Focused Energy Report Volume XXXXIII...2 Executive Summary The Focused Energy Report for the month of April 2016 reviews the Energy Prices taking in consideration the comparison with

Focused Energy Report –

Volume XXXXIII

Monthly Report – April 2016

Energy Desk

GAIL (India) Ltd.

1

Table of Contents

Energy Prices 3 I.

Under-Recoveries on Petroleum Products 3 II.

Hydrocarbon Exploration and licensing policy (HELP) and comparison with NELP 4 III.

A. Features of HELP .................................................................................................................................................................................. 4

B. Other Features of HELP ..................................................................................................................................................................... 5

C. Objectives of HELP .............................................................................................................................................................................. 5

D. Salient Features of NELP ................................................................................................................................................................... 6

E. Comparison of HELP and NELP ...................................................................................................................................................... 7

India Gas Sector & LNG infrastructure 8 IV.

A. Key Players Oil and Gas India ......................................................................................................................................................... 8

B. Recent Reforms in the sector .......................................................................................................................................................... 8

C. SWOT Analysis of the sector in India ........................................................................................................................................... 9

D. LNG ........................................................................................................................................................................................................... 9

E. LNG Import Capacity to Double By 2019 ................................................................................................................................ 11

Key policy change in Renewable energy sector 13 V.

A. Benchmark Capital Cost Norm for Solar PV and for Concentrated Solar Power (CSP) projects for 2016-17

13

B. The benchmark capital cost norm for solar thermal projects ......................................................................................... 13

C. The benchmark capital cost norm for Solar PV .................................................................................................................... 14

D. Draft Policy for Repowering of the Wind Power Projects ................................................................................................ 14

E. Incentive: .............................................................................................................................................................................................. 15

F. Implementation Arrangements: .................................................................................................................................................. 15

G. Support to be provided by States: ............................................................................................................................................. 15

2

Executive Summary

The Focused Energy Report for the month of April 2016 reviews the Energy Prices taking in consideration the

comparison with last month. There’s increase of around 11.45 % in the WTI oil prices, the prices of natural gas

Henry Hub have increased by 15.29 % and around 10.12 % increase is there for crude oil prices of Brent. It

seems market has touched the market as of now and itno the consolidation phase around $40 levels,

However next quarter projection demand will decide the future course of action and so the prices.

The next discussion in the report is about “Hydrocarbon exploration policy (HELP) and its comparison with

NELP”.

Hydrocarbon Exploration and Licensing Policy (HELP) is a policy adopted by Government of India indicating

the new contractual and fiscal model for award of hydrocarbon acreages towards exploration and production

(E&P). HELP is applicable for all future contracts to be awarded.

HELP replaces the present policy regime for exploration and production of oil and gas, known as New

Exploration Licensing Policy (NELP), which has been in existence for 18 years. All the features of HELP and

NELP discussed in this section.

At at the end of nine rounds, 360 exploration blocks have been offered under NELP, and for 254 blocks PSCs

have been signed. Presently, 166 blocks are active and 88 have been relinquished. Separately, under the CBM

Policy-1997, thirty- four blocks have been offered and 33 were awarded as on date

In the next section, discussion is on “Indian Natural Gas Sector & LNG infrastructure”.

Top companies of oil & gas sector with their revenue, along with new reforms by government in this sector

along with SWOT analysis of this sector in India is discussed here.

LNG infrastructure current positions along with future upcoming projects by 2019 are discusses in this

section. India's LNG import capacity could double from around 25 mmtpa to over 50 mmtpa in 2018/2019, if

the under-construction and likely projects progress as planned. However, India only has around 17 mmtpa of

contracts in place to 2019. The country has typically used spot market purchases to meet import

requirements, though this was somewhat detrimental over the previous five years while LNG prices have been

high

In this section there is a discussion about “Key policy change in Renewable energy sector “ during the month

of March”.

The Central Electricity Regulatory Commission vide its final order on 23rd March, 2016 determined the

Benchmark Capital Cost Norm for Solar PV and for Concentrated Solar Power (CSP) projects for 2016-17. In

case of determining the capital cost for Solar Photo voltaic, many parameters were considered likes the Land

cost and cost of PV modules etc.

The Ministry of New & Renewable Energy in consultation with various stakeholders including the Industry and

States recently came up with the Draft Policy for Repowering of the Wind Power Projects with an objective to

promote optimum utilization of wind energy resources.

