Cerc Tariff Sep09 Li

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RENEWABLE ENERGY ± NEW TARIFF

GUIDELINES & REC FRAMEWORKSaurabh MehtaAsst. Manager (BD ² Projects)

Reliance Power

Sep 09



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CERC¶s new regulation

Background

Salient Features

Wind Energy

Solar Energy

N ational Solar Mission

Renewable Energy Certificate (REC)

Background

REC Concept

Operational Framework

FLOW OF PRESENTATION



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CERC¶S NEW REGULATIONBackground ² Pre regulation scenario

´ Wind Energy

« Different Tariff regimes for different states

« Large variations ² Rajasthan Rs 4.28 / Unit v/s Tamilnadu Rs. 3.39 / Unit

« Similar tariff for different wind zones in a state

« No clarity for CDM Benefits sharing

« Fixed project cost without any indexing

« Fixed ROE throughout the project life

´ Solar Energy

« Different Tariff regimes for different states

« No clarity of tariff determination methodology

« Large portions of tariff (Rs. 10 to 12) to come from GOI as Generation Based Incentive

(GBI)

CERC·s new regulation addresses the issues of Renewable Energy Tariff Determination



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Salient Features

´ Eligibility criteria

SN. RE Source Criteria

1 WindMinimumWind Power Density ² 200 w/m2 @ 50 m hub

height

2 Solar PV Technologies approved by MNRE

3 Solar Thermal (CSP) Technologies approved by MNRE

4 Biomass Restriction on fossil fuel use up to 15%

5 Small Hydro Power Capacity lower than or equal to 25 MW

CERC¶S NEW REGULATION



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CERC¶S NEW REGULATIONSalient Features contd.

´ Review Period ² 3 years

´ Tariff Period ²

« Small Hydro Projects : 35 years

« Solar PV & Solar Thermal : 25 years

« Other RE Projects : 13 years

´ Useful life ²

« Wind Projects : 25 years

« Biomass Projects : 20 years

« Small Hydro Projects : 35 years

« Solar PV / Solar Thermal Projects : 25 years

´ Project Specific Tariff ²

May be determined by commission on case to case basis for the following;

« Hybrid Solar Thermal Power Plants

« Municipal solid waste projects

« Any other new renewable technology



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CERC¶S NEW REGULATIONSalient Features contd.

´ Tariff Structure

Single part tariff with following fixed cost components (except for biomass and non ² fossil

fuel based cogen plants)

« Return on Equity (ROE)

« Interest on loan capital

« Depreciation

« Interest on working capital

« Operation and maintenance expenses

´ Levellised Tariff ²

« Discount factor equivalent to weighted average cost of capital (WACC)

´ Dispatch Principles ²

« ´MUST RUNµ status for all RE projects except biomass project of 10 MW and non-fossil fuel

based cogen plants.



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Financial Principles for Tariff Determination

S.N. Parameter Pre-Regulation As per present regulation

Project ost (Rs. rs/ W) Fixe In exe

2 Loan Tenure 0 years 0 Years

3 Debt Equity Ratio 70:30 70:30

Interest Rate 2. S I LTPLR + 0 bps

Depreciation .28

7 till 0th year.

alance - sprea over

remaining life

6 Return on Equity (ROE) 6 Fixe9 till 0th year,

2 from th year onwar

7 D Sharing with utilityNo uniform regulation.

Varying for States

0 in st year,

0 raise till 6th year,

0 - 0 thereafter




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Financial Pr inciples for Tar iff Determination

SN. RE SourceCapital Cost (Rs

Cr/MW)

O&M Cost

(Lacs/MW)Approx PLF (%)

Auxiliary

Consumption

1 Wind 5.15 6.5 20% - 30% -

2 Solar PV 17.0 9.0 19% -

3 Solar Thermal (CSP) 13.0 13.0 23% 10%

4 Biomass 4.50 20.25 80% 10%

5 Small Hydro Power 5 to 7# 12 to 21 # 30% & 45% # 1%

6Non ² fossil fuel

based cogen4.45 13.35 45% to 60% # 8.5%


# - Varying for different states



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CERC¶S NEW REGULATIONL v llis T riff t t - is ris

.N t tPr -

r gul ti

Ex

¡ ct¡ ¢ £ ft ¡ r ¤ ¡ ¥ r ¡ gul£ ti ¦ ¤

(Wi ¤ ¢ Z ¦ ¤ ¡ Wis ¡ )

