SUMMER INTERNSHIP REPORT ON
1. ANALYSIS OF REC MECHANISM
2. STUDY OF OPPORTUNITY AND OPTIONS TO SUPPLY
POWER TO AN UPCOMING MEGA FOOD PARK IN THE
STATE OF MADHYA PRADESH.
UNDER THE GUIDANCE OF
Mrs. Rachna Vats, Senior Fellow (NPTI)
And
Mr. Anuj Xess, Manager (REConnect Energy)
Submitted by
SIDDHARTH SUNDRIYAL
ROLLNO: 83
MBA (POWER MANAGEMENT)
Center for Advanced Management and Power Studies
NATIONAL POWER TRAINING INSTITUTE
(Under Ministry of Power, Govt. of India)
Affiliated to
MAHARSHI DAYANAND UNIVERSITY, ROTHAK
AUGUST 2013
1
TRAINING COMPLETION CERTIFICATE
I
DECLARATION
I, Siddharth Sundriyal, Roll no. 83 / Semester 3/ Class of 2012-14 of the MBA (Power
Management) of the National Power Training Institute, Faridabad hereby declare that the
Summer Training Report entitled
1. Analysis of REC Mechanism.
2. Study of opportunity and options to supply power to an upcoming mega food park
in the state of Madhya Pradesh.
is an original work and the same has not been submitted to any other Institute for the award of
any other degree.
A Seminar presentation of the Training Report was made on 04.09.2013 and the suggestions as
approved by the faculty were duly incorporated.
Presentation In charge
(Faculty)
Signature of the Candidate
Countersigned
Director/Principal of the Institute
II
ACKNOWLEDGEMENT
I express my sincere thanks to Mr. Vibhav Nuwal (Director), REConnect Energy for giving me
a great opportunity to work in such an esteem organization. I am solemnly thankful to Mr. Anuj
Xess, (Manager) , REConnect Energy for his guidance and support.
I also record my sincere thanks to Mr. Chetan Adhikari and Mr. Manoj Jha, REConnect
Energy, for giving me valuable inputs during my tenure with the Organisation.
I feel deep sense of gratitude towards Mr. S. K. Chaudhary, Principal Director, Dept. of
Management Studies, Mrs. Manju Mam, Director, NPTI and Mrs. Indu Maheshwari, Dy.
Director, NPTI for arranging my internship at REConnect Energy, Gurgaon and being a constant
source of motivation and guidance throughout the course of my internship.
I am truly indebted to Mr. Rohit Verma (Dy. Director), Mrs. Rachna Vats (Senior Fellow),
Mrs. Farida Khan (Senior Fellow), Ms. Vardha Saghir (Senior Fellow), Ms. Karishma
Verma (Senior Fellow) NPTI for their cooperation; and for guiding me through the course of my
internship.
Siddharth Sundriyal
III
EXECUTIVE SUMMARY
The report is divided into two parts and covers two projects
Project 1: Analysis of REC Mechanism.
Government of India is endeavoring hard to increase share of renewable energy in electricity mix
of country. As per target set under National Action Plan on Climate Change (NAPCC),
government envisages renewable energy to constitute approx. 15% of total electricity
consumption in the country by 2020. A number of regulatory provisions and fiscal policies like
Renewable Purchase Obligation (RPO) and Accelerated Depreciation (AD) have been introduced
for the same. Schemes like Feed in Tariff (FiT) has proved quite successful in providing initial
thrust but it gives rise to problems such as price rigidity and rather slow cost reductions driven
by mass production, and increases the financial burden on national governments.
REC mechanism, launched on November 18th 2010, is market based instrument to promote RES
and in cost effective manner. In India where RE sources are not evenly spread across different
parts of country the mechanism seems even more promising by helping the obligated entities to
meet their binding targets (RPO). But the contemporary mechanism certainly has loose ends to
work upon. Uncertainty about REC price after current control period (FY 2017), non-uniform
approach in RE target setting, less frequent (once in a month) trading sessions, annual
compliance of RPOs making REC market skewed towards year end, piling up of REC inventory
etc. are making the mechanism less attractive for developers.
The project involves comprehensive study of current REC mechanism, REC pricing
methodology, and trading pattern. Based on the study and discussion with several stakeholders
areas of improvement in the contemporary mechanism have been identified and some
recommendations have been given to make the mechanism more attractive and promising.
IV
Project 2: STUDY OF OPPORTUNITY AND OPTIONS TO SUPPLY POWER TO AN
UPCOMING MEGA FOOD PARK IN THE STATE OF MADHYA PRADESH.
This project report is meant for a developer of an upcoming mega food park in M.P. who is a
potential client of m/s REConnect Energy Solutions. The Scope of this report are:
I. Opportunity for taking distribution license
a. Rules and regulations governing obtaining and operating as a distribution licensee
b. Procedure for obtaining distribution license
c. Eligibility for obtaining distribution license
d. Pros and cons of operating a distribution license at the food park versus other
models available
II. Assessment of solar project for captive power supply at the food park
a. Optimal size and model (captive, under solar park, etc)
b. Cost and savings estimate for various models
d. Assessment of various options available for sourcing power and potential savings
on the same .
e. Introduction of different EPC/ solar park providers
V
LIST OF TABLES
Table 1: Fees and charges of REC .................................................................................................. 8
Table 2: Pricing of REC ................................................................................................................ 25
Table 3: NAPCC charges .............................................................................................................. 29
Table 4: Demand Potential of RE Power Requirement.................................................................. 29
Table 5: REC inventory ............................................................................................................... 29
Table 6: Voluntary Purchase of RE by Customer Type in USA .................................................. 31
Table 7: Benchmark costing of solar pv ....................................................................................... 31
Table 8: Comparison of RE sources ............................................................................................. 35
Table 9: Project developers………………………………………………………………………
Table 10: EPC Providers and System Integrators………………………………………………..
LIST OF FIGURES
Figure 1: REC concept .................................................................................................................. 39
Figure 2: Comparison of projects with and without REC ............................................................ 52
VI
ABBREVIATIONS
APPC
Average Power Purchase Cost
CA
Central Agency
CEA
Central Electricity Authority
CER
Carbon Emission Reduction
CERC
Central Electricity Regulatory Commission
DISCOM
Distribution Company
FiT
Feed in Tariff
JNNSM
Jawaharlal Nehru National Solar Mission
MNRE
Ministry of New and Renewable Energy
NAPCC
National Action Plan on Climate Change
NLDC
National Load Dispatch Center
ORER
Office of Renewable Energy Regulator
O&M
Operation and Maintenance
PEx
Power Exchange
RE
Renewable Energy
REC
Renewable Energy Certificate
SLDC
State Load Dispatch Center
WACC
Weighted Average Cost of Capital
VII
Table of Contents
TRAINING COMPLETION CERTIFICATE............................................................................ I
DECLARATION.......................................................................................................................... II
ACKNOWLEDGEMENT .......................................................................................................... III
EXECUTIVE SUMMARY ........................................................................................................ IV
PROJECT 1: ANALYSIS OF REC MECHANISM. ............................................................................. IV
PROJECT 2: STUDY OF OPPORTUNITY AND OPTIONS TO SUPPLY POWER TO AN ..... V
UPCOMING MEGA FOOD PARK IN THE STATE OF MADHYA PRADESH. ................... V
LIST OF TABLES ...................................................................................................................... VI
LIST OF FIGURES .................................................................................................................... VI
ABBREVIATIONS ................................................................................................................... VII
TABLE OF CONTENTS ........................................................................................................ VIII
CHAPTER 1 : RENEWABLE ENERGY CERTIFICATE MECHANISM ........................... 2
REC MECHANISM IN INDIA .......................................................................................................... 2
1.1.1 Introduction .................................................................................................................... 2
