are domestically made. Currently, there is no excise duty to be paid for WTGs and renewable energy components attract a VAT of 0-5 per cent in most States. According to a report published by the Ministry of New and Renewable Energy, GST is likely to cause an increase of 11-15 per cent in project cost of wind power projects.

One can only hope that all these risks were adequately factored by the bidders. This kind of aggressive bidding is not new to us. Starting from BoT road projects awarded a decade back, to coal mining, telecom spectrum and more recently, solar power and hybrid annuity model (HAM) projects in the road sector, this issue has been ingrained in the system.

While it is good to see such investor interest in India’s infrastructure space, it is absolutely essential to tread carefully. Let us not forget all the BoT projects which became distressed assets in the books of lenders due to optimistic traffic projections or higher revenue shares promised during a competitive bidding war.

View original post on Hindu Business Line: http://www.thehindubusinessline.com/opinion/wind-power-bids-in-india-are-unrealistic/article9618027.ece

The UK’s electrical grid is so overrun with renewable power, it may pay wind farms to stop producing it

Generating electricity from the sun and wind is great for the planet, but the infrastructure necessary to deal with these intermittent power sources is tricky. Too much or too little power can upset the balance of the grid, which has to be finely tuned to keep the voltage of the electricity it delivers to customers stable.

Without a means of storing renewable energy or handling huge variations in production, too much electricity surging into the grid can damage appliances or even cause outages. This is the problem that the UK may face this summer, the country’s grid operator says. When electricity demand naturally falls during the summer months, it is thinking about paying wind farms to stop generating so much power.

For the past few years, the UK has been ramping up renewable-energy production—especially wind power—in order to reduce its carbon emissions. Government subsidies have also encouraged homes and businesses to install rooftop solar panels, which can bypass the grid altogether.

Meanwhile, National Grid, which manages the UK’s electricity network, has been trying to update its aging infrastructure. Ofgem, the UK’s energy regulator, estimates that payments to balance electricity generation when it gets out of whack—either too much or too little to meet demand, from both renewable and (mostly) fossil-fuel generators—ran to about £354 million ($540 million) in 2015, or less than 1% of energy bills.

This summer, National Grid estimates that maximum and minimum energy demand from utilities is likely to fall to an all-time low (paywall). Peak demand is predicted to be 35.7 gigawatts, compared with 37.5 gigawatts in 2015, and minimum demand to be 18.1 gigawatts, compared with 18.4 gigawatts in 2015.

The UK’s electricity consumption has been falling in recent years. Some of the decline was down to the financial crisis, in addition to increased energy efficiency at homes and businesses, according to a National Grid spokesman.

Reduced energy demand and more prevalent renewable power is a good combination for the climate, but a headache for grid operators. These staid businesses are scrambling to balance their grids in response to a rapid energy transition. In the meantime, they may have to keep paying some power plants for, in effect, not doing their job.

 

View original post on: https://qz.com/952827/the-uks-electrical-grid-is-so-overrun-with-renewable-power-it-may-pay-wind-farms-to-stop-producing-it/

The Underachieved Solar Target Of FY17, What Went Wrong?

While the industry is cheering on the record-breaking wind capacity addition for the year for FY17, we still fall behind in our solar targets, which has been the government’s favourite child

 

While the industry is cheering on the record-breaking wind capacity addition for the year for FY17, we still fall behind in our solar targets, which has been the government’s favourite child.

As per the official data of the Union ministry of new and renewable energy (MNRE), against the targeted 12,000 MW (10,500 MW ground-mounted and 1500 MW rooftop solar) for grid-connected solar projects in 2016-17, 5,525.98 MW has been achieved. Cumulative solar capacity currently stands at 12,288.83 MW, against 6,762.85 MW as compared to the last fiscal, which is a great news for the solar industry overall and is impressive even if it falls short of the target.

However, let’s talk about what happened to this particular fiscal’s target. Was 12000 MW too ambitious for this fiscal or things didn’t go as planned by the officials.

According to Amit Kumar Kadam, Partner, Renewables, PwC, the target of 12000 MW for solar was made on certain assumptions, one of the biggest being the solar parks, which failed to get operational by 2016.

5000-6000 MW capacity addition was expected to come from solar parks. Two to three solar parks were already operational but the rest didn’t take off as per the desired target. The main issue was the infrastructure which was not ready”, says Kumar.

