It will provide small consumers a choice of suppliers and allow distribution companies (discoms) to procure power from their own renewable energy plants to meet their renewable purchase obligation.
The Union Cabinet on Wednesday cleared changes in the Act. Union Power Minister Piyush Goyal earlier this week said the Bill would be tabled in Parliament soon.
Aimed at creating a competitive market for retail buyers, open access will allow consumers of less than one Mw to choose their supplier.
In the Electricity Act-2003, consumers of more than one Mw can change their distribution company.
Power generators, too, will be allowed to sell their surplus outside a state. “Opening the sector will make sure the supply of power is in line with market realities,” said an executive in a distribution company.
Currently, state governments can appeal to the regulator to stop such sales in extraordinary circumstances. Distribution companies in other states are unable to freely procure such power.
“We end up scheduling costly power, which has pushed us to the wall. Banks have also withdrawn any support from the discoms,” said a senior executive with a Delhi-based private power distribution utility.
The distribution industry owes Rs 13,000 crore to power plants.
A big relief for the distribution sector is the separation of the content and carriage businesses. Building infrastructure for power supply and the supply of power will be two different business entities. Besides, any power supplier can use the infrastructure.
The bill also has an important insertion imposing a “duty to connect, supply to request”, where the last-mile supply will keep in mind the economics and viability.
“In most developed markets, the carriage business is controlled by the regulator and content, that is power supply, is market driven within a price band,” said the executive.
As a separate business, the onus of development of the network will rest with the carriage provider.
Distribution companies from across the country have written to the ministry of power seeking a clear demarcation of duties and responsibilities for content and carriage.
The distribution companies, which have repeatedly pointed to their financial stress as the reason for not complying with the renewable purchase obligation, have now been asked to generate renewable power to meet their targets.
The Act proposes a National Renewable Energy Policy and a new Renewable Generation Obligation.
The head of oneof the distribution companies said the sentiment among Indian consumers was that power should be cheap.
“All consumers think they are burdened with costly power, whereas the discoms struggle with recovering their cost. In a situation like this, an unbundled distribution sector helps all,” said the executive.
(Source: Business Standard, December 15, 2014)
POWER SECTOR UNABLE TO UTILISE FULL CAPACITY DUE TO POOR TRANSMISSION
NEW DELHI: The power sector is unable to use at least 10 per cent of its capacity due to the choked transmission network in the country, hurting projects of Tata Power, Essar Power, Jindal Power, JSW Energy, CLP, DB Power, MB Power, Emco Energy, GMR and Adhunik Power.
Inadequate transmission has kept about 25,000 Mw of generation capacity idle, making the problem comparable to the issue of acute fuel scarcity that has hit about 30,000 Mw of new capacity, industry executives say. In addition to the inadequate capacity, regulatory authorities impose strict restrictions on the utilisation of existing networks and keep a large amount of transmission capacity idle as a safeguard against grid collapse.
They say new transmission capacity in key corridors is scheduled to come up after four years, making the outlook grim for many plants. Transmission problems are also hurting power trading, said Rajesh KMediratta, director – business development at Indian Energy Exchange.
“The impact of transmission congestion on the power exchanges has been increasing with each passing year impacting both the volumes as well as the prices. The volume lost is slated to increase further unless adequate measures are adopted to augment transmission capacity in the regions having congested transmission corridors. Constraints in the regional transmission system in south further added to the problem and increased the power deficit there,” he said.
Last month, no power could be imported into the southern region throughout the month either through the eastern or western corridor due to congestion, added Mediratta.
Most power plants in western India have signed power purchase agreements with customers in the north or south because states in only these regions invited long-term PPAs. But there is no capacity in key power corridors to ship this power, making these plants idle. To compound matters for these plants, Coal India is not supplying coal to these plants because PPAs have not started operating.
Ashok Khurana, director general of the Association of Power Producers, says restrictions on capacity utilisation of transmission corridors often prevent generation companies from supplying power even after signing longterm power supply agreements.
He also said there were many cases where power producers are unable to sell electricity in shortterm markets due to congestions and restrictions. Transmission bottlenecks prevent the supply of power to deficit regions in summer and monsoon seasons, when demand peaks, he said. Khurana also wrote to the regulator saying projects of Tata Power, Essar Power, Jindal Power, JSW Energy, CLP, DB Power, MB Power, Emco Energy, GMR and Adhunik Power are facing transmission constraints.
At least half a dozen transmission projects of various companies including Power Grid Corporation, Reliance Infra and Sterlite Grid with investments of over Rs 7,000 crore are held up or delayed due to the slow speed of official clearances.