These two new policy changes are discussed here.

3

ENERGY PRICES I.

WTI Crude Oil ($/barrel) BRENT Crude Oil ($/barrel) Natural Gas ($/mmbtu)

Particulars Jan. 2016 (Final) Feb. 2016 (Estimated)

JCC Crude Oil ($/b) 7.81 7.87

Average International FOB Price & Exchange rate:

UNDER-RECOVERIES ON PETROLEUM PRODUCTS II.

(A) Product-wise Under-recovery of Public Sector Oil Marketing Companies(OMCs):

^w.e.f.19.10.2014, Diesel price has been de-regulated.

*additionally, a subsidy of Rs 0.82/Litre on PDS kerosene

** Cash Subsidy is for Delhi market.

(B) The OMCs have reported the following under recovery during 2013-14 & of 2014-15:

Price on 1st March 2016 Price on 1

st April 2016 Change % Change

Brent crude oil 35.96 39.60 3.64 10.12%

WTI crude oil 34.40 38.34 3.94 11.45%

Henry Hub Natural Gas 1.70 1.96 0.26 15.29%

Particulars Unit 30-March-16 Next Pricing Fortnight

for 1st April. 2016

Crude Oil(Indian Basket)

- In US Dollar

- In Indian Rupees

($/bbl)

(Rs/bbl)

36.89

2450.08

37.29

2491.72

Exchange Rate (Rs/$) 66.41 66.82

Product Unit Under/Over-recovery

(eff. 1stOct. 15)

Cash Subsidy under

DBTL(eff. 1st Oct. 15)

Diesel^ (Rs/Litre) -

PDS Kerosene* (Rs/litre) 6.58

Domestic LPG** (Rs/Cylinder) 46.71

Product 2013-14

(Rs/Crore)

2014-15

(Rs/Crore)

Diesel 62,837 10,935

PDS Kerosene 30,575 24,799

Domestic LPG 46,458 36,580

4

HYDROCARBON EXPLORATION AND LICENSING POLICY (HELP) III.AND COMPARISON WITH NELP

Hydrocarbon Exploration and Licensing Policy (HELP) is a policy adopted by Government of India on 10.03.2016

indicating the new contractual and fiscal model for award of hydrocarbon acreages towards exploration and

production (E&P). HELP is applicable for all future contracts to be awarded.

HELP replaces the present policy regime for exploration and production of oil and gas, known as New

Exploration Licensing Policy (NELP), which has been in existence for 18 years.

A. Features of HELP

Four main aspects of HELP are:

Uniform License: It provides for a uniform licensing system to cover all hydrocarbons such as oil, gas,

coal bed methane etc. under a single licensing framework, instead of the present system of issuing

separate licenses for each kind of hydrocarbons.

Open Acreages: It gives the option to a hydrocarbon company to select the exploration blocks

throughout the year without waiting for the formal bid round from the Government.

Revenue Sharing Model: Present fiscal system of production sharing contract (PSC) is replaced by an

easy to administer “revenue sharing model”. The earlier contracts were based on the concept of profit

sharing where profits are shared between Government and the contractor after recovery of cost. Under

the profit sharing methodology, it became necessary for the Government to scrutinize cost details of

private participants and this led to many delays and disputes. Under the new regime, the Government

will not be concerned with the cost incurred and will receive a share of the gross revenue from the sale

of oil, gas etc. Bidders will be required to quote revenue share in their bids and this will be a key

parameter for selecting the winning bid. They will quote a different share at two levels of revenue called

“lower revenue point” and “higher revenue point”. Revenue share for intermediate points will be

calculated by linear interpolation. The bidder giving the highest net present value of revenue share to

the Government, as per transparent methodology, will get the maximum marks under this parameter.

Marketing and Pricing Freedom has been granted, subject to a ceiling price limit, for new gas production

from Deepwater, Ultra Deepwater and High Pressure-High Temperature Areas. The policy provides

marketing and pricing freedom to the gas production from existing discoveries which are yet to

commence commercial production as on 1.1.2016 as well as for future discoveries. To protect the

interests of the consuming sector, a ceiling based on the landed cost of the alternate fuels has been

imposed. The ceiling price shall be the, lowest of the

Fuel oil import landed price

Weighted average import landed price of substitute fuels (0.3 x price of imported coal + 0.4 x price of

imported fuel oil + 0.3 x price of imported naphtha) and

LNG import landed price.