Outside the solar parks comes the Rooftop segment(1500 MW target) which didn’t get the desired push especially from the DISCOMs. “The single most important reason for the underachievement of the renewable targets in the last fiscal year is the dismal performance in the solar rooftop segment. Economic reasons such as no economies of scale in rooftop and non-economic reasons such as poor contract enforceability, poor implementation of net metering policies by state agencies etc. are some of the major reasons behind the shortfall in the rooftop targets”, says Manu Agarwal, Research Analyst, Centre for Energy, Environment and Water.

Kumar says the DISCOMs need financial incentives to encourage rooftop installations which would alleviate their concerns about loss of profitable customers and additional network investments.

The third major concern is the PPA signing and biddings which didn’t happen as anticipated. According to Girishkumar Kadam, VP, Corporate Sector Ratings, ICRA and Power Sector Lead, the 2016-17 target for solar faced shortfall owing to the delays in tendering and PPA signing process. “There was a temporary lull in the sector post-Rewa. The authorities would be re-evaluating the project structure and there is going to be a bidding delay in the next fiscal as well”.

“Post the tender, the winning developers should be awarded the LOA (Letter of Award) in 5 months and the PPA should be signed in the next 1 month, but that didn’t happen. The same scenario cannot be predicted for the next set of targets”, says Kadam.

There is now a downward concern, according to Kumar. The DISCOMs want a replication of what happened at the Rewa auction and are hesitant in signing the PPAs at tariffs higher that Rewa. All experts are of an opinion that Rewa was a result of unique conditions of land, payments, subsidies, created by the state which led to those record tariffs, a pure plug and play.
Raj Prabhu, CEO, Mercom Capital Group voices another hurdle of RPO Compliance and government policies which hindered this year’s solar target, “The 12,000 MW goal was pretty aggressive but the government agencies were not equipped to handle it. Power demand is lacking and some states have to curtail power as there is no demand. Every time there is a new low bid, tender activity freezes as all states want the bids to get down to those levels. I think the investors and renewable energy companies are ready to invest and execute projects but hurdles are in the government machinery.”

Going forward, Kumar says the sector could land into trouble post-2018 when we touch almost 20% of the installed capacity in solar. ” There are major challenges- Grid stabilisation, Spinning reserves and storage. Who will incur the cost of all three?. India is in no position for storage innovation as we are dependent on countries like Japan for technology breakthrough.”

“Getting to 175 GW by 2022 will be tough, it is a very aggressive target. The issue is, these targets are set to top-down from the central government without figuring out how states will be able to achieve this. DISCOM financials are in shambles and most would rather cut power than purchase and supply it to the customer”, says Prabhu who terms the next 2 years crucial to see if the states can handle higher renewable generation.

However, Sabyasachi Majumdar, Senior Vice President, ICRA is optimistic of the overall targets and set up the government and predicts 7-7.5 GW of capacity addition for solar in 2018, amidst a very strong project pipeline via NSM (National Solar Mission) route. “A lot is under implementation. We should look at these targets from year to year basis. All the capacities for FY17 should be commissioned and the shortfall in the target should be made up in the next fiscal”, says Sabhya.

Of the 5,526 MW added, only 2,803.77 MW had been commissioned till February end, but it was followed by a spurt of more than 2,700 MW in March 2017, which shows how the government is speeding up on its targets just in time to beat the year-end deadline.

Amidst all, the experts hail both centre and state specific policies giving momentum to the renewable energy, besides some unattended areas. “Under the national solar mission, the projects awarded via SECI have increased tremendously with amendments in the national tariff policy as well. The states have coined their own region-specific policies and targets showing active interests in bids and RPO targets”, says Girish.

The targets of the government might seem too ambitious but aiming for the moon will at least make you land on the stars. 12,288.83 MW of cumulative capacity against 6,762.85 MW compared to the last fiscal, being this FY17’s shining star.

 

View original post on Business World: http://businessworld.in/article/The-Underachieved-Solar-Target-Of-FY17-What-Went-Wrong-/11-04-2017-116155/

India plans Renewable Energy Management Centres for Green Corridors

Existing control centres, known as state load dispatch centres (SLDCs) currently lack renewable energy forecasting systems. Flickr: Tapas GaneshExisting control centres, known as state load dispatch centres (SLDCs) currently lack renewable energy forecasting systems. Flickr: Tapas Ganesh

As part of India’s Green Energy Corridor scheme, the Ministry of Power has proposed setting up a host of Renewable Energy Management Centres (REMCs) across the country to help integrate renewables as their penetration increases. The centres will cost around INR4.09 billion (US$63.5 million).