1.1.2 Drivers for REC in India ................................................................................................ 3
1.1.3 Control period, operative period and sunset date .......................................................... 3
1.1.4 Objectives for REC Mechanism in India ........................................................................ 4
1.1.5 Operational Framework for RECs ................................................................................. 4
1.2 SALIENT FEATURES OF REC FRAMEWORK ............................................................................. 6
CHAPTER 2: REC CONCEPT ................................................................................................... 8
2.1 VALIDITY OF CERTIFICATES ................................................................................................... 9
2.2 DENOMINATION AND ISSUE OF CERTIFICATES ........................................................................ 9
2.3 FEES AND CHARGES ................................................................................................................ 9
2.4 FUNDING FOR CAPACITY BUILDING OF STATE AGENCY ........................................................ 10
2.5 PRICING OF CERTIFICATES: ................................................................................................... 10
CHAPTER 3: REC POTENTIAL MARKET ASSESSMENT .............................................. 11
3.1 RE POWER REQUIREMENT IN DIFFERENT STATES IN INDIA TO FULFILL RPO . ...................... 12
3.2 THE KEY DRIVING FACTORS FOR DEMAND AND SUPPLY OF RECS : ....................................... 13
CHAPTER 4: FINDINGS AND ANALYSIS ........................................................................... 14
1. LACK OF CLARITY REGARDING MINIMUM SIZE OF PROJECTS TO BE ELIGIBLE FOR REC – .... 14
2. NON-UNIFORM APPROACH IN TARGET SETTING. .................................................................... 15
3.NON AVAILABILITY OF RPO LEVELS AND PERIODIC ACCOMPLISHMENT AT SINGLE SOURCE . 16
4. PILING UP OF REC INVENTORY (CLOSING BALANCE) ............................................................ 16
5. UNCERTAINTY ABOUT LENGTH OF CONTROL PERIOD AND REC PRICE POST 2017 ................. 17
VIII
6. LITTLE PARTICIPATION OF SMALL VOLUNTARY BUYERS ....................................................... 18
7. CURRENT REC MECHANISM DOESN’T INCENTIVISE OFF-GRID INSTALLATIONS ..................... 19
CHAPTER 5: REGULATIONS FOR SPECIAL ECONOMIC ZONE IN M.P. ................. 21
CHAPTER 6: OPPORTUNITY FOR TAKING DISTRIBUTION LICENSE .................... 22
6.1 RULES AND REGULATIONS GOVERNING OBTAINING AND OPERATING AS A DISTRIBUTION
LICENSEE .................................................................................................................................... 22
6.1.1 Introduction to Distribution Licensee........................................................................... 22
6.2 ELIGIBILITY FOR OBTAINING DISTRIBUTION LICENSE ............................................................ 22
6.3 PROCEDURE FOR OBTAINING DISTRIBUTION LICENSE ............................................................ 23
6.4 DOCUMENTS TO BE ACCOMPANIED WITH THE LICENSEE APPLICATION FORM. ....................... 23
6.5 PROS AND CONS OF OPERATING AS A DISTRIBUTION LICENSE AT THE FOOD PARK VERSUS
OTHER MODELS AVAILABLE........................................................................................................ 26
6.6 OPTIONS FOR PROCURING OR GENERATING POWER FOR THE MEGA FOOD PARK. ................... 27
6.6.3 Assessment of solar project for captive power supply at the food park ....................... 27
6.6.2 Mechanism of Viability Gap Funding in Phase-II Batch-I of JNNSM ......................... 32
6.6.3 Criteria ........................................................................................................................ 32
6.6.4 Power projects models for the mega food park. ........................................................... 35
CHAPTER 7: SUGGESTIONS AND RECOMMENDATIONS. .......................................... 38
BIBLIOGRAPHY ....................................................................................................................... 40
IX
PROJECT 1:
ANALYSIS OF REC MECHANISM
1
CHAPTER 1 : RENEWABLE ENERGY CERTIFICATE MECHANISM
REC Mechanism in India
1.1.1 Introduction
For catalyzing the necessary development of renewable energy in India, various policy
Instruments have been listed in NAPCC. Renewable Energy Certificate (REC) is one such policy
instrument prescribed in the plan. It is anticipated that this mechanism would enable large
number of stakeholders to purchase renewable energy in a cost effective manner.
When renewable power is produced, it entails accrual of certain non-energy and societal
Beneficial attributes (e.g. environmental and socioeconomic benefits). Renewable Energy
Certificates (RECs) or Green tags, Renewable Energy Credits, or Tradable Renewable
Certificates (TRCs) as they are at times referred to, represent an aggregation of such attributes of
electricity generated from renewable energy sources. These attributes are unbundled from the
physical electricity, and the two products—the attributes embodied in the certificates and the
commodity electricity—may be traded separately. RECs have at times been viewed as a
contractual right (property right) to the environmental attributes of electricity that is generated
from renewable energy.
In less than a decade RECs have become the pseudo currency of renewable energy markets,
primarily because of their flexibility and the fact that they are not subject to the geographic and
physical limitations of commodity electricity. In several countries RECs are being used by
utilities and marketers to supply renewable energy products to end-use customers as well as to
demonstrate compliance with renewable energy mandates.
The Renewable Energy Certificates (RECs) have the potential to address some of the key issues
preventing exploitation of renewable potential in India. Providing the generator or the buyer, an
option of cost compensation through sale of such certificates will incentivize development of
R.E. projects over and above the Renewable Purchase obligation set by regulatory commissions
at state level.
2
1.1.2 Drivers for REC in India
India has a huge RE potential- its midterm potential (till 2032) is estimated to be around 2,22,000
MW; however this potential is not distributed uniformly across the country. The Electricity Act
2003 (EA 2003) mandates State Electricity Regulatory Commissions (SERC) with the function
of RE promotion within the State. The SERCs set targets for distribution companies to purchase
certain percentage of their total power requirement from renewable energy sources. This target is
termed as Renewable Purchase Obligation (RPO).
The requirement of scheduling and prohibitive long term open access charges poses major
barrier for RE abundant states to undertake inter-State sale of their surplus RE based power to
the States which do not have sufficient RE based power. Consequently, the States with lower RE
potential have to keep their RPO target at lower level.
Besides the shortcomings of state level approach to renewable development, other inherent
disadvantages of energy produced from such resources such as high unit cost of the RE based
non-firm power compared to conventional power sources result in lack of motivation to produce
RE based power beyond that required to satisfy the RPO mandate within the State in RE
abundant States. Also RE scarce States are not able to procure RE generation from other States
due to the reasons mentioned above.
To overcome the challenges being faced in overall renewable development, a mechanism to
enable and recognize inter- State RE transactions was critically required for further promotion
and development of RE sources. The aim of introducing such a mechanism was to enable all the
SERCs to raise their States‘RPO targets even if necessary resources are not available in some
States. The Renewable Energy Certificate Mechanism is a mechanism which fits the bill.
1.1.3 Control period, operative period and sunset date
Control period is a period during which the proposed REC Scheme will be in force while
operative period is a period in which projects implemented during control period. Sunset date
refers to the date on which scheme expires. It is proposed that the Scheme shall come into force
3
on April 1, 2010 and control period shall be five years i.e. March 31, 2015. And the sunset date
shall be 25 years from the date on which scheme came into force i.e. March 31, 2035.
1.1.4 Objectives for REC Mechanism in India
While effective implementation of inter-state transactions would be primary objective for the
REC mechanism in India, some of the other objectives identified for REC mechanism are:

Effective implementation of RPO regulation in all States in India

Increased flexibility for participants to carry out RE transactions

Overcoming geographical constraints to harness available RE sources

Reduce transaction costs for RE transactions

Create competition among different RE technologies

Development of all-encompassing incentive mechanism

Reduce risks for local distribution licensee.
1.1.5 Operational Framework for RECs
Step-1 Accreditation:
The proposed REC mechanism requires a procedure for accrediting generation plants which are
eligible to receive RECs. Accreditation is done to assess and establish eligibility of renewable
energy plants to receive RECs. The process of accreditation is largely one time activity where in
plants are validated on its renewable nature and other pre-requisites to be eligible for issuance of
REC. The State agency appointed by the State Electricity Regulatory Commission (SERC) shall
be responsible for Accreditation. Accreditation process involves processing of application,
verification of projects, transfer of information, creation and operation of accounts etc. The
process of accreditation of eligible renewable energy projects would also involve verification of
applications (projects) and sites and hence the accreditation agencies at state level would need to
have adequate monitoring capability.
4
Step-2 Registration
Every eligible entity shall apply for registration at central level. Only one central agency at
national level will be authorized to recognize attributes from renewable generation to avoid
double counting. Registration will result in creation of an account for all the entities participating
in the mechanism.
Step-3 Information of RE generation
Central agency would receive information about injection of RE power by the accredited RE
generators through State Load Dispatch Centre (SLDC) via Regional Load Dispatch Centre
(RLDC) and local distribution licensee.
Step-4 Issuance of REC by REC registry
The eligible entity shall receive a certificate for a specified quantity of electricity generated and
injected into the grid. One REC will be issued for each 1 MWh of electricity generated from
renewable energy plants. RECs will be created as electronic records in a register (because
electronic documents are easier to track than paper documents). The issued certificates will be
credited to the registered account of the plant operator/owner.
Step-5 Exchange of REC
RE generators with REC certificates can exchange their certificate at a common platform viz. the
power exchange approved by CERC. Obligated entities (as defined by the SERCs in their
regulations for RPO obligations) shall buy REC through power exchange. The price discovery of
REC will be based on the demand and supply of the RECs in the market, subject to a forbearance
price (ceiling price) determined by CERC. REC exchange will be connected to the central
agency to keep record of all the transaction in the REC exchange.
Step-6 Monitoring Mechanism
It is proposed that a panel of auditors shall be empanelled by CERC at the central level. The
remuneration charges for such panel of auditors will be met out of the funds which Central
Agency may collect from eligible entities.
5
Step-7 Compliance by Obligated Entities
Central registry will furnish details of REC purchase and redemption to respective SERCs to
enable them to assess compliance by obligated entities and impose penalties on them, if
applicable. As evolved by the Forum of Regulators, there is a provision for enforcement
mechanism in the draft model regulation for SERCs under section 86 (1) (e) of the Act. As per
this provision, in the event of default, obligated entities would be directed to deposit the amount
required for purchase shortfall of REC at forbearance price (i.e. maximum price) of REC in a
separate fund, which cannot be utilized without approval of the concerned State Commission. In
addition to this enforcement mechanism the penalty under Section 142 of the Electricity Act
2003 would also be applicable to the obligated entity. The concerned State Commission can
empower an officer of the State Agency to procure required shortfall of REC at the cost and
expense of Distribution licensee.
1.2 Salient Features of REC Framework
● Cost of electricity generation from renewable energy sources is classified as cost of
electricity generation equivalent to conventional energy sources and the cost for environmental
attributes.
● RE generators will have two options:
a. either to sell the renewable energy at preferential tariff , or
b. to sell electricity generation and environmental attributes associated with RE generation
in the form of REC separately.
Grid connected RE Technologies approved by MNRE would be eligible under this scheme.
● Existing projects having firm PPA would not be eligible till the end of the contract period or a
period of three years from the date of premature termination of the agreement, whichever is
earlier.
6
● Captive Generators (including their self-consumption) shall be eligible for REC if they do not
avail promotional / concessional Wheeling Charges, Banking Facility and enjoy Electricity Duty
Waiver. However, if they forgo such benefits, they will not be eligible to access the market for 3
years. Provided that the 3 year limit does not apply if the concessions are withdrawn by the state
or state commission.
● Under REC Mechanism, RE generating company sells the electricity generated either
a. to the distribution licensee at a price not exceeding the pooled cost of power purchase of
such distribution licensee, or
b. to any other licensee or to an open access consumer at a mutually agreed price, or
through power exchange at market determined price.
● Central Agency- NLDC would issue REC to RE generators.
● One REC will be issued to the RE generators for 1 MWh of electricity injected into the grid
from renewable energy sources.
● Categories of Certificates: Solar and Non-solar.
● CERC may, in consultation with the Central Agency, appoint from time to time compliance
auditors to inquire into and report on the compliance of these Regulations by the person applying
for registration, or on the compliance by the renewable energy generators in regard to the
eligibility of the Certificates and all matters connected thereto.
7
CHAPTER 2: REC CONCEPT
As shown in the figure RE generation either can be sale at feed in tariff or it can be utilized by
selling it for REC benefits. So electricity shall have to be sold to a licensee equal or less than
APPC.RE generator can sell REC as a green attributes through power exchanges.
FIGURE 1: REC Concept
RENEWABLE ENERGY GENERATION
ELECTRICITY +
REC BENEFITS
SALE AT FIT
ELECTRICITY
GENERATED WILL
BE SOLD TO
DISCOM AT A
REGULATED TARIFF
ELECTRICITY
SOLD
TO
OPEN MARKET
AT
MARKET PRICE
GREEN ATTRIBUTE
SOLAR REC
DISCOMS AT PRICE
LESS THAN /EQUAL
TO APPC
NON SOLAR REC
SALE OF RECS AT
EXCHANGE
8
2.1 Validity of Certificates
Eligible entity should apply for Certificates within three months after corresponding generation
from the eligible RE projects. Also the certificate would be valid for 2 years from the date of
issuance of such certificate.
2.2 Denomination and issue of Certificates
The detailed procedure for issuance of REC would be covered under the detailed procedure to be
issued by the Central Agency later. Each certificate would represent one megawatt hour of
electricity generated from renewable energy sources and injected into the grid.
2.3 Fees and charges
Fees and Charges payable under this mechanism would include onetime registration fee and
charges, annual fee and charges, the transaction fee and charges for issue of certificate and
charges for dealing in the certificate.
The details of fees and charges for different procedures of REC are as under:
Table 1 : Fee& Charges for REC
Fee and Charges towards Accreditation
Amount in Rs
Processing Fees (One Time)
5,000
Accreditation Charges (One Time)
30,000
Annual Charges
Revalidation Charge at the end of five (5)
years 15,000
Fee and Charges towards Registration
10,000
15,000
Processing Fees (One Time)
1, 000
Registration Charges (One Time)
5, 000
Annual Charges
1,000
Revalidation Charge at the end of five (5)
years
Fee and Charges towards Issuance of
REC
Fees per Certificate
5,000
Amount in Rs
Amount in Rs
10
9
The fees and charges under this mechanism would be collected by the Central Agency and
utilized for the purpose of meeting the cost and expense under the mechanism including the
remuneration payable to the compliance auditors, the officers, employees, consultants and