The ceiling will be calculated once in six months. The price data used shall be the trailing four quarters

data with one quarter lag. To safeguard the Government revenue, the Government’s share of profit will

be calculated based on the higher of prevailing international crude price or actual price. All gas fields

5

currently under production will continue to be governed by the pricing regime which is currently

applicable to them.

B. Other Features of HELP

Other features of HELP are:

Exploration is allowed through-out the contract period.

Exploration Phase for onshore areas have been increased from 7 years to 8 years and for offshore

increased from 8 years to 10 years.

A concessional royalty regime will be implemented for deep water and ultra-deep water areas. These

areas would not have any royalty for the first seven years (instead of the 5% at present), and thereafter

would have a concessional royalty of 5% (in deep water areas) and 2% (in ultra-deep water areas),

instead of the 10% at present. In shallow water areas, the royalty rates are reduced from 10% to 7.5%.

For onshore areas royalty has been kept same i.e. 12.5% for oil and 10% for gas so that there is no

impact on revenue to the State Governments.

This policy provides for a uniform, non-discretionary framework for extension of contract in respect of 28

Pre-NELP discovered fields. The extension will be granted for a period of 10 years both for oil and gas.

During the extension period, it is proposed to increase the Government take by way of

Charging normal royalty and cess in place of concessional royalty and cess charged during the original

contract period.

The profit petroleum during extension period will also be 10 percent higher than the normal percentage

C. Objectives of HELP

The major Guiding Principles behind HELP are to:

enhance domestic oil and gas production

bring substantial investment

generate sizable employment

enhance transparency and

reduce administrative discretion

Till the adoption of Liberalisation policy in 1991-92, petroleum exploration and production (E&P) activities were

carried out in India only by public sector oil companies viz, Oil and Natural Gas Corporation Limited (ONGC) and

Oil India Limited (OIL). The New Exploration Licensing Policy (NELP) for exploration & production of oil & natural

gas (but excluding Coal Bed Methane), and the Coal Bed Methane (CBM) Policy were formulated during 1997-98

by the Government of India, with Directorate General of Hydrocarbons (DGH) as the nodal agency, to provide a

level playing field for both the public and private sector companies in exploration and production (E&P) of

hydrocarbons. The activities in E&P sector have been significantly boosted by this policy and it has opened up

E&P sector to private and foreign investment with 100% Foreign Direct Investment (FDI), bringing in a healthy

competition between public sector oil companies and private sector or foreign companies.

Under NELP, which became effective in February 1999 (with the first production sharing contract (PSC) getting

signed in 2000), acreages are offered to the participating companies through a process of open international

competitive bidding, in a transparent manner with attractive terms & conditions. The first round of offer of blocks

was launched in 1999 and most of the ninth round awards were concluded in 2012.

6

D. Salient Features of NELP

The salient features of NELP are as under:

100% FDI is allowed under NELP

No mandatory state participation through ONGC/OIL or any carried interest of the Government.

Blocks to be awarded through open international competitive bidding

ONGC and OIL to compete for obtaining the petroleum exploration licenses (PEL) on a competitive basis

instead of the existing system of granting them PELs on nomination basis.

ONGC and OIL to get the same fiscal and contract terms as private companies.

Freedom to the contractors for marketing of crude oil and gas in the domestic market.

Royalty at the rate of 12.5% for the onland areas and 10% for offshore areas.

Royalty to be charged at half the prevailing rate for deep water areas beyond 400 m bathymetry for the

first 7 years after commencement of commercial production.

Cess to be exempted for production from blocks offered under NELP.

Companies to be exempted from payments of import duty on goods imported for petroleum operations.

No signature, discovery or production bonuses.

Agreement between government and contractor is governed by a Production Sharing Contract. A Model

Production Sharing Contract is created which is reviewed for every NELP round.

Contracts to be governed in accordance with applicable Indian Laws.

As at the end of nine rounds, 360 exploration blocks have been offered under NELP, and for 254 blocks PSCs

have been signed. Presently, 166 blocks are active and 88 have been relinquished. Separately, under the CBM

Policy-1997, thirty- four blocks have been offered and 33 were awarded as on date.