With a 160GW target of solar and wind by 2022, the ministry is concerned about grid stability and security. It noted that seven states will account for 104GW (65%) of this capacity including: Tamil Nadu, Andhra Pradesh, Karnataka, Maharashtra, Madhya Pradesh, Gujarat and Rajasthan.

The newly proposed REMCs would therefore be separated into the Southern, Western and Northern regions across the seven major resource rich states and various projects of the Green Energy Corridor scheme.

Existing control centres, known as state load dispatch centres (SLDCs) currently lack renewable energy forecasting systems, scheduling, monitoring and reserve management abilities.

To alleviate this problem, India aims to emulate state-of-the-art renewables forecasting and monitoring systems already successfully operating in countries like Spain, Germany, US, Denmark, Belgium and Australia.

The REMCs’ functions include:

  • Forecast renewable energy generation at state and regional levels
  • Schedule renewable generation with real time tracking and SCADA systems
  • Coordinate with the relevant load dispatch centre

Power Grid Corporation of India Limited (PGCIL) has already worked on similar control centre projects and has therefore been assigned the implementation role. On completion, PGCIL will hand the REMCs over to the states.

The projects are to be implemented within 15 months of award and commissioned progressively through 2018/19.

PGCIL recently entered in to a loan agreement of up to US$500 million with the Asian Development Bank (ADB) partly for one of its Green Energy Corridor projects.

View original post on: https://www.pv-tech.org/news/india-plans-renewable-energy-management-centres-for-green-corridors

PM Narendra Modi may step in to resolve wrangling on NITI Aayog’s proposed National Energy Policy

ঘোষণা নীতি আয়োগ-এর

NEW DELHI: Prime Minister Narendra Modi is likely to intervene to resolve an inter-ministerial wrangling over NITI Aayog‘s proposed National Energy Policy to roll out the long-overdue power sector reforms.

Different stakeholder ministries, including those of power, coal, and new and renewable energy, have failed to come to a consensus on some points of the proposed policies, including freeing coal from price control, despite several rounds of consultations, said a senior government official who is aware of the deliberations on the matter.

“National Energy Policy is pending with PMO (prime minister’s office),” the official told ET. “The top office is now planning to convene a high-level meeting of all concerned ministers and secretaries to be chaired by the PM himself to suggest way forward to the policy,” the official said.

The first draft of the policy, framed by the Aayog after intense consultations over last one and a half year, was ready for seeking public comments by March. But that has been held back after concerned ministries raised objections with the PMO over certain proposals.

PM Narendra Modi may step in to resolve wrangling on NITI Aayog's proposed National Energy Policy



Coal ministry, for example, expressed reservations over the proposal to free up the commodity from any price control. Such a move would divest the ministry of its power to control coal prices and help maximise profit for Coal India.

However, NITI Aayog has largely stood by its reforms agenda. National Energy Policy has proposed comprehensive reforms to free sectors such as coal, electricity and fertilisers from subsidies and price controls, helping to produce more power by making electricity generation projects commercially viable for private companies.

The policy has outlined the need and measures to improve financial condition of power distribution companies (discoms), which are bogged down by debt, to make the sector profitable in the medium to long term.

Key suggestions being considered include overhauling the entire structural and functional capacity of discoms so that they operate more professionally.

In India, electricity and fertiliser sectors are heavily subsidised. The government feels there is a need to bring down subsides in such sectors and, hence, a clear roadmap for lowering subsidies and aligning their prices to that of the market has been laid out.

But this proposal hasn’t gone down well with concerned ministries.

National Energy Policy is aimed at curbing imports by increasing production of renewable energy in the country fivefold to 300 billion units by 2019 and tripling coal production to 1.5 billion tonnes. Coal imports are envisaged to come down by 10% by 2022 and by 50% by 2030.

NITI Aayog CEO Amitabh Kant had earlier told ET that differences are obvious as the policy proposes far reaching reforms to transform the power sector. “Wherever there are differences, we’ll pose them before the Prime Minister and let him take a call,” he had said earlier. Prime Minister is the chairman of the Aayog.

National Energy Policy will replace Integrated Energy Policy of the UPA regime that envisioned a roadmap for sustainable growth with energy security over a reasonable period of time.

All bets are off: 4 takeaways on what President Trump means for the power sector

The paradigm of decarbonization that’s guided utility sector investments for the past decade is now up in the air. How will the Trump victory impact other industries? Here’s what we know about the President-elect. 

After a long election night, the American public elected real estate magnate and reality TV star Donald Trump as the 45th president of the United States. The Republican nominee’s win shocked political commentators across the spectrum, as most election models predicted a victory for his Democratic rival Hillary Clinton in the hours before polls closed.

