1 A Presentation on Regulatory Regime for Renewable Energy Projects in Andhra Pradesh.

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AAPresentation on Regulatory Presentation on Regulatory

Regime for Renewable Energy Regime for Renewable Energy Projects in Andhra PradeshProjects in Andhra Pradesh

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In respect of NCE: Role of the State Commissions

National Electricity Policy

Tariff Policy notified by GoI

State Government Policy

Promotional measures taken by APERC

Salient features of NCE Tariff Order Dt. 20-03-2004

In this PresentationIn this Presentation

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Section 86(1)(e) of the Electricity Act, 2003 mandates the Commission to promote Generation and Co-generation of electricity from Renewable sources –

by providing suitable measures for connectivity with the grid, and

sale of electricity to any person, and also

specify a percentage of the total consumption of electricity in the area of a distribution licensee.

Role of the State Commissions Role of the State Commissions in respect of NCE under in respect of NCE under Electricity Act 2003Electricity Act 2003

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Role of the State Commissions Role of the State Commissions in respect of NCE under in respect of NCE under Electricity Act 2003Electricity Act 2003(contd..)(contd..)

While specifying Terms and Conditions for determination of tariff under Section 61 of the Act, the Commission shall inter-alia be guided, by the requirements of promotion of co-generation and generation of electricity from renewable sources of energy

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Feasible potential to be exploited fully (5.2.20) Encourage private sector participation (5.2.20) Efforts need to be made to reduce the capital cost of NCE projects

(5.12.1) Promotional measures to be taken for development of technologies

(5.12.1) Share of NCE to be increased progressively (5.12.2) Purchase of NCE by DISCOMS shall be through competitive bidding

process (5.12.2) Commission may determine appropriate differential in prices to

promote NCE technologies

National Electricity PolicyNational Electricity Policy

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Tariff PolicyTariff Policy

Minimum percentage of NCE purchase U/S 86 (1) (e) of the Act to be fixed taking into account.

availability of such resources in the region.

impact on retail tariffs.

Specified percentage for NCE purchase to be made applicable for the tariff to be determined by the State Commissions effective from April, 2006 onwards.

Preferential tariffs to be determined by the SERCs till NCE technologies can compete with conventional sources.

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Future procurement through competitive bidding

process (U/S 63) within same type of NCEs.

Central Commission to lay down guidelines within

three months for pricing of non-firm power when

purchased not through competitive bidding.

Tariff PolicyTariff Policy

(Contd..)(Contd..)

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State Government policy on NCE State Government policy on NCE [G.O.Ms.No.93 dated 18-11-1997]

(Valid for 3 years)(Valid for 3 years)

Power Purchase Price Rs.2.25 with 5% annual escalation with 1997-1998 as the Base year (Base year changed to 1994-95 by the Commission in its Order dated 20-06-2001)

Wheeling Charges 2% (sub-judice) 3rd Party Sales Allowed at a tariff not lower than HT Tariff

of APSEB Banking Allowed up to 12 months Banking Charges 2% Re-use of banked energy

(a) Captive Consumers Throughout the year

(b) Third Party Sales August – March

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Renewable Power Purchase Obligation (RPPO) order dated 27-09-2005 issued by the Commission U/s 86(1)(e) of Electricity Act, 2003.

Certain Incentives / reliefs were permitted by the Commission in the matter of Open Access phasing, Cross-subsidy Surcharge etc., for NCE Developers.

Tariff rationalization has been done to achieve overall efficiency in the NCE generation and usage.

Promotional measures Promotional measures undertaken by APERCundertaken by APERC

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Highlights of RPPO Order Dated 27-09-2005

This obligation applied to all - Distribution licensees, Captive Power users (set aside; under re-examination), Open Access Consumers

Percentage specified : 5% for three years viz., 2005-06 to 2007-08

0.5% out of the above reserved for wind based energy.