7

E. Comparison of HELP and NELP

A comparison of both the policies – HELP and NELP is given below:

Parameter HELP NELP

Fiscal Model Revenue sharing Profit sharing

Cost recovery Not applicable Yes

Cost efficiency Encouraged Neutral

Royalty Low rates for offshore Standard rates

Exploration Period Onland and Shallow Water- 8

years

Deepwater- 10 years

Onland and Shallow Water- 7 years

Deepwater & Ultra-deepwater - 8 years

Management Committee More focus on reservoir

monitoring; no

micromanagement

Technical & financials examination

Revenue to Government On production After cost recovery i.e. from profit

petroleum

Exploration in Mining Lease areas Allowed Not allowed

E&P activity for all hydrocarbons Allowed Not allowed

8

INDIA GAS SECTOR & LNG INFRASTRUCTURE IV.

A. Key Players Oil and Gas India

Company FY15

Sales/Turnover

(INR bn)

No. Of

Employees

Year

Established

Total Assets

(INR bn)

Ownership

ONGC 823 33,185 1956 2,080 68.93% state

Oil India 99.78 7,845 1959 362.27 67.64% state

Indian Oil Corp 4,507.65 32,962 1959 1,299 68.57% state

BPCL 2,532.54 12,687 1976 384.53 54.93% state

HPCL 2,170 10,634 1974 363.57 51.11% state

Reliance 3,884 24,930 2000 3,977 public

GAIL 565.69 4,266 1984 528.93 56.11% state

Source: Company data

B. Recent Reforms in the sector

Prime Minister Narendra Modi's government is enacting incremental reform to improve the country's

wider business environment. Key reforms include a streamlining of bureaucratic procedure and an

increase in companies' operational flexibilities.

The government has also enacted various domestic pricing reforms, including an increase in the

domestic gas price cap and the liberalisation of diesel prices.

Unconventional and deepwater resources, which account for the bulk of the prospective resource base,

are subject to a separate pricing formula, which has yet to be determined. Interest in the NELP-X

licensing round rests heavily on how this formula is calculated.

While fiscal and regulatory reforms offer upside risk to exploration and production, major downside risks

remain. India has a relatively strong record in terms of policy formation, but often struggles in the

implementation.

Changes in the licensing terms from a profit sharing to a revenue sharing structure could dissuade some

international oil companies from investing. A revenue sharing contract poses higher risk and entails a

significantly longer period of cost recovery.

A sharp drop in the price of crude may also dampen interest in the round, straining the economic

viability of the more expensive unconventional and deepwater developments.

The downstream sector is set for strong growth, supported by falling subsidisation, domestic price

liberalisation, rapidly rising domestic demand and lower crude feedstock costs.

Government has replaced NELP with HELP. A new policy for Hydrocarbon exploration policy.

The government unveiled a slew of reforms to attract investments into the domestic oil and gas sector by nearly

doubling gas prices to over $7 a unit, apart from liberalising pricing. Recent reforms in the oil and gas sector

involving market-linked pricing will help the country drill out 22 per cent more gas at 110 mmscmd by 2020-21.

Domestic gas production to rise to around 110 million metric standard cubic metre per day (mmscmd) by FY21

and 130 mmscmd by FY25 from 90 mmscmd in FY16. Similarly, demand for gas will be rising to 250 mmscmd by

FY20 and 290 mmscmd by FY25 from the current demand of 230 mmscmd.

9

C. SWOT Analysis of the sector in India

Strengths

India has substantial undeveloped oil and gas

reserves.

It is an established producer, with a pre-existing

infrastructure base and growing oilfield services

sector.

India's positive demographic profile and

improving economic outlook make it a high-

potential consumer market for oil and gas.

Weaknesses

The oil & gas sector is dominated by state-

controlled enterprises, despite attempts by the

government to deregulate the industry and

encourage greater foreign participation.

There is insufficient gas infrastructure to support

targeted production growth or the expected rise

in consumption.

Legacy regulatory and bureaucratic procedures

remain convoluted and often prohibitive.

Opportunities

India has vast underexplored acreage,

particularly in the deepwater offshore and

onshore unconventional plays.

Under Prime Minister Narendra Modi's

government the industry is in transition,

enacting a number of major fiscal, licensing and

regulatory reforms.

The government continues to deregulate fuels

prices, with the price of both gasoline and diesel

liberalized.

Threats

Historically, Indian governments have struggled

with effective policy implementation; resistance

at the state level could prove obstructive.