For the power sector, Trump’s election is likely an unwelcome development. U.S. utility companies gave more money to Clinton than any other candidate this election cycle, while none made sizeable donations to Trump. 

Much of that support came from the fact that Clinton is more of a known quantity to the power sector. Because they invest in multi-decade assets, utilities desire certainty and predictability out of policymaking, and the Clinton campaign laid out a full energy platform promising to build on the model of carbon regulation and renewable energy supports pushed by President Obama.

The Trump campaign, by contrast, was hard to predict: Beyond promises to roll back EPA regulations and support fossil fuels, he laid out few concrete energy policy proposals. And because energy and climate policy rarely featured on the campaign trail this cycle, the details of how a Trump administration would plan to transform U.S. energy production remain unclear. 

In the coming weeks, much effort will be spent trying to decipher who Trump will appoint and how his team will handle the specifics of energy policy. But given that President Trump will likely come into office with a GOP-controlled Congress and a vacancy to fill on the Supreme Court, there are some broad conclusions for the power sector that we can already draw. 

1. The Clean Power Plan — and other air regulations — are in danger 

One of the most immediate impacts of Donald Trump’s election is that the Clean Power Plan now appears much more likely to be struck down. 

The CPP is the EPA’s first set of federal carbon regulations and seeks to cut CO2 emissions from the power sector 32% by 2032. Though the utility industry is largely on board with the plan, a group of conservative states and fossil fuel interests challenged the rules, saying they constitute an overreach of EPA’s authority. 

Those arguments came to a head in September, when the D.C. Circuit Court held an en banc hearing on the regulations. Due to the composition of the court — six Democratic appointees and four from Republicans — legal experts largely expect the rules to be upheld there

But the Supreme Court could be a different story. No matter who prevails at the D.C. Circuit, the high court is expected to take up the Clean Power Plan next year. The justices have already shown interest in the case, placing an unprecedented judicial hold on compliance until court challenges are concluded. 

After Justice Antonin Scalia’s death earlier this year, the Supreme Court has a vacancy, and Republican senators have refused to confirm President Obama’s nominee, Judge Merrick Garland.

If the Supreme Court were to hear the Clean Power Plan case with one seat vacant, energy lawyers told Utility Dive that a 4-4 split would be plausible, which would uphold the D.C. Circuit decision. But if Trump puts another conservative on the court — as he has promised — it could potentially give CPP opponents the five skeptical judges they would need to overturn the Clean Power Plan. 

Given that Trump will come into office with a GOP-controlled Senate, that judicial outcome is now much more likely. But even if the Supreme Court upholds the plan, a Trump administration and Republican Congress could still scuttle it by defunding the agency or simply halting implementation work. 

And while the Clean Power Plan is the highest-profile EPA air pollution rule at risk in a new Trump presidency, it is not the only one. Fossil fuel interests still bristle at rules like the Mercury and Air Toxics Standards (MATS), which regulates harmful coal power pollution, and the EPA’s new source pollution rules, which govern emissions from new power plants. 

Trump has indicated that he wants to overhaul the EPA. With him in the White House, the future of any clean air or water regulation remains uncertain. 

2. Renewable energy subsidies could be on the chopping block

EPA regulations are a relatively easy way for Donald Trump to weaken President Obama’s clean energy legacy, since many of them are facing current court challenges or could simply not be enforced. 

Renewable energy subsidies would take more of an effort to revoke. At the end of last year, Congress reached a deal to extend supports for wind and solar energy into the early 2020s, with subsidy levels decreasing over time. That tax credit extension is fueling a boom in deployment, with renewables expected to add the vast majority of generating capacity for the remainder of the decade. 

That could change quickly. Though Trump hasn’t laid out a policy position on renewable subsidies, wind and solar have been the target of frequent ridicule from the president elect. In one speech designated for energy policy, Trump lambasted solar energy as “very expensive” and accused wind turbines of “killing all the eagles.” 

Because the renewable energy supports are already in place, revoking them would take a legislative effort. That’s a heavier lift than in the past, since many Republican officials have renewable energy facilities or manufacturing in their states, boosting support for the industry among conservative lawmakers. 

But there’s also appetite in some circles to get rid of renewable energy subsidies altogether. Some fossil fuel and nuclear generators complain that the production tax credit for wind lets these facilities to bid into the market at lower prices, pushing down electricity prices and preventing their baseload plants from competing. 