representatives engaged to perform the functions under these regulations.
2.4 Funding for capacity building of State Agency
State Agency is an important institution in the process of effective implementation of REC
mechanism. Considering the role envisaged for such an agency, it is necessary to build up
capacity for the agency. Hence certain percentage of the proceeds from the sale of Certificates
would be provided for the purpose of training and capacity building of the State Agency as
designated by the concerned State Commission and for other facilitative mechanism required as
per the detailed procedure by the Central Agency.
2.5 Pricing of Certificates:
The price of REC will be as discovered in the power exchange, subject to a floor and forbearance
price determined by CERC. The forbearance price will not only ensure optimum incentive for
the RE technologies but also save the obligated entities purchasing RECs at unrealistic high
price. It is should be noted that the REC purchase expense for meeting compliance by
distribution licensees should be treated as pass through‘ expense in the Annual Revenue
Requirement. CERC, declares the floor and forbearance prices for the solar and non-solar RECs.
Forbearance Price: The forbearance price has been derived based on the highest difference
between cost of generation of RE technologies / RE tariff and the average power purchase cost of
2011-12 for the respective states.
Floor Price: The floor price has been determined keeping in view the basic minimum
requirements for ensuring the viability of RE projects set up to meet the RE targets. This
viability requirement shall cover loan repayment & interest charges, O&M expenses and fuel
expenses in case of Biomass and Cogeneration.
Table 2: REC Price for Period 2012-17
Non Solar REC (Rs/MWh)
3,300
Forbearance Price
Floor Price
1,500
Solar REC ( Rs/MWh)
13,400
9,300
10
CHAPTER 3: REC POTENTIAL MARKET ASSESSMENT
To analyze the potential REC market in India, Renewable energy generation thus
available has been compared with the current scenario (RE capacity addition as planned) to
quantify incremental RE generation due to target set out in NAPCC.
Table 3 : NAPCC target implementation
NAPCC Target
implementation
Scenario
Energy Requirement
Unit
2009-10 2010-11
2010-11
2011-12
2012-13
2013-14
2014-15
BU
848.39
906.32
968.32
12.7567
15.8205
19.6201
NAPCC Target
RE Energy
%
BU
5%
42.4195
6%
54.3792
7%
67.7824
8%
81.3672
9%
96.1146
10%
112.134
Incremental Energy
BU
-
11.9597
13.4032
13.5848
14.7474
16.0194
MW
15765.9
19553.1
24250
30075
37299.
46258
%
25%
25%
25%
25%
25%
25%
RE Energy Availability
BU
34.5273
42.8213
53.1075
65.8642
81.6848
101.305
RE Energy Availability
%
4.07%
4.72%
5.48%
6.48%
7.65%
9.0%
Incremental Renewable
Energy Availability
BU
-
8.29397
10.2862
12.7567
15.8205
19.6201
Current Scenario
Renewable Installed
Capacity
CUF
At estimated CUF of 25% on aggregate basis, total renewable energy generation is expected to
increase from 34.53BU (2009-10) to 101.305BU units (2014-15), which translate to share of RE
quantum in overall energy mix to increase from 4.07% to 9.03%, which is marginally lower
than the RPO trajectory outlined under NAPCC. Thus, incremental RE generation varies
from 8.29BU to 19.6201BU. If RECS are proposed to be introduced for new RE projects, this
translates to REC market potential of around 8 to 20BU per annum.
11
3.1 RE Power Requirement in different states in India to Fulfill RPO .
As discussed above that 21 states have declared their RPO. It is interesting to see how
much electricity these states need to procure from RE sources in order to fulfill their
RPO?
Table 4: Demand Potential of RE Power Requirement (in MUs)
State
2010-11
2011-12
2012-13
4190
4793
5483
Assam
65
139
224
Delhi
227
241
254
Gujarat
2514
2949
3425
Haryana
3787
4557
5484
Himachal Pradesh
662
776
902
Jammu & Kashmir
101
317
554
Jharkhand
287
308
330
Karnataka
4924
5465
6066
Madhya Pradesh
2247
2288
2330
Maharashtra
5889
7460
8602
Manipur
15
26
48
Mizoram
18
23
29
Orissa
1098
1222
1418
Punjab
1722
1794
1869
Rajasthan
3688
4161
5159
Tamil Nadu
6609
6518
6934
10
22
24
Uttar Pradesh
2497
3201
3800
Uttarakhand
723
845
889
Andhra Pradesh
Tripura
West Bengal
663
1146
2199
As shown above, a large amount of Renewable Energy generation is required by
obligated entities to fulfill their RPO condition as defined by their respective states and but as
shown in Table 4, as per the projection of Renewable Energy generation in future is not going to
be sufficient for obligated entities to fulfill their RPO criteria.
12
So in order to complete their RPO these obligated entities should have to purchase REC.
3.2 The key driving factors for demand and supply of RECs :
a) Demand for RECs: The demand for the RECs will be mainly driven by the states which
are not able to meet their RPO targets by purchase of RE power. A review of RPO target
and actual achievement shows that very few states have been able to meet their RPO
targets. In long term, factors like RPO targets, total electricity consumption of the states
and the gap between targets & achievement will vary, which will eventually change the
demand for RECs.
b) Supply for RECs: The supply of RECs will depend upon the new renewable energy
capacity addition, RE projects getting eligible for issuance of RECs, players
participating in the REC market etc .
13
CHAPTER 4: FINDINGS AND ANALYSIS
1. Lack of Clarity Regarding Minimum Size of Projects to be Eligible for REC –
CERC doesn’t specify minimum installed capacity for projects to avail RECs, though in Draft
document issued by CERC on March 17, 2010, it was mentioned as 250 KWp.30 Only three state
agencies, (viz. Jammu and Kashmir, Maharashtra and Orissa), have specifically notified the
minimum size allowed for REC projects.
The table shows the detailsSTATE
REC cap
Andhra Pradesh
No Cap
Assam
No Cap
Bihar
No Cap
Chattishgarh
No Cap
Delhi
No Cap
Gujarat
No Cap
Haryana
No Cap
Himachal Pradesh
No Cap
Jammu & Kashmir
250 kW
Goa & UT
No Cap
Jharkhand
No Cap
Kerala
NA
Madhya Pradesh
No Cap
Maharashtra
250 kW
Manipur and Mizoram
No Cap
Meghalaya
No Cap
Nagaland
NA
Orissa
250 kW
Punjab
No Cap
Rajasthan
No Cap
Tamil Nadu
No Cap
Tripura
No Cap
Uttar Pradesh
No Cap
Uttrakhand
No Cap
30Source:
MODEL PROCEDURE / GUIDELINES FOR ACCREDITATION OF RENEWABLE ENERGY GENERATION
PROJECT FOR REC MECHANISM BY STATE AGENCY (Draft dated March 17, 2010)
14
MERC specifies minimum installed capacity for availing REC benefit to be 250
kwp.31However, there are cases in Maharashtra where projects lower than the specified
capacity (250 kWp) have been accredited.
Energy
Project
No.
Capacity
(MW)
OO1
0.225
29-06-2012
N/A
OO1
0.225
6/6/2012
N/A
Maharastra Wind
M-Tech Innovations Ltd
M/s KOTHARI AGRITECH PVT.
LIMITED
M/s KOTHARI AGRITECH PVT.
LIMITED
OO2
0.225
6/6/2012
N/A
Maharastra Wind
BotharaFoundary& Machine Works
OO1
0.225
29-03-2012
23-05-2012
Maharastra Wind
Deegee Orchards Pvt Ltd
OO1
0.23
17-02-2012
23-03-2012
Maharastra Wind
Sanjay D. Ghodawat HUF
OO1
0.23
17-02-2012
N/A
Maharastra Wind
NarendraSolvexPvt Ltd
Narendra Vegetable Products Pvt
Ltd
OO1
0.23
17-02-2012
23-03-2012
OO1
0.23
17-02-2012
23-03-2012
STATE
Source
Maharastra Wind
Maharastra Wind
Maharastra Wind
RE Generator
Date of
Accrediation
Date of
Registration
*Source:https://www.recregistryindia.in/index.php/general/publics/accredited_regens
There should be uniformity among states agencies while setting eligibility criteria for
Accreditation. Again, the states which have specifically laid out criteria should follow
them strictly. More clarity regarding minimum installed capacity for REC eligibility is
desired.
2. Non-Uniform Approach in target setting.
The target for RE generation (year 2012-13) has been taken as average of renewable energy
requirement as per the NAPCC and as per the MNRE Report on “Renewable Energy in India:
progress, Vision and Strategy. Therefore, the Commission has, for computing floor price, settled
on a figure which is around 70000 MUs.
In the last order dated 1st June 2010 for calculating REC prices the respective RE (MU) for 6%
of DMRPS it was considered on the basis of 17th Electric Power Survey (EPS) data.
A uniform approach should be adopted for setting the targetas it directly affectsthe floor price.
Higher the target higher is the floor price.And subsequently it affects the cash flow for project
developers.
15
3.Non Availability of RPO levels and Periodic Accomplishment at Single Source
Information about RPO levels of various states is not available at single source (website). Again,