Domestic gas pricing remains in flux;

unfavourable terms would be a major drag on

production growth.

Source: BMI & WoodMac

D. LNG

India will need to increase its natural gas trade links over the forecast period to meet strong growing gas demand.

This will be through increased imports of LNG as gas pipeline projects fail to progress. India is taking advantage of

depressed liquefied natural gas (LNG) prices to boost its imports of natural gas. The country has renegotiate existing

term contracts, which are indexed at significantly high price levels. Petronet has negotiated with RasGas to alter the

pricing formula in its long-term contracts and waive outstanding penalties.

As per BMI India's natural gas import needs to increase from an estimated 19.8bn cubic metres (bcm) in 2014 to

51.2bcm by 2024. Import requirements are driven by strong domestic gas demand growth. Forecasts remain

relatively conservative, given India's efforts to increase gas use as a percentage of total energy use, and it is

believe unrestrained consumption would be significantly higher.

Gas imports to be in the form of LNG over the 10-year forecast. While there have been plans for pipeline

connections to India from Iran, Turkmenistan and Russia, a low probability of pipeline imports from these sources

within our forecast period is seen.

10

Imports LNG to India have increased yearly since the country's first terminal opened in 2004. In 2012, imports

reached around 18bcm with the Dahej terminal running near capacity and the Hazira facility also at high

utilisation. In 2013, two new LNG terminals were commissioned. The first to be completed was the GAIL-led

project at Ratnagiri in Maharashtra. The Dabhol LNG terminal has an initial regasification capacity of 5mn tpa

(6.8bcm), though could increase this in two phases of 2.5mn tpa over the coming years to eventually double in

size. India's newest LNG terminal received its first cargo in August 2013. The facility at Kochi in Kerala is operated

by Petronet and has a capacity of 5mn tpa (6.8bcm).

LNG Net Exports- India

India's LNG import capacity is now around 32bcm (23.6mn tpa) and the country has a range of other LNG

terminal proposals in the pipeline, as it looks to plug the considerable gap in demand. The next facility to

become operational will likely be the Andhra Pradesh LNG terminal slated for a 2016 start-up.

India's natural gas pipeline and storage network is limited, and despite forecasted growing gas production the

network is not extensive enough in many parts of the country to reach the demand centres. Such problems have

been seen at the new Kochi terminal, where the facility is currently being underutilised due to a lack of takeaway

capacity. A dispute over land ownership rights has seen the Kochi-Bangalore line indefinitely cancelled. For the

time being the spare capacity at the facility is being rented for storage.

India's LNG Supply Deals

LNG Supply Deals

Exporter Export Facility Importer Start Date End Date Volume (bcm)

United States Cove Point Gail 2019 2039 3.1

United States Cameron LNG IndianOil Company 2018 2038 1.0

Unspecified Gazprom portfolio Gail 2018 2038 3.4

United States Sabine Pass Export Gail 2017 2037 4.8

Australia Gorgon LNG Petronet LNG 2016 2036 2.0

Unspecified BG Portfolio GSPC LNG 2015 2035 1.7

Qatar RasGas Petronet LNG 2009 2030 3.4

Qatar RasGas Petronet LNG 2004 2028 6.8

Unspecified Gas Natural Portfolio Gail 2013 2015 0.6

Source: Bloomberg, BMI

-15

.4

-19

.8

-23

.0

-25

.0

-21

.6

-21

.5

-26

.1

-33

.7

-38

.2

-42

.2

-46

.5

-51

.2

2 0 1 3 E 2 0 1 4 E 2 0 1 5 E 2 0 1 6 F 2 0 1 7 F 2 0 1 8 F 2 0 1 9 F 2 0 2 0 F 2 0 2 1 F 2 0 2 2 F 2 0 2 3 F 2 0 2 4 F

LNG Net Exports (BCM)

11

E. LNG Import Capacity to Double By 2019

Momentum behind India's LNG import capacity expansion may help soak up some of the expected glut in the

global LNG market over the next five years. India will be in a stronger position to negotiate attractive term contracts

and reduce its exposure to the spot market.

India presents a substantial LNG market opportunity over the next five years if it is able to follow through with

momentum behind import capacity expansion. Currently the country has the capacity to import 25mn tonnes per

annum (tpa), though this could double by 2019. LNG imports are currently being restrained as the Maharashtra

LNG terminal is unable to import during the monsoon season. A breakwater is due to be completed by 2016 to

allow the facility to work at optimal capacity.