1

(200 ² 250

W / 2 )

20%

2

(250 ² 300

W / 2 )

23%

3

(300 ² 400

W / 2 )

27%

4

(400 b v

W / 2 )

30%

1 M h r shtr 4.39 5.64 4.90 4.18 #

2 T il u 3.39 5.64 4.90 4.18 3.76

3 Guj r t 3.50 5.64 4.90 # #

4 R j sth 4.28 5.64 4.90 # #

5 K r t k 3.40 5.64 4.90 4.18 #

# - Wind zone not present in the state



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WIND ENERGYProject IRRs w/o depreciation benefit ² comparison

S.N State

Pre-regulationAs per

RegulationMH RJ GJ KA TN

1 Wind Zone 1 8.2% 7.8% 4.9 % 4.6 % - 12.9%

2 Wind Zone 2 10.4 % 10.2% 7.0% 6.5% 6.4% 13.1%

3 Wind Zone 3 13.2 % 13.2 % 9.7% 9.2% 9.2% 13.2%

4 Wind Zone 4 - - - 11.1% 11.0% 13.4 %

Capex @ Rs. 6.0 Crs / MW



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WIND ENERGYEquity IRRs w/o depreciation benefit ² comparison

S.N State

Pre-regulationAs per

RegulationMH RJ GJ KA TN

1 Wind Zone 1 6.3 % 5.4 % 1.2 % 0.7 % - 13.8%

2 Wind Zone 2 9.7 % 9.2 % 4.0 % 3.3 % 3.3 % 13.9 %

3 Wind Zone 3 14.1 % 14.3 % 8.3 % 7.5 % 7.4 % 14.2 %

4 Wind Zone 4 - - - 10.6 % 10.5 % 14.4 %

Capex @ Rs. 6.0 Crs / MW



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SOLAR ENERGYLevellised Tariff State-wise Comparison

S.N. State

PPA

Tenure

(Pre-

regulation)

Pre-regulationPresent

RegulationSolar PV Solar Thermal

aharashtra* earsRs. 3. /Unit

( § ay qualify for GBI benefit

of Rs.¨ ©

/Unit)

Rs. 3. /Unit( § ay qualify for GBI benefit

of Rs.¨

/Unit)

Solar PV ²

Rs. 8.8

/Unit

Solar

Thermal ²

Rs. 3.7

/Unit

For 5

years

Tamilnadu* earsRs. 3. 5 /Unit

( § ay qualify for GBI benefit

of Rs.¨ ©

/Unit)

Rs. 3. 5 /Unit( § ay qualify for GBI benefit

of Rs.¨

/Unit)

3 Gujarat 5 ears

Rs. 3. / Unit (till¨ ©

th

year)

Rs. 3. / Unit ( ̈ 3th to

© 5th year)

Rs. . / Unit (till¨ ©

th

year)

Rs. 3. / Unit ( ̈ 3th to

© 5th year)

4 Rajasthan ears Rs. 5.78 /Unit Rs. 3.78 /Unit

5 Uttar Pradesh ears Rs. 5. /Unit Rs. 3. / Unit

* - Projects are under GBI policy with cap of 50 MW



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OBJECTIVES

´ To make India Global leader in solar energy through -

« 20,000 MW Generation Capacity by 2020



´ Cost reduction for solar power to grid parity (Rs 4-5 / kWh) by 2020

´ To achieve parity with coal based Thermal Power by 2030

´ Mandatory setting of solar plants equivalent to 5% of thermal power plant capacity

to be set by the generation utilities.

´ 4 ² 5 GW of solar manufacturing capacity by 2017

NATIONAL SOLAR MISSION





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ROAD MAP FOR 20 GW BY 2020

Utility connected power 12000 MW

Rooftop PV

(Captive & Grid connected)3000 MW

Rural Installation

(Rural grid plants stand alone)

3000 MW

Other PV applications

(eg telecom towers etc)2000 MW

Solar lighting, heating & othersLighting for 20 mn households

Solar collection area for 20 mn sq mtrs for heating

NATIONAL SOLAR MISSION

Resource Mobilization

Funds of Rs. 80,000 ² Rs. 100,000 Crs required over 30 years for incentives like GBI

Proposed to be supplemented through cess on fossil fuel and thermal projects

May not be required after the recent regulation of CERC.