information about periodic accomplishment of RPO target by various obligated entities are also
not available on public domain.
Once rational RPO targets have been set for various states, the information about it and its
accomplishment should be available on website maintained by central agency (NLDC). The
Central Agency (CA) from time to time, after each trading session (of RECs) or fortnightly,
update the RPO achievement section and should intimate the utilities falling short of target. The
regular updating of target achieved will give an idea of REC market to the RE generators and
they can thus eventually anticipate the REC demand in months ahead.
4. Piling Up of REC Inventory (Closing Balance)
Since the first trading session in March 2011, in last 30 trading sessions, only four times number
of RECs issued have exceeded number of RECs redeemed. This has led to huge surge of REC
inventory (non-redeemed). Again, RECs are valid for only two years (from date of issuance) and
eventually lapsed if not traded in two years.
This leaves the RE developers with skepticism about the popularity of certificate market as their
cash inflows are at stake.
Table 5: REC Inventory
Month, Year
Opening Balance
Solar
REC Issued
Total
Solar
0
REC Redeemed
Total
Solar
0
Non
Solar
532
532
Closing Balance
March, 2011
0
Non
Solar
0
Total
Solar
0
Non
Solar
424
Total
0
Non
Solar
108
424
April, 2011
0
108
108
0
4503
4503
0
260
260
0
4351
4351
May, 2011
0
4351
4351
0
28270
28270
0
18502
18502
0
14119
14119
June, 2011
0
14119
14119
0
27090
27090
0
16385
16385
0
24824
24824
108
July, 2011
0
24824
24824
0
30224
30224
0
18568
18568
0
36480
36480
Aug, 2011
0
36480
36480
0
31813
31813
0
25096
25096
0
43197
43197
Sept, 2011
0
43197
43197
0
74612
74612
0
46362
46362
0
71447
71447
Oct, 2011
0
71447
71447
0
126544
126544
0
95504
95504
0
102487
102487
Nov, 2011
0
102487
102487
0
135697
135697
0
105527
105527
0
132657
132657
Dec, 2011
0
132657
132657
0
88055
88055
0
111621
111621
0
109091
109091
Jan, 2012
0
109091
109091
0
102348
102348
0
171524
171524
0
39915
39915
Feb, 2012
0
39915
39915
0
200736
200736
0
206188
206188
0
34463
34463
March, 2012
0
34463
34463
0
203819
203819
0
199737
199737
0
38545
38545
16
April, 2012
0
38545
38545
0
122369
122369
0
71226
71226
0
89688
89688
May, 2012
0
89688
89688
249
230448
230697
10
168675
168685
239
151461
151700
June, 2012
239
151461
151700
324
258801
259125
342
236485
236827
221
173777
173998
July, 2012
221
173777
173998
328
382384
382712
179
158220
158399
370
397941
398311
Aug, 2012
370
397941
398311
190
474594
474784
379
273893
274272
181
598642
598823
Sept, 2012
181
598642
598823
1443
568124
569567
1160
264446
265606
464
902320
902784
Oct, 2012
464
902320
902784
1412
614478
615890
1791
222700
224491
85
1294098
1294183
Nov, 2012
85
1294098
1294183
1603
392485
394088
1219
132352
133571
469
1554231
1554700
Dec, 2012
469
1554231
1554700
992
382391
383383
1208
273644
274852
253
1662978
1663231
Jan, 2013
253
1662978
1663231
3306
304238
307544
2308
193337
195645
1251
1773879
1775130
Feb, 2013
1251
1773879
1775130
1882
314917
316799
2234
152952
155186
899
1935844
1936743
March, 2013
899
1935844
1936743
2917
268323
271240
3183
427871
431054
633
1776296
1776929
April, 2013
633
1776296
1776929
2444
259299
261743
2217
44459
46676
860
1991136
1991996
May, 2013
860
1991136
1991996
3973
249221
253194
1703
52968
54671
3130
2187389
2190519
June, 2013
3130
2187389
2190519
2802
292928
295730
1479
72486
73965
4453
2407831
2412284
July, 2013
4453
2407831
2412284
17227
462962
480189
2029
161402
163431
19651
2709391
2729042
Aug, 2013
19651
2709391
2729042
12890
488824
501714
2359
40889
43248
30182
3157326
3187508
53982
7121029
7175011
23800
3963703
3987503
Total :
Stricter compliance of RPO is recommended. Otherwise the balance between demand and supply
is disturbed. Laxity in compliance leads to piling up of REC inventory. This again leads to
skepticism in minds of RE project developers who are pondering about setting up plants under
RE mechanism.
5. Uncertainty about Length of Control Period and REC price post 2017
A great deal of confusion and wide range of opinions persists when it comes to length of control
period. A longer control period will give a sense of security and certainty to developers but at the
same time this won’t reflect the reduction in cost due to change in technology.
A longer control period should be set, with floor price kept constant over the control period. This
will ensure minimum returns to the RE generators, giving certainty. But the forbearance price
should be revised from time to time (yearly or once in two years) reflecting the reduction in cost
due to improvement in technology. While anticipating his cash flows, the developer should take
into account the floor price fixed. Anything above floor price he gets by selling RECs on PEx
will be his premium for the risk he has taken.
17
6. Little Participation of Small Voluntary Buyers
While the primary goal of the RECs is to address the needs of the compliance market, it can also
serve as a useful tool for meeting the ‘green electricity’ needs of the voluntary market. Such
applications include participation by corporate as a part of their Corporate Social Responsibility
(CSR) and by philanthropic organizations as well as individuals. In 2004, voluntary market in the
USA was estimated to account for about 3 million MWh of green electricity with an estimated
market value of $ 15–45 million. This is projected to go up to 20 million MWh of green
electricity with an estimated market value of $ 100–300 million by 201032.
The increase in voluntary demand for RE by residential and commercial consumers in the US is
driven by green products offered by utilities and competitive electricity suppliers, and
RECs.Refer Table 6.
Table 6: Voluntary Purchase of RE by Customer Type in USA
S. No.
1
2
3
4
Year
Residential (GWh)
Commercial (GWh)
Total (GWh)
Share of Commercial (in %)
2005
3,000
5,500
8,500
65
2006
3,200
8,700
11,900
73
2007
4,500
13,600
18,100
75
2008
5,500
18,8000
24,300
77
Source33
In India REC has found little popularity among voluntary buyers. Only two corporates viz.
(POSOCO and Manikaran Power Trading Ltd.) have voluntarily bought RECs from IEX so far.34
Recommendation: Steps should be taken to encourage participation of voluntary buyers. A
smaller denomination of REC would enhance market participation and would improve liquidity
in the market for RECs. Smaller denominationwill facilitate participation of small buyers as well
as small projects across the country.While the compliance market may remain the primary driver
for the RECs in India in the initial stage, the scope for voluntary market purchases would remain
promising in future.
32
Holt, Ed and Lori Bird (2005).“Emerging Markets for Renewable Energy Certificates: Opportunities and
Challenges", Technical Report, NREL/TP-620-37388, National Renewable Energy Laboratory, Colorado.
33
Cook, O. and A. Karelas (2009). Insights into the Renewable Energy Market: A Brief Overview of
Procurement Trends, Drivers, and Impacts of Voluntary Commercial Purchasers, Center for Resource
Solutions. Francisco, California.
34 Source: List of REC Voluntary Buyers from IEX http://www.iexindia.com/RECApp/RECVoluntaryBuyers.aspx
18
7. Current REC Mechanism doesn’t Incentivise Off-grid installations
The present REC mechanism doesn’t benefit off-grid application. As per current CERC REC
Regulation the mechanism is only for grid connected plants. Thus the off-grid and small
applications like rooftop solar PV cannot avail the benefit from REC mechanism.
By leveraging the REC mechanism, solar becomes cost competitive with conventional power
production from commercial and industrial segments. REC represents critical source of cash
flows for project owners. In several countries like Australia small RE installations are also
included in beneficiary list of similar certificate trading schemes.
The following figure 2. shows how REC can substantially reduce payback period of small
installations. (Source: BRIDGE TO INDIA Financial Model)
19
PROJECT 2:
STUDY OF OPPORTUNITY AND OPTIONS TO SUPPLY POWER TO AN
UPCOMING MEGA FOOD PARK IN THE STATE OF MADHYA
PRADESH.
20
CHAPTER 5: REGULATIONS FOR SPECIAL ECONOMIC ZONE IN M.P.
The MADHYA PRADESH ACT No. 23 of 2003 - THE INDORE SPECIAL ECONOMIC
ZONE (SPECIAL PROVISIONS) ACT, 2003 gives the following guidelines regarding
generation, transmission, distribution, supply, sale and use of electricity in the special economic
zones in the state of Madhya Pradesh.