Mandatory purchase from all the NCEs with PPAs consented by the Commission as on 27-09-2005 to confer regulatory certainty even if consequently the minimum percentage specified increases.

Provision to purchase from other distribution licensee(s), at weighted average cost of the purchase provided, thus sending a right signal to site generation where it is optimally feasible.

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Highlights of RPPO Order Dated 27-09-2005

The tariffs determined in the Commission’s order dated 20-03-2004 as amended shall be the ceiling tariffs.

The rates obtained under RPPO are as follows:

Category Fixed cost/Rs.

Variable cost/Rs.

Total/Rs.

Bagasse Co-Gen 1.57 1.06 2.63

Bio-mass 1.47 1.38 2.85

Mini Hydel - - 2.49

Wind - - 2.70

Industrial Waste 1.61 1.40 3.01

Municipal Waste 1.96 0.76 2.72

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Highlights of RPPO Order Dated 27-09-2005

Failure to comply with this obligation attracts penal provisions of Section 142 of the Act.

Money secured through penalization to be used for promotion of co-generation and renewables besides conservation of electricity.

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Must-run status conferred on NCE projects

Consumers availing of power from NCE projects are allowed open access without being subjected to phasing as per the contracted capacity applicable for conventional energy.

Relief of 50% on cross-subsidy surcharge to those availing open access from NCE projects.

Other Incentives provided by the Commission

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Banking facility for Mini-Hydel and Wind-based projects:

1. Banking allowed during all the 12 months.

2. Drawals are subject to the following:

(a). The banking year shall be from January to December.

(b). The banking charges shall be in kind @2% of the energy delivered at the point of injection.

(c). Drawals shall be permitted only during the 6 month period, from July to December.The banked energy remaining unutilized as on 31stDecember shall be treated as lapsed.

(d). Drawal of banked energy during the peak hours i.e 06:00 to 09:00 hours and 18:00 hours to 21:00 hours shall not be permitted.

Other Incentives provided by the Commission

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Rationalization of NCE tariffs through cost-reflective tariffs with due regard for the promotion by allowing suitable incentives.

Tariff determination for qua-class against project- wise tariffs

Two-tier tariff as against single-part tariff except for wind power and municipal waste projects.

Threshold PLF for full fixed cost recovery :

Biomass power plants - 80% Bagasse based co-gen - 55% Mini Hydel - 35%

Salient features of NCE Tariff Order Dated 20-03-2004

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Incentive of 25 paise / unit after threshold PLF.

Variable cost determined based on market rates for fuel with escalation thereon.

Debt-equity ratio of 70:30.

Return on equity at 16% is provided in spite of decling interest rates to provide promotional impetus.

Accelerated depreciation allowed to facilitate loan repayments.

Exemption from Merit Order requirements.

Salient features of NCE Tariff Order Dated 20-03-2004(contd..)

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Tariff determination for Biomass Plants  FIXED COST

Assumption for Biomass Fixed

Cost TariffFixed Cost Year of

operationFixed cost Tariff per

UnitCapital Cost Rs. 4.00

Crs/MW1st 1.61

Fixed CostCoverage (PLF)

80% 2nd 1.57

Debt Equity Ratio 70:30 3rd 1.53

Interest on TermLoan

12% 4th 1.49

Return on Equity 16% 5th 1.45Interest onWorking Capital

12% 6th 1.41

Depreciation (70% + 20%)

7.84% 7th 1.37

O & MExpenditure (including insurance)

4% 8th 1.33

O & MEscalation

4% 9th 1.26

Total Fixed Cost 10th 0.87

Biomass Fixed Cost Tariff

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Explanation in respect of Depreciation : From the date of commissioning till the depreciation accumulates to 70% of the project cost. The balance depreciation of 20% of the project cost will be allowed every year equally for the balance period of the PPA so that the total depreciation allowed for the project does not exceed 90% of the project cost

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VARIABLE COST

Variable Cost

(Assumption)