Power companies say they are feeling the pinch. “Power project developers are already incurring losses due to cost overruns and inability to utilise plant at full capacity is escalating the troubles. Sizable power generation capacity is stranded because of lack of transmission network that prevents us from meeting the demands. Power transmission capacity has failed to grow in tandem with the growth of generation capacity,” said an executive with a generation company. Lower generation due to weak transmission also prompts Coal India to cut fuel supply as the plant is not running at full capacity, the executive said.
Industry sources said southern states of Tamil Nadu, Kerala, Karnataka and Telangana would not have been facing power shortages if there was adequate transmission capacity available with generating firms in Madhya Pradesh, Odisha and Chhattisgarh.
According to Central Electricity Regulatory Commission (CERC), Indian Energy Exchange could not allow trade of close to 11 billion units of electricity in past three financial years due to congestion in transmission network.
In fiscal 2012-13, almost 3.7 billion units were lost as a result of unavailability of the corridors while in 2013-14 the number went up by 41 per cent to 5.3 billion units.
(Source: The Economic Times, December 15, 2014)
POWER PACT: JSW ENERGY ALL CHARGED UP WITH JPVL BUY
With the new government promising better fuel linkage and a more efficient national grid for India’s power sector, JSW Energy’s latest big-ticket acquisition appears to be a smart move to align a greater portion of its portfolio to fixed power purchase agreements (PPAs), moving away from the merchant power producer model it has relied on thus far.
At present, around 81% of the 3,140 MW of power that JSW Energy produces is sold in the merchant market, which is more remunerative than fixed sales agreements with state-run power distribution firms, but lacks the steady nature of cash flow from fixed long-term contracts.
In September, the Sajjan Jindal-led power generation firm entered into an understanding with Jaiprakash Power Ventures (JPVL), a part of the debt-laden Jaypee Group, to acquire two of its hydroelectric power plants for R9,700 crore. JSW Energy deferred a decision to buy another 500 MW thermal power plant from JPVL, pending further clarity on coal linkage for the project.
“Given that both the projects (that JSW Energy is acquiring) are tied up under long term PPA, the overall mix of the capacity has tilted in favour of PPA at 65%, while 35% of capacity is under merchant basis,” a report by domestic brokerage Motilal Oswal said.
The average price of merchant power in the spot market is around R3.8 per unit currently, according to data available with energy exchange IEX, while recently-signed PPAs have seen power producers get as much as R4.5 per unit.
To be sure, JSW Energy’s deal with JPVL will take a few months to materialise, pending necessary approvals. If the current trend in PPA-linked power prices vis-à-vis spot market prices continues, JSW Energy will stand to gain substantially from the acquisition.
JSW Energy declined to participate in the story.
Analysts point out that any further upside in merchant power prices in India is limited. The southern states see the largest demand for merchant power since a number of the gas-based power plants that have signed PPAs with the state governments in this region are non-operational due to shortage of natural gas. As a result, merchant power prices in south India have been, on an average, 91% higher than in the rest of the country (from FY12 to FY14), according to Ambit Capital.
JSW’s revenues of R8,934 crore in FY13 was almost seven times that its turnover in FY09, reflecting the rise in demand and prices for merchant power in the country. In FY14, however, JSW Energy’s net sales declined 3% to R8,705 crore.
(Source: The Financial Express, December 15, 2014)
MAKING THE MOST OF THE RENEWABLE OPPORTUNITY
Electricity and associated infrastructure is the backbone of any economy and availability of reliable and affordable electricity is a key catalyst that puts the economy on higher growth trajectory. India is predominantly a thermal grid nation as more than 70% of electricity generated comes through that source. But with issues surrounding conventional energy for incremental capacity addition, and potential for cost increases due to escalation in variable charges in operative years, renewable energy offers a much better alternative to build the nation’s energy infrastructure. Globally, renewables are being viewed as a means to provide people with a better quality of life and are increasing their share in the global energy pie. The recent IEA report predicts that renewable electricity generation would grow worldwide and, by 2020, it will make up for 26% of global electricity generation.
The current model of power generation, transmission and distribution in India is a centralised one wherein large utilities pool electricity and then distribute it. In a country like India, where nearly 30% population has little or no access to electricity, a decentralised model where abundantly available renewable energy sources could be used more efficiently is expected to benefit economic and social growth in a much better way.
As a banker, I have seen the lifecycle of many renewable power projects. I feel that wind and solar energy carry more potential for growth than other renewable technologies primarily because of lower gestation periods, comparatively remunerative tariffs, minimal fuel risk and operating expenses. The gestation period of solar is far less and returns are consistent, thus making it attractive for long-term investors such as pension and insurance funds.