The Developer or Co-developer or any other person designated as such by the
Development Commissioner shall be deemed to be the Licensee to undertake in the Zone,
the activities of transmission, distribution, supply and sale of electricity, with authority to
purchase the energy requirements in the Zone from such sources as may be considered
appropriate and conducive to the development of the Zone.

The Developer or the Co-developer or any other person designated as such by the
Development Commissioner shall be deemed to be permitted to generate electricity for
the purpose of supplying it within the Zone.

The Unit established in the Zone shall be entitled to generate electricity either
individually or in association with other Units in the Zone for captive use and
consumption of such Unit or Units or sell and supply electricity to other units in the
Zone.

The tariff terms and conditions of the generation, transmission, distribution, sale, supply
and use of electrical energy in the Zone shall be subject to such regulations as may be
made by the Development Commissioner.

The provisions of levying electricity duty and cess under the Madhya Pradesh Electricity
Duty Act 1949 (9 of 1949) and Madhya Pradesh Upkar Adhiniyam 1981 (1 of 1982) shall
not be applicable to sale or supply of electricity to the Zone and generation, transmission,
distribution and consumption within the Zone.
21
CHAPTER 6: OPPORTUNITY FOR TAKING DISTRIBUTION LICENSE
6.1 Rules and regulations governing obtaining and operating as a distribution
licensee
6.1.1 Introduction to Distribution Licensee.
According to Electricity act 2003:-
"distribution licensee" means a licensee authorized to operate and maintain a distribution system
for supplying electricity to the consumers in his area of supply;
“ licensee” means a person who has been granted a licensee under section 14;
The Appropriate Commission may, on an application made to it under section 15, grant any
person license:
I.
II.
to distribute electricity as a distribution licensee; or
to undertake trading in electricity as an electricity trader, in any area as may be
specified in the license
6.2 Eligibility for obtaining distribution license
Section14. (Grant of licensee):
The Appropriate Commission may grant a licensee to two or more persons for distribution of
electricity through their own distribution system within the same area.

Provided also that a distribution licensee shall not require a licensee to undertake trading in
electricity.
22
6.3 Procedure for obtaining distribution license
Procedure for Grant of License
a. Every application under section 14 shall be made in such form and in such manner as
may be specified by the Appropriate Commission and shall be accompanied by such fee
as may be prescribed.
b. Any person who has made an application for grant of licensee shall, within seven days
after making such application, publish a notice of his application with such particulars
and in such manner as may be specified.
c. a licensee shall not be granted until the objections, if any, received by the Appropriate
Commission in response to publication before the expiration of thirty days from the date
of the publication of the application have been considered by it;
d. Where a person makes an application under sub-section (1) of section 14 to act as a
licensee, the Appropriate Commission shall, as far as practicable, within ninety days after
receipt of such application, I.
issue a licensee subject to the provisions of this Act and the rules and regulations
made thereunder ; or
II.
reject the application for reasons to be recorded in writing if such application does
not conform to the provisions of this Act or the rules and regulations made
thereunder or the provisions of any other law for the time being in force: Provided
that no application shall be rejected unless the applicant has been given an
opportunity of being heard.
e. A licensee shall continue to be in force for a period of twenty- five years unless such
licensee is revoked.
6.4 Documents to be accompanied with the licensee application form.
1. Affidavit of the authorized person on non judicial stamp paper of appropriate value.
2. Information relating to existing licensee.
3. Prior experience ( preceding 3 years details for related business)
23
4. Documents related to the status of the applicant:a. Copies of the company’s memorandum /articles of association/ partnership deed/
constitution of society etc.
b. Copies of the certificate of registration of company/ society and certificate of
commencement of the business.
c. Relevant resolution of company / society/ local authority.
d. Letter of authority of the board of directors in favor of person applying and
signing the application.
e. Names and address of the directors with share holding/ financial stake.
f. Names of principal share holders/ partners/ members.
g. Income tax clearance certificate.
5. Data relating to management and financial capability.
A licensee must have sufficient and financial capability to function as a
transmission or distribution licensee on a sustainable basis. Documents
demonstrating these capabilities shall include:
a. Managerial capability
1. Senior management’s CV.
2. Cadre strength for different categories, technical and non technical.
b. Financial capability
1. Bank references regarding applicant’s solvency.
2. Most recent balance sheet.
3. Audited accounts of the applicant and it’s holding company, subsidiary or
affiliated company for each of the three preceding financial years.
4. Any accompanying notes and certification on the above statements from a
reputed chartered accountant.
c. Any other document/ evidence to substantiate applicant’s ability to perform
functions of distribution of electricity in a sustainable manner.
d. Financial details of other business ventures of the applicant.
6. Map of the area of supply.
a. Detailed map showing the area of the supply/ transmission as mentioned in the
regulation.
24
b. Detailed electrical distribution map (including information on substations and
configuration of the system) and geographical map of the proposed area of
distribution, drawn to scale.
c. The map shall clearly distinguish between the existing and new facilities that shall
be required for meeting the obligation to supply.
d. The map shall include the streets and roads in which the electricity is distributed.
7. A list of all local authorities vested with the administration of any portion of the area of
distribution.
8. A list of protected / reserved forests, sanctuaries and monuments of archeological
importance in the proposed area of supply.
9. A list of cantonment, aerodrome, fortress, arsenal, dockyard, or camp or any building or
place in occupation of the government for the defense purpose in the proposed area of
supply.
10. An appropriate statement describing any lands, which the applicant proposes to acquire
for the purpose of the license and the means of such acquisition.
11. Data relating to the applicant’s future business:
a. Five year business plan for the distribution of electricity for which the application
is being made and funding arrangements for meeting its obligations under
proposed license for maintenance, operation, improvement and expansion for
future load growth.
b. Five year annual forecast of costs, sales and revenues and project financing
stating the assumptions underlying the figures provided.
c. Details of approach and methodology for setting up the proposed distribution
system.
12. Statement of exclusion desired of the general conditions of the license specified by the
commission and justification thereof.
13. Proof of payment of application fee.
14. Proof of compliance with such additional requirements as may be prescribed by the
central government u/s 14 of the act if license of distribution of electricity has been
granted to any other person in the proposed area of supply.
a. Capital adequacy
25
b. Credit worthiness
c. Code of contact
d. Others
15. Copies of agreement for purchase of power, if executed.
16. No objection certificates to distribute or supply in an area from the central government as
per section 15(2)(ii) of the electricity act or acknowledgement or the filing of the
application with the central government seeking such approvals.
17. Acknowledgement of service of a copy of transmission application to the state
transmission utility.
18. Details of assets and facilities required for the business in appropriate format.
a. Is the applicant acquiring existing assets or creating new assets?
b. For applicants employing other contractors
6.5 Pros and cons of operating as a distribution license at the food park versus
other models available
The Madhya Pradesh government provides several concessions to the SEZ including the mega
food parks as per its SEZ Policy 2003 and Agro and Food Processing Policy 2012.
 Assistance on power consumption with subsidized rate of INR 1.50 per unit for 5 years
subject to a ceiling of 25% of the electric units consumed to Cold Storage, Cold
Chamber, Ripening Chamber and Individual Quick Freezing Enterprise
-Agro and Food Processing Policy 2012
 GoMP through its Ministry of Power will allocate 5MW Power for the SEZ units. A
33KV/11KV sub-station will be constructed to provide uninterrupted & quality power at
cheaper rates in the area.
- Jabalpur mega food park
Other pros and cons for a distribution licensee of a mega food park can be as stated below-
26
Pros:
1. Easy load forecasting.
Since a mega food park will consist mostly of industrial and commercial setups, with
well known load and time of operation, load forecasting will be easy. Also, seasonal
fluctuations in power demand can be predicted according to the harvesting seasons.
2. Easy energy accounting.
Fixed number of consumers within the food park will make the energy accounting easy.
3. Less risk of default.
Industrial and commercial users pay their bills on time to continue getting uninterrupted
power for their processing and other units.
Cons:
1. Restriction to load shedding.
Industrial and commercial users will expect uninterrupted power supply for their plant
machineries to work efficiently.
6.6 Options for procuring or generating power for the mega food park.
The options available for the developer of the food park to procure or generate power for
the food park can be 1. Generate own power ( coal based, solar, wind or biomass).
2. Purchase from open access/third party/bilateral/power exchange.
3. Combination of the above.
4. PPA(power purchase agreement).
6.6.3 Assessment of solar project for captive power supply at the food park
Madhya Pradesh is endowed with high solar radiation with around 300 days of clear
sun. Madhya Pradesh offers good sites having potential of more than 5.5 to 5.8kWh/sq m for
installation of solar based power projects.
27
Solar project in Madhya Pradesh are governed by Madhya Pradesh Solar Power Policy – 2010.
The Madhya Pradesh Urja Vikas Nigam (MPUVN) Limited is the nodal agency for
implementation of the Madhya Pradesh Solar Power Policy – 2010.
Only new plant and machinery shall be eligible for installation under this policy. Hybrid system
shall be allowed as per guidelines of MNRE.
Any enterprise willing to establish solar PV/solar thermal projects in MP shall be eligible for
incentives under this policy. Eligibility for availing benefits under this scheme shall be based on
techno-economical viability and available resources. Captive units will be eligible to get benefits
under this policy as an investor/consumer.
State Policy

Minimum capacity of a grid connected Solar Power Generator (SPG) should be 1 MW
each.