Two LNG terminals are reportedly under construction and Shell is reportedly due to expand the Hazira facility by

2.5mmtpa by 2017. According to Indian Oil Corporation (IOC), ground works at the Ennore LNG development

began in August 2015 and the company is expecting start-up at the 5mmtpa facility in 2018. Similarly, GSPC LNG

announced that the construction of its 5mn tpa terminal at Mundra is also underway, with a targeted start-up of

Q117. This is expected to increase import capacity by 12.5mmtpa by 2018.

India’s Current and Likely LNG Terminals

Current And Likely LNG Terminals

Regasification Capacity (mn tpa) Status Target Start-Up

Dahej 10.0 Operational

Hazira 7.5 Operational

Maharashtra 5.0 Operational

Kochi 5.0 Operational

Ennore LNG 5.0 Under Construction 2018

Kakinada FSRU 5.0 JV Agreed H217

Swan Energy FSRU 4.5* FID H116 2018

Gangavaram 5.0 All Clearances 2017

Mundra 5.0* Under Construction Q117

* possible expansion to 10mn tpa. Source: BMI

There is also traction behind three further LNG import facilities. In November 2015, Swan Energy signed a deal

with Exmar to use a floating storage and regasification unit (FSRU) at the Jafrabad port in Gujarat. A final

investment decision on the project is due in the first half of 2016, with a potential start-up as soon at 2018.

A second FSRU project is also planned at Kakinada, where in September 2015 a joint venture agreement for the

project was signed between A.P Gas Distribution Corporation, Shell, Engie and GAIL for the project.

Petronet has received all necessary approval for an onshore LNG import terminal at Gangavaram port in Andhra

Pradesh. Progress remains unclear, particularly given the momentum behind the nearby Kakinada development,

though the terminal has passed a significant bureaucratic hurdle. Start-up is touted for 2017, but this is

unrealistic.

12

2018 A Big Year: India's Planned LNG Import Capacity

Source: Petronet, Exmar, Gujarat Government, IOC, GAIL, GSPC

India's LNG import capacity could double from around 25mmtpa to over 50mmtpa in 2018/2019, if the under-

construction and likely projects progress as planned. However, India only has around 17mmtpa of contracts in

place to 2019, according to Bloomberg data. The country has typically used spot market purchases to meet

import requirements, though this was somewhat detrimental over the previous five years while LNG prices have

been high.

Figure 1: India's Cumulative Region wise Import Capacity

13

KEY POLICY CHANGE IN RENEWABLE ENERGY SECTOR V.

A. Benchmark Capital Cost Norm for Solar PV and for Concentrated Solar Power (CSP) projects for

2016-17

The Central Electricity Regulatory Commission vide its final order on 23rd March, 2016 determined the

Benchmark Capital Cost Norm for Solar PV and for Concentrated Solar Power (CSP) projects for 2016-17. In case

of determining the capital cost for Solar Photo voltaic, many parameters were considered likes the Land cost and

cost of PV modules etc.

The graph below depicts the change in the total capital cost from FY 2012-13 to FY 2016-17 and the % change

year on year. The capital cost of Solar PV has decreased approximately by 68% from FY 2012-13.

In case of Solar Thermal, Commission had proposed to retain the benchmark capital cost of Solar Thermal power

projects at INR 12.0 Crore / MW for FY 2016-17 (which remained the same in FY14-15 and FY 15-16). After

reviewing all the comments and suggestions the Commission came up with the following order:

“Given the nascent stage of technology for Solar Thermal, the Commission has proposed to retain the benchmark

cost without any decrease. At this point, it is not feasible to further increase these prices. The Commission decides to

retain the benchmark capital cost for Solar Thermal power projects at INR 12.0 Crores / MW for FY 2016-17.”