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BACKGROUND

´ National Action Plan for Climate Change (NAPCC) announced by the Hon. PM of

India on June 30, 2008

´ Principles

« Protecting the poor and vulnerable sections through sustainable growth

« Achieving national growth through ecological sustainability

« Demand side management

« Deploying appropriate technology for adaptation and mitigation of GHG

« Engineering new and innovative forms of markets

´ Envisages several measures to address global warming

RENEWABLE ENERGY CERTIFICATE

Increases the share of renewable ener gy in total electr icity consumption



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NAPCC PROMOTING RENEWABLE ENERGY

´ Target of mandatory 5% Renewable Energy Purchase (RPO) for FY 2009-10 against

current level of around 3.5% by Discoms, Open Access consumers and captive

consumers.

´ Target will increase by 1% for next 10 years

´ Constitute approx. 15% of the energy mix of India

´ Need for innovative financing instruments

´ Policy instrument prescribed in NAPCC is Renewable Energy Certificate (REC)

Mechanism to enable RPO implementation.

´ Report on Development of Conceptual Framework for REC Mechanism for India - ABPS

Infrastructure Advisory Private Limited submitted to MNRE, June 09




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REC CONCEPT

Electricity generated from RE sources can be divided into two components:´ Electricity component

´ Environmental component

The environmental component associated with renewable energy can be carved out as a

separate component and used for the purpose of REC mechanism

SCHEMATIC OF REC CONCEPT




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SALIENT FEATURES OF REC FRAMEWORK

NOT an incentive scheme. Enable sale and pur chase of renewable component

acr oss the State boundar ies

Scheme to come into for ce on Apr il 1, 2010

Coexist with all current incentive based schemes

1 MWhr 1 REC

Pur chase of REC would be considered as pur chase of RE

Not related to carbon credits

RE gener ators with capacity untied in PPA will have an option to sell electr icity

and REC separ ately

REC will be issued to RE Gener ators only Validity of 25 years for REC Fr amework

Carr y forwar d allowed for maximum of 25% of REC issued .




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ELIGIBILITY CRITERIA

´ Eligible

« RE technologies recognized by MNRE

« Grid connected RE generators of at least 250 KW capacity

´ Not eligible

« RE project with existing PPA

« If RE sale at preferential Tariff




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PROPOSED PROCESS OF REC MECHANISM

´ Step 1: Electricity Generation and Feeding to the Grid

´ Step 2: Request for issuance of REC

´ Step 3: Confirmation of Electricity Generation

´ Step 4: Creation and Issuance of RECs

´ Step 5: REC Sale by RE Generator

´ Step 6: Surrender/Redeeming of RECs

´ Step 7: Compliance Reporting




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OPERATIONAL FRAMEWORK OF REC MECHANISM -

COMPREHENSIVE Accreditation of RE power plants

(State nodal agency: SNA)

Registr ation of Eligible entities(Centr al level agency)

Information related to accreditated RE

plants for registered entities sent to RECregistr y

Sale of electr icity at par with conventional power

Discom issuing RE injection cer tificate

State Load Despatch Centre

(SLDC)

RE Gener ator Centr al RECRegistr y (NLDC)

REC exchange

Auditing Panel

SERC: Compliancebased on SNA Repor t

1

2

4 5

6

Information related to

REgener ation

Electr icity Ener gy

accounting

Issuance of

REC

Information on RECpur chase/redemption

State Nodal

Agency SNA




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RECOMMENDED METHODOLOGY

´ Link the electricity component with normative RE tariff

´ REC component with notional fixed price


ISSUES

´ Additional benefit to the RE developer «..?

´ Whether registration with national registry is mandatory for RE developer «.?

´ Price for REC component - Market driven or notional fixed ....?



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SALE AND PURCHASE FOR REC

´ Not only obligated entities (Discoms, Open Access Consumers, Captive consumers)

but also other persons shall be allowed to buy RECs

´ Redemption of RECs by obligated entities shall be reported to monitoring committee

´ Redemption by voluntary buyers will be reported to only Central Regulator

´ REC Exchange Platform is expected to provide the services for sale and purchase of

RECs

´ The Task Force has agreed with the proposal that ¶one single market· shall be

created in the country for exchange/transfer of REC

´ FOR should undertake the assessment of market, liquidity requirements, costs

involved in setting up of the market and necessary fee structure




THANK YOU

Cerc Tariff Sep09 Li

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