This project will come under the state policy of Small Solar Power Plants of capacity up
to 2MW connected to distribution network (below 33 kV).
Evacuation

For Solar PV sources, connectivity may be allowed at Low Voltage or 11/33 kV as
considered technically suitable by the Distribution Licensee.
Generation

Generation of the State depends upon the Irradiance at the specific site selected for
project. In MP it varies from 5 – 6 kWh / m2 / day. Even if the most conservative
approach is chosen 1.5 MUs of Electricity can be generated by a 1 MW Power Project.
Tariff
28

The MPERC determines the levelised tariff of Rs. 10.70 per unit for 25 years for sale of
electricity from Rooftop PV and other small Solar Power Projects with capacity limited
to 2 MW
CDM Benefits

There is sharing of Clean Development Mechanism benefits and this will be as per the
provisions in CERC (Tariff for Renewable Energy Sources) Regulations, 2009 which is
mentioned as follows

“The CDM benefits should be shared on a gross basis, starting from 100% to developers
in the first year after commissioning and thereafter reducing by 10% every year till the
sharing becomes equal (50:50) between the developers and the consumers, in the sixth
year. Thereafter, the sharing of CDM benefits should remain equal till the time that
benefit accrues.”
Sale to third party / Captive use.
Open Access for Renewable Sources of Energy

Renewable Sources of Energy will have Open Access, subject to availability of adequate
transmission capacity in Transmission Licensee’s system within the State as per Open
Access Regulations

The project developer is required to obtain Short / Long Term Open Access permission in
case of captive use / third party sale.

The open access charges, as applicable and will be levied. In case of sale of power to the
Distribution Licensee, such permission is not applicable and is not required to be
obtained.

In case the point of injection and drawl fall within the jurisdiction of any of the
Distribution Licensees involving the transmission network, permission for bulk power
transmission is required to be obtained from M.P. Power Transmission Co. by the
developer before executing the agreement with M.P. Power Trading Co. and the
developer will not be required to execute a separate agreement with M.P. Power
Transmission Company Limited.
29

The Distribution Company in whose area the energy is consumed (irrespective of the
point of injection) will deduct 2% of the energy injected towards wheeling charges in
terms of units.