B. The benchmark capital cost norm for solar thermal projects

The benchmark capital cost norm for solar thermal projects for FY 2016-17 shall be INR 12.0 lakhs/MW, with

breakup as follows:

Particulars Unit Rate No. Total

Plant Capacity MW 55.55

14

C. T

he

bench

mark

capital

cost

norm for Solar PV

The benchmark capital cost norm for Solar PV projects for FY 2016-17 shall be INR 530.02 lakhs/MW, with

breakup as follows:

S.No. Particulars Capital cost norm

proposed for FY 2016-

17 ( Rs. Lakhs/MW),

for Solar PV projects

% of total cost

1. PV modules 328.39 61.96%

2. Land cost 25 4.7%

3. Civil and General Works 35 6.6%

4. Mounting Structures 35 6.6%

5. Power Conditioning Unit 35 6.6%

6. Evacuation cost up to inter-connection

point ( Cables and Transformers)

44 8.3%

7 Preliminary and Pre-operative expenses

including IDC and Contingency

27.63 5.21%

Total capital cost 530.02 100%

D. Draft Policy for Repowering of the Wind Power Projects

Major share of renewable power capacity in India is from wind energy. India started harnessing of the wind

power prior to 1990. The present installed capacity is over 25 GW which is fourth largest in the world after China,

USA and Germany.

Most of the wind-turbines installed up to the year 2000 are of capacity below 500 kW and are at sites having

high wind energy potential. It is estimated that over 3000 MW capacity installation are from wind turbines of 500

kW or below. In order to optimally utilise the wind energy resources repowering is required.

The Ministry of New & Renewable Energy in consultation with various stakeholders including the Industry and

States recently came up with the Draft Policy for Repowering of the Wind Power Projects with an objective to

promote optimum utilization of wind energy resources. Some of the key pints of the policy are mentioned below:

All the wind turbine generators with the capacity of 1MW or below would be eligible for repowering.

The Policy offers incentives in form of an additional interest rate rebate of 0.25% over existing rebate

available to the new wind projects by IREDA.

Secondly through benefits like Accelerated Depreciation or GBI that would be made available to the

repowering project.

The power generated corresponding to average of last three years’ generation prior to repowering

would continue to be procured on the terms of existing PPA.

loops $/loop 5,50,5000 120 Loop 3,96,00,00,000

HTF system $/m2 70 392,400 M2 1,64,80,80,000

Interconnect piping $/m2 10 392,4200 M2 23,54,40,000

Turbine Euro/kW 120 55.55 MW 51,02,82,300

BOS Rs/MW 8,000,000 55.55 MW 44,44,00,000

Land Rs/Acre 200,000 350 Acre 7,00,00,000

Site development Rs/Acre 50,000 350 Acre 1,75,00,000

Total cost 6,88,57,02,300

Cost/MW 12,39,55,037

Cost/MW 12.39

15

Augmentation of transmission system from pooling station onwards to be carried out by the respective

STU.

During the period of execution of repowering, wind turbines would be exempted from not honoring the

PPA for the non-availability

Similarly, in case of repowering by captive user they will to be allowed to purchase power from grid

during the period of execution of repowering.

E. Incentive:

For repowering projects Indian Renewable Energy Development Agency (IREDA) will provide an

additional interest rate rebate of 0.25% over and above the interest rate rebates available to the new

wind projects being financed by IREDA.

Benefits available to the new wind projects i.e. Accelerated Depreciation or GBI as per applicable

conditions would also be available to the repowering project.

F. Implementation Arrangements:

The repowering projects would be implemented through the respective State Nodal Agency/Organisation

involved in promotion of wind energy in the State.

G. Support to be provided by States:

In case augmentation of transmission system from pooling station onwards is required the same would

be carried out by the respective State Transmission Utility.

In case of power being procured by State Discoms through PPA, the power generated corresponding to

average of last three years’ generation prior to repowering would continue to be procured on the terms

of existing PPA and remaining additional generation would either be purchased by Discoms at Feed-in-

Tariff applicable in the State at the time of commissioning of the repowering project or allowed for third

party sale.

State will facilitate acquiring additional footprint required for higher capacity turbines.

For placing of wind turbines 7D x 5D criteria would be relaxed for micro siting.

A wind farm/turbine undergoing repowering would be exempted from not honouring the PPA for the

non-availability of generation from wind farm/turbine during the period of execution of repowering.

Similarly, in case of repowering by captive user they will to be allowed to purchase power from grid

during the period of execution of repowering.

Note:

The data and information in the report is sourced from websites and documents available in public

domain and doesn’t purport to be official view of government or any organization. Sincere efforts have

been made to present correct data; however, errors and omissions, if any, are regretted and the same may

please be brought to the notice of Energy Desk for necessary corrective action.