Renewable Energy Certificates IPP Perspective It Pays to

Renewable Energy Certificates: IPP Perspective It “Pays” to be Environment Friendly

Renewable Energy Certificates A concept developed under the Electricity Act, 2003 and National Action Plan on Climate Change (NAPCC) to enhance the share of renewable in the total generation capacity of the country. 1 REC = 1 MWh of electricity injected in grid It “Pays” to be Environment Friendly

Salient features of REC To Promote RE & to facilitate RPO Framed by CERC Governed by NLDC Trading at Power Exchanges Solar & Non Solar It “Pays” to be Environment Friendly

Power Scenario in Himachal Pradesh Considerable increase in power generation in last three decades observed Strong morphology and network of rivers and glaciers – great potential for hydro power Hydropower generation is more economical than thermal power generation in Himachal Pradesh Solar is also being greatly encouraged It “Pays” to be Environment Friendly

Ctd… Estimated installed capacity of SWH: 14, 460 m 2 Hydropower potential in Himachal Pradesh It “Pays” to be Environment Friendly Total Capacity (MW)-installed Capacity (MW)-under implementation

Major sources for meeting power requirement Own hydel generation Free power entitlement of Go. HP Central sector stations where HPSEB has share allocations Purchased through private micro hydel plants installed in the State and bilateral short term contracts It “Pays” to be Environment Friendly

Pricing of Electricity Market prices of electricity ü Done based on supply-demand dynamics ü Price discovery generally through competitive bidding or power exchanges Average Power purchase price ü Calculated by pooling the price from all sources of power for a state ü Generally lower than normative tariff Feed-in-tariff or the Preferential tariff It “Pays” to be Environment Friendly

RPO Status (2009 -10) It “Pays” to be Environment Friendly

REC in Himachal Pradesh Notification by HPERC on the Regulations: 26 th May 2010 Designation of “Directorate of Energy” as a state agency: 19 th June 2010 Applicability of RPPO The distribution licensee Any other person consuming electricity ügenerated from conventional Captive Generating Plant having capacity of 1 MW and above for his own use and/or üprocured from conventional generation through open access third party sale It “Pays” to be Environment Friendly

Ctd… Defined ‘minimum percentage’ to be abided as per RPPO Year Minimum Quantum of purchase (in %) from renewable sources (in terms of energy in k. Wh) of total consumption 2010 -11 Total (2) 10% Non -Solar (3) 10 % Solar (4) 0% 2011 -12 11. 1% 11% 0. 1% 2012 -13 12. 1% 12% 0. 1% (1) i) ii) The distribution licensee shall purchase electricity (in k. Wh) from renewable sources, at a defined minimum percentage of the total consumption including transmission and distribution losses, within the area of the distribution licensee, during a year The Captive and Open Access User(s)/ Consumer(s), shall purchase electricity (in k. Wh) from renewable sources, at a defined minimum percentage of his total consumption It “Pays” to be Environment Friendly

Ctd… Certificate by CERC: Instrument of discharge of obligation Segregated meeting of obligation viz. a viz. Solar and Nonsolar Consequence of default üPenalty üCreation of separate fund It “Pays” to be Environment Friendly

Ctd… No project accredited till date ü PPA for maximum number of projects have been signed on preferential tariff. ü Projects intended for third party sale are in process of commissioning. It “Pays” to be Environment Friendly

Alternate Revenue Stream Analysis Hydro power generation PPA with DISCOM @ preferential tariff PPA with DISCOM @ APPC 2. 95 1. 48 3. 5 0 1. 5 Transmission losses in CTU 0% 0% 0% 4% Wheeling charges & losses 0 0 10% Royalty 0 0 12% CTU charges per k. Wh 0 0. 16 2. 95 2. 98 3. 9 3. 54 0. 00% 1. 02% 32. 20% 20. 00% Electricity tariff REC Benefits Net realization Upside in % wrt Option 1 Third party sale - within sale - outside state *APPC price for 2009 -10 as per CERC ** Deduced from last two year data of power exchange It “Pays” to be Environment Friendly

Liability RE Generator • Consistency in observing all the timelines and rules and regulations of the mechanism required State Regulatory Agencies • monitoring of electricity generated • installation of requisite metering system • clarification on all predicaments, different states have different set of rules and regulations It “Pays” to be Environment Friendly

Risk Assessment • On non abidance of RPO On persistence of APPC Risk = Feed-in-tariff – APPC = (2. 95 – 1. 48) Rs. /unit = 1. 47 Rs. /unit On persistence of competitive bidding price Risk = Feed-in-tariff – competitive bidding price = (2. 95 – 3. 50) Rs. /unit = -0. 55 Rs. /unit It “Pays” to be Environment Friendly

Ctd… • On abidance of RPO ü With the availability of RECs On persistence of APPC Risk = Feed-in-tariff – APPC + REC = (2. 95 – (1. 48+1. 50) Rs. /unit = -0. 03 Rs. /unit On persistence of competitive bidding price Risk = Feed-in-tariff – competitive bidding price + REC = (2. 95 – (3. 50+1. 50) Rs. /unit = -2. 05 Rs. /unit It “Pays” to be Environment Friendly

Ctd… 60. 00% At APPC (without REC) 40. 00% Risk level 20. 00% -20. 00% -40. 00% -60. 00% -80. 00% At APPC (with REC) 1 At Competitive bidding price (without REC) At Competitive bidding price (with REC) Type of Electricity pricing availed It “Pays” to be Environment Friendly

Recommendations Bankers RE Generators State Regulatory Agencies Successful implementation of the REC mechanism It “Pays” to be Environment Friendly

Ctd… For Bankers üAPPC along with REC generates considerable revenue. Hence, shouldn’t be rejected. For Project participants üIncreased awareness required üCompetitive bidding tariff appears most profitable For regulating agencies üStringency in abidance of RPO obligation required. üAppropriate channelization of defaulters It “Pays” to be Environment Friendly

THANK YOU!!! It “Pays” to be Environment Friendly