If Trump’s energy team will listen to clean energy opponents remains to be seen. The president elect has also said he is “for” renewable energy on many occasions, even while criticizing it in the next breath. But whether he opts for a full-frontal attack on wind and solar subsidies or will simply turn his attention to boosting fossil fuels, the future for renewables in a Trump administration does not look as bright as it would under a Clinton administration. 

3. Fossil fuels will likely get a boost

If Donald Trump has sent mixed messages about renewables, no one can mistake his support for fossil fuels. 

Trump made the plight of the fossil fuel worker a centerpiece of his campaign, lambasting EPA regulations he claims are “destroying our energy companies” and promising to put coal miners, oil drillers and power plant operators back to work. 

As elsewhere, the details of how Trump would do that are scant, but he has promised to increase U.S. production of oil, natural gas and coal.

Energy analysts point out that’s likely impossible, since coal’s decline in the U.S. is chiefly attributable to competition from cheap natural gas. But there are things Trump could do to open up new production areas, such as lifting restrictions on offshore drilling and fossil fuel production on federal lands. 

On the flip side, a Trump administration is likely to rebuff any environmentalist efforts to restrict domestic fossil fuel production or transport — a recent priority for green groups, which have sought to halt the expansion of oil and gas pipelines. 

Taken together, those two factors mean a much friendlier market for U.S. fossil fuel extraction and the generators that burn that fuel, even if the details are yet to be filled in. As one industry analyst told the Wall Street Journal this morning, “U.S. oil companies have a better future today than yesterday.” 

4. The paradigm of decarbonization may shatter

More important than any particular policy proposal is the paradigm shift that Trump’s election represents for the power sector. 

For the past few years — particularly since Obama’s reelection — the narrative for the future of the U.S. power sector was clear: Utilities would have to decarbonize their power plant portfolios quickly, first turning to natural gas as a bridge from coal and then ultimately to a greater reliance on renewables, energy efficiency and advanced technologies like storage. 

The Clean Power Plan underpins much of this narrative, pushing the states with the most coal power to shift to cleaner sources in the coming decades. Through those rules, the Obama administration sought to show the world the U.S. was serious about combating climate change and provide a stable policymaking environment for utilities to make investments. 

With the world’s largest economy committed to decarbonization, over 190 nations signed a landmark climate accord in Paris last year to limit global climate change to 2 degrees Centigrade this century. And not only did U.S. utilities sign on to support the CPP in court, they began using the temporary extension of wind and solar tax credits to make unprecedented investments in renewables. 

For the first time, it appeared a new climate consensus was forming — that U.S. and global policymakers not only accepted the realities of global warming, but were seeking to craft international efforts to stop it. 

Now, that consensus may be gone. Trump has said he would pull the U.S. out of the Paris accord and openly disavows the concept of human-caused climate change, once calling it a hoax perpetrated by the Chinese government. How Trump’s election affects other nations’ decarbonization plans remains to be seen, but his disavowal of climate policy creates deep uncertainty for the power sector. 

From plants to pipelines, utility assets last for decades, meaning the investments companies make in the next few years will shape the power mix for decades to come. Under the CPP and current renewables incentives, most U.S. utilities are opting to replace retiring coal plants with wind and solar facilities.

But without those programs, the investment situation may start to look different for many utilities. Whereas Hillary Clinton was likely to build upon existing regulations on power sector pollution, the promise of less stringent rules could increase the appeal of fossil fuel assets. 

If that happens, it could scuttle any remaining chance of meeting the Paris Accord. Already this year, Oxford researchers estimated if we want to meet the 2 degree goal, “no new investment in fossil electricity infrastructure (without carbon capture) is feasible from 2017 at the latest.” Given that the transport and industrial sectors continue to increase emissions, researchers said that “2 degree capital stock” is likely already depleted. 

In other words, scientists say the world is already behind the needed trajectory of emissions reduction to meet the Paris goal, and investments in more long-lived fossil fuel assets could commit the world to see the most catastrophic consequences of climate change if they are not retired early. 

But it may not all be bad news for renewables. Wind and solar have come down precipitously in price over the past decade, and energy storage costs are declining quickly as well. Even with Trump in the White House, renewables will likely continue to enjoy strong growth and grow their portion of the U.S. power mix. 

Even if that’s the case, wind and solar growth in the U.S. can’t make up for the possible end of a global climate consensus and the enhanced appeal of fossil fuel assets at home and abroad.

Unlike political paradigms, the scientific one won’t change when Trump walks into 1600 Pennsylvania Ave. on January 20.

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