Wheeling charges are not applicable where generation and consumption of energy are at
the same premises without involving the licensees system network.
Reactive Power Charges
The MPERC orders for the charges for KVARh consumption from the grid as 27 paise/unit.
Table 7.Benchmark Capital Cost Norm for Solar PV Power Projects for the FY 2013-14
Sr.No.
Particulars
Capital Cost Norm for
% of total cost
Solar PV project
(Rs. Lakh/MW)
1.
PV Modules
344.50
43%
2.
Land Cost
16.80
2%
3.
Civil and General Works
094.50
12%
4.
Mounting Structures
105.00
13%
5.
Power Conditioning Unit
060.00
7%
6.
Evacuation Cost up to Inter‐ connection
105.00
13%
080.00
10%
805.80
100%
Point (Cables and Transformers)
7.
Preliminary and Pre‐ Operative Expenses
including IDC and contingency
8.
Total Capital Cost
Benchmark Capital Cost for solar Thermal Power Projects.
Considering the expected reduction in cost of thermal power projects globally as well as the tariff
quoted by the bidders selected under JNNSM, the Commission proposes the benchmark capital cost
of solar thermal project as 1200 Lakh/MW for FY 2013-14.
30
Solar Technology Parks
Solar technology parks for generation and manufacturing units in equipment & related ancillaries
for solar systems shall be promoted and established at appropriate locations in the state of
Madhya Pradesh. The MPUVN shall be the nodal agency for establishing the Solar technology
parks. The SME sector will be promoted for manufacture of various components and systems for
solar systems. The Solar technology parks will be given preference in land allocation and
creating of essential facilities by the state government.
Advantages and disadvantages of setting your solar plant in a solar park .
Advantages of a solar park
1. Ready to move & start facility for any solar power developer with clear title land.
2. Proper North-South oriented plots to be allotted so as to reduce land wastage, which are ideal
for solar plant designing
3. Reduction in time to both start and execute the project.
4. No ROW (right of way) issue will be there for laying of transmission line, which will be done
only once and common to all.
5. Ease of work execution and management will be there.
6. Relief from local issues which again will result into time and money saving in project
execution.
7. Evacuation from individual project will be done right from the individual plot to the discom’s
substation at 132KV level.
8. Reduced transmission losses to the tune of 1/16th of the normal at 33KV.
9. Individual plant metering at pooling substation for ease of billing.
10. Security, preventive maintenance of approach roads & transmission line etc. will be done on
periodic basis.
11. Grid down time is also minimum for 132 kV sub-station, which means higher revenue
generation.
12. Better financials than in your own lands.
13. Good for High Networth individuals with tax liability.
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Disadvantages of a solar park - Your project is not in your area or land.
6.6.2 Mechanism of Viability Gap Funding in Phase-II Batch-I of JNNSM
The mechanism of operation of Viability Gap Funding shall be as enumerated below:
1) The tariff to be paid to the developer is fixed at Rs.5.45 per kWh. This tariff will remain firm
for 25 years project period. In case benefit of accelerated depreciation is availed for a project, the
tariff will get reduced by 10% to Rs.4.95 per kWh in line with CERC regulations.
2) The developer will be provided a viability gap fund based on his bid. The upper limit for VGF
is 30% of the project cost or Rs.2.5 Cr./MW, whichever is lower.
3) The developer has to put his own equity of at least Rs.1.5 Cr./MW.
4) The remaining amount can be raised as loan from any source by the developer.
5) The VGF when paid by the SECI may be used to return part of the loan or developer
contribution (in excess of Rs.1.5 Cr./MW) or a combination thereof as the case may be, in case
investments have already been made. SECI will issue a letter confirming release of VGF so that
bidder is able to achieve financial closure for full amount if required at the time of signing of
PPA.
Registration fee
For large grid connected solar power projects, along with application, developer shall have to
pay @ Rs. 50,000/- per megawatt as non-refundable registration fee. The maximum limit for
registration fee shall be Rs 50 lakhs per project. The Board of MPUVN may change the
registration fee from time to time.
6.6.3 Criteria
a. Financial Criteria :Net Worth:-
The Net Worth of the company should be equal to or greater than the value calculated at the rate
of Rs 2 Crore or equivalent US$ per MW of the project capacity upto 20 MW. For every MW
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additional capacity, beyond 20 MW, additional net worth of Rs. 1 crore would need to be
demonstrated. The computation of Net Worth shall be based on unconsolidated audited annual
accounts of the company. The Company would be required to submit annual audited accounts for
the last four financial years However, the Net Worth criteria should be met not more than seven
days prior to the date of submission of RfS by the bidding Companies. To demonstrate fulfilment
of this criteria, the Company shall submit a certificate from a Chartered Accountant certifying
the availability of Net Worth on the date not more than seven days prior to submission of RfS
along with a Certified copy of Balance Sheet, Profit & Loss Account, Schedules and cash flow
statement supported with bank statement.
b. Technical Criteria
Under the VGF scheme in Phase II Batch-I of the JNNSM, it is proposed to promote only
commercially established and operational technologies to minimize the technology risk and to
achieve the commissioning of the Projects.
c. Connectivity with the Grid
(i) The plant should be designed for inter-connection with the transmission network of STU/CTU
or any other transmission utility at voltage level of 33 KV or above.
(ii) The responsibility of getting connectivity and open access with the transmission system
owned by the STU / CTU or any other transmission utility, as may be required, will lie with the
Project Developer.
This arrangement would be subject to arrangement of energy accounting with the SLDC.
The maintenance of Transmission system upto the inter-connection point shall be the
responsibility of the Project Developer.
d.Bank Guarantees
The Project Developer shall provide the following Bank Guarantees to SECI in a phased manner
as follows:
• Earnest Money Deposit (EMD) of Rs. 10 Lakh/MW in the form of Bank Guarantee along with
RfS.
• Performance Bank Guarantee of Rs. 20 Lakh/MW at the time of signing of PPA.
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In addition to the Performance Bank Guarantee of Rs. 20 Lakh/MW to be provided at the time of
signing of PPA, the Bank Guarantee towards EMD will also be converted into Performance
Bank Guarantee.
The Project Developers are required to sign PPA with State Utilities/Discoms in line with the
Timeline given in the guidelines. In case, the Project Developer refuses to execute the PPA
within the stipulated time period, the Bank Guarantees towards EMD shall be encashed by SECI
as penalty. In case the Project is not selected, SECI shall release the Bank Guarantees within 15
days of the issue of LoI to selected Projects. All the Bank Guarantees shall be valid for a period
of 16 months from the date of signing of PPA for the Projects.
e.Permits and Licensing
Permit and licensing requirements vary, depending on the location of the project but the key
permits, licences and agreements typically required for renewable energy projects include:
• Land lease contract.
• Environmental impact assessment.
• Building permit/planning consent.
• Grid connection contract.
• Power purchase agreement.
The authorities, statutory bodies and stakeholders that should be consulted also vary from
country to country but will usually include the following organisation types:
• Local and/or regional planning authority.
• Environmental agencies/departments.
• Archaeological agencies/departments.
• Civil aviation authorities (if located near an airport).
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6.6.4 Power projects models for the mega food park.
1. Solar plant models.
A solar generator can opt the following models for generation and consumption of solar power
within its own area.
1. Solar captive.
2. Pseudo captive solar project.
3. Solar rooftop.
4. Solar thermal plant.
1 mw of solar power plant will need about 5 acres of land. Ideally the land has to be very close to
a substation. For a 1 mw plant 11 kva is ok.
For each km the substation is away from land, one has to incur about Rs 10 /12 lakhs for laying
the transmission lines. Better than that is to buy up the land between your land and
the substation.
A simple way to determine the approximate ceiling for the solar PV system capacity for all
electricity needs is as follows:
a. Find out your total monthly electricity consumption. Let’s say it is 100000 kWh
b. Divide it by 30 to get an approximate daily consumption. In the example, it is about 3300
kWh.
c. Using the thumb rule that 1 W of solar PV can approximately produce 4 Wh of electricity
per day, you can determine the approximate maximum solar PV capacity you will require
to power all your systems using solar PV. In this case, if the total daily consumption of
electricity is 3300 kWh, you will require a maximum of 3300/4 = 825 kw.
d. 1 MW can generate approx 1.5- 1.7million units per year.
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2. APPC plus REC.
Solar power can be sold to the state discoms at APPC and RECs can be claimed for the same,
which can be traded in the exchange at a price between rs.9.3-12 per unit. The power required
can be purchased from the exchange or through a PPA at generally lower rate.
Another option for bulk user is to procure power through a power purchase agreement i.e. PPA at
preferential tariff as decided by the SERC.
3. Third Party PPA
Third Party PPA is a power purchase agreement which a developer can use and claim REC.
Third party PPA rec is normally got by government authorized power trading companies.
Companies that set up large solar plants of size 10MW and above, can approach these companies
to avail the 3rd party PPA for their solar project in Madhya Pradesh. The current third party PPA
for solar power doing the rounds in Madhya Pradesh is Rs 4.50 - 5 per unit with 5% escalation
once or twice a year. This third party PPA is available for 5 and 10 years tenure. Companies that
avail 3rd Party PPA for their solar project in Madhya Pradesh can also avail REC benefit.
For small use or to overcome the deficit of power, the power distributor can purchase power
through open market i.e. IEX or PXIL at the exchange rate.
4. Biogas.
Also since a mega food park have several food processing plants, and they generate huge amount
of biodegradable waste, a mega food park can also establish a biogas plant with capacity
depending upon the amount of waste generated per day. The biogas plant can be used to generate
electricity or can be used as a source of cooking gas for the food processing plants themselves.
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The table below shows a comparison of different RE sources as per the Madhya Pradesh SERC.
Table 8.
Solar PV
Solar
Biogas
Wind
Exchange
5.64
5.92
2.4(average)-IEX
thermal
Price/unit
1)10.44 for 2MW and
12.65
(Levelised
above
2.0- PXIL
tariff)
2)10.70 for less than 2
As on 8.8.13
MW
Capital cost
1)8 cr/ MW,
(cr/MW)
2)For rooftop and others
13.25
4.63
5.96
Given in table 1.
less than 2 MW-10.5
Requirements
Registration with IEX
and PXIL.
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CHAPTER 7: SUGGESTIONS AND RECOMMENDATIONS.
1. Solar plant cannot supply power fully to the mega food park. It can only be used as a backup
power source during daytime. Therefore for long term procurement of power at a comparatively
lower price, a long term PPA is suggested.
2. If the mega food park developer wants to invest in solar power, he can do so in form of captive
solar plant. Rooftop installation will make optimum utilization of space. In case of Rooftop PV,
cost of land, water facilities, land development, roads, security, illumination, civil structures,
initial infrastructure for supply etc. will not be needed , which would results in lower costs in
upfront investment.
3. The solar power generated can be sold to the state discoms at tariff decided by the SERC. The
generator can get the RECs for the power thus sold and can trade the power in the IEX or PXIL.
4. Pseudo captive solar plant.- available space and rooftops can be leased to a developer for
setting up of solar plant. In this case, the food park developer need not require to invest in solar
installation and will get the benefit from the rent of land and rooftops.
The details of some solar project developers and EPC providers is given below.
Table 9:Project Developers
s. no.
Name of developer
Phone no.
Email
1.
Adani power ltd.
079-25555101
ajaypratap.singh@adanipower.com
2.
Azure power
011-49409800
inderpreet@azurepower.com
3.
Dalmia solar power ltd.
011-23457100
ramkr.yadav@dalmiacement.com
4.
Electrotherm India ltd.
079-66186500
renewable@electrotherm.com
5.
Essel Infraprojects ltd.
022-66012323
6.
Gadawari Power and Ispat ltd.
0771-40820000
info@gpilindia.in
7.
Green infra ltd.
011-49190500
info@greeninfralimited.in
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8.
Inspira projects ltd.
022-67733600
contact@inspiraprojects.com
9.
Kishore electro infra private ltd.
040-65440559
Balraj.khatri@kishoreindustries.in
10.
Lanco solar private ltd.
0124-4691000
saibaba@lancogroup.com
11.
Maharashtra seamless ltd.
0124-4624000
contact@jindalpipe.com
12.
Mahindra solar
022-24901441
epc@mahindraepc.com
13.
Moser baer solar ltd.
0120-24658001
pvinfo@moserbaer.in
14.
Punj Lloyd infrastructure ltd.
0124-2620123
rajatseksaria@punjlloyd.com
15.
Tata BP solar india ltd.
080-40702000
amitk@tatabp.com
Table 10: EPC Providers and System Integrators
s. no.
Name of developer
Phone no.
Email
1.
Abener engineering private ltd.
022-66889600
abener@abener.abengoa.com
2.
CG Power solutions
022-24237777
info@cgpowersolutions.com
3.
Eversun energy private ltd.
080-41209110
marketing@eversunenergy.com
4.
Harsha Abacus Solar pvt ltd.
02717-391208
info@harsha-abakus.com
5.
Kirloskar brothers ltd.
020-27214444
Sandra.pinto@kbl.co.in
6.
Larson & Toubro ltd.
044-22526000
info@lntecc.com
7.
Meru energy india pvt ltd.
9711918415
info@meruenergy.com
8.
Samved energy systems pvt. Ltd.
020-20270231
samvedenergy@gmail.com
9.
Siemens ltd.
022-39677000
10.
Solarsis india pvt. Ltd.
040-40484444
info@solarsis.in
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BIBLIOGRAPHY
Reports and Publications
1. “Guide to ELECTRICITY LAWS in India” by Raj Singh Niranjan.
2. “Taxes and incentives for renewable energy” published in June 2012 by KPMG
International.
3. “ Solar yearbook and Directory 2013” by India Infrastructure.
4. “RENEWABLES 2012 – Global Status Report” by REN21
5. Solar Radiation Hand Book-2008 of Indian metrology department
Websites
1. Ministry Of Power.- http://www.powermin.nic.in/
2. Ministry of New and Renewable energy.- http://www.mnre.gov.in/
3. Central Electricity Regulatory Commission.- http://www.cercind.gov.in/
4. Central Electricity Authority.- http://www.cea.nic.in/
5. Renewable Energy Certificate Registry of India.- https://www.recregistryindia.in/
6. Power System Operation Corporation India Ltd.- http://www.nldc.in/
7. Indian Renewable Agency Development Agency. - http://www.ireda.gov.in/
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