Financial Year

Variable cost

Rs./UnitAuxiliary Power Consumption

9% 2004-2005 1.27

Cost of Fuel Rs.1000/MT

2005-2006 1.33

Fuel PriceEscalation

5% 2006-2007 1.4

Specific FuelConsumption (Kg/Kwh)

1.16 2007-2008 1.47

2008-2009 1.54

Note :- This tariff is also applicable to Industrial Water Based Projects

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Tariff determination for Bagasse Based Co-generation Plants

FIXED COST

Assumption for Bagasse Fixed Cost

TariffFixed Cost Year of

operationFixed cost inRs. / Unit

Capital Cost 3.25 Crs/MW

1st 1.72

Fixed Cost Coverage (PLF)

55% 2nd 1.67

Debt Equity Ratio 70:30 3rd 1.63Interest on Term Loan 10% 4th 1.59

Return on Equity 16% 5th 1.55Interest on working capital

12% 6th 1.51

Depreciation(70+20%) 7.84% 7th 1.47

O & M Expenditure Per annum (including insurance)

3% 8th 1.43

O & M Escalation 4% 9th 1.3510th 0.9

Bagasse Fixed Cost Tariff

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Explanation in respect of Depreciation :-From the date of Commissioning till the depreciation accumulates to 70% of the project cost. The balance depreciation of 20% of the project cost will be allowed every year equally for the balance period of the PPA so that the total depreciation allowed for the project does not exceed 90% of the project cost.

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Tariff fixation for Mini-Hydel ProjectsTariff fixation for Mini-Hydel Projects

Parameter Norm Year of operation

Tariff ** Rs/Unit

(exclusive of Royalty)

Capital Cost ** 3.75Crs./MW 1st 2.69

Fixed Cost Coverage (PLF) 35% 2nd 2.6

Debt-equity ratio 70:30 3rd 2.52

Interest on Term Loan 12% 4th 2.43

Return on Equity 16% 5th 2.34

Interest on Working Capital

12% 6th 2.26

Depreciation * 6.7% 7th 2.17

O & M Expenditure (including insurance)

1.50% 8th 2.09

O & M Escalation 4% 9th 2.00

Royalty (Water Rate) The water rates applicable as per (#)

10th 1.92

Auxiliary consumption 1%

Assumption for Mini - Hydel Fixed Cost Tariff Tariff for Mini- Hydel Projects

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* To match the loan repayment profile for the first ten

years; the balance depreciation is spread over for

the life of the project.

** As revised in the Order dated 07.07.2004 on

R.P.No.5/2004 and R.P.No.12/2004.

(#) As per G.O.Ms.No.39 dated 02.04.2002 Royalty

payable is a pass – through and to be paid to the

Government directly by APTRANSCO and DISCOMs.

Tariff fixation for Mini-Hydel Projects Tariff fixation for Mini-Hydel Projects (contd..)(contd..)

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*.

Tariff fixation for Municipal Waste Tariff fixation for Municipal Waste based Projects and Wind Electricity based Projects and Wind Electricity Generating Plants:Generating Plants:

Base unit price of Rs.2.25 as on 01.04.1994 and a simple escalation of 5% per annum thereafter.

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*.

INSTALLED CAPACITY OF NCES IN A.P (As on 31.03.2007):

Resource Potential (MW)Sanctioned

(MW)

Cumulative installed capacity

(MW)

Wind 2,100.00 453.97

(50)107.37

(33)

Biomass 627.00 282.25

(49)217.75

(40)

Co-generation 500.00 362.55

(26)200.50

(18)

Municipal Solid waste 40.00 30.35 (05)

12.75(03)

Industrial Waste 135.00 58.16 (19)

19.50(07)

Small Hydro 500.00 119.853

(44)92.35 (31)

TOTAL 3,902.00 1307.13

(193)650.22 (132)

* Figures in brackets indicate no. of projects

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