However, there is one critical area that needs to be addressed. The land requirements in case of wind and solar projects are multiples of the land required in a thermal project or other renewable technologies. Being a populated country with priorities spread across sectors like agricultural, residential, commercial, and industrial, availability of land for large-scale renewable programmes may become a constraint. This is where we need to do out-of-the-box thinking.
Wind industry worked out an alternate model during the course of its lifecycle whereby point-to-point land use concept was brought in and so it saved on gross land requirement. The same may be difficult in case of solar projects as they need to be spread out in an array but the solution lies is making rooftop projects a priority. Not all rooftops may be used for solar generation as there might be competing uses for other services and requirements or adequate roof space may not be available. But solutions emerge only when we face the challenges. As per WWF-TERI report, 60% of India’s land area receives an annual global insolation above 5 kWh/sqm/day. With nearly 330 clear sunny days, solar power alone can supplement most of India’s electricity needs. A beginning can be made from Delhi where all existing big buildings, new buildings and houses are asked to come up with rooftop solar modules. A report on rooftop solar panels in Delhi put the potential at around 2,550 MW by 2020 (with around 31 sq km of solar suitable rooftop area used from the total qualified rooftop area of around 119 sq km).
Innovation will also need to be brought in areas of project implementation. Can we think of putting up small solar projects on the sturdy transmission towers of PowerGrid? Let’s find out if we can really use the towers connecting over 1,00,000 km of PowerGrid lines for putting up small capacity solar projects? A similar exercise can be carried out on telecom towers that currently number 6,00,000. Solar panels on highways and along railway tracks could be one more option.
Noting the challenges that private capital has faced in execution and running of thermal assets, can we have a model whereby private capital is encouraged more for investing in renewable assets? By this change, India can build more than 1,50,000 MW of solar assets and more than 1,00,000 MW of wind assets (onshore and offshore) by 2025.
A 1,50,000 MW solar generation capacity may generate energy equivalent to only 35,000-40,000 MW of thermal asset, but even if 15,000 MW of generation is taken off diesel because of this initiative, India would save an annual foreign currency outgo of $35 billion. The government’s plan of putting up to 1,000 MW solar power units along border areas may save us additional $500 million of foreign currency outflows on diesel, besides saving on logistical arrangements and related costs.
Another area to look at is the ambitious project of 100 Smart Cities. Such cities may have renewable sources as their energy backbone and the learning earned during implementation may be replicated to other segments in India.
Japan will invest $35 billion in India’s multiple infrastructure projects. If only $5 billion of this moves towards equity of projects in the solar domain, a whopping 16,000 MW of these renewable assets can get commissioned.
The government also successfully resolved the issue of anti-dumping duties by ensuring enough business for domestic players while enabling cost-effective imports for power producers. By constant innovation, I believe the cost of projects in the solar sphere will continue to go down and the efficiency will go up. The day is not far when solar energy will become cheaper when compared to conventional energy and without worrying about availability of resources and resultant pollution. If India urgently designs and implements mechanisms and innovative policies that promote increased use of renewable resources, I am confident that we will achieve the energy security sooner than expected.
(Source: The Financial Express, December 15, 2014)
COAL BLOCK E-AUCTION RULES: CURRENT MINE OWNERS TO GET HEAD START OVER NEW BIDDERS
NEW DELHI: The captive coal mining firms in producing blocks might not lose their mines even after the deadline of March 31, 2015, set by the Supreme Court. The government’s final rules for reallocation of cancelled mines through an e-auction process give the existing owners an advantage over new bidders.
In Phase-I, the 74 operational ones among the 204 deallocated mines will be on the block. The successful bidder will mine coal only for captive use, for projects in the power, steel or cement sector.
The detailed tender document that potential bidders have to file asks for precise details of end-use, amount of coal needed, distance of the end-use plant from the mine and the project’s completion status.
“A company eligible to bid for any Schedule-II coal mine under sub-section (3) of Section 4 of the Ordinance shall have incurred an expenditure of not less than 80 per cent of the total project cost of the unit or phase of the specified end-use plant for which the company is bidding,” says a gazette notification in this regard, adding “a company eligible to bid for any Schedule-III mine shall have incurred an expenditure of not less than 60 per cent of the total project cost of the unit or phase of the specified end-use plant for which the company is bidding.” Under Schedule-II are the 42 producing coal blocks, while Schedule-III lists the 32 that are about to begin production.
This implies the power, steel and cement projects with attached captive mines could get these back after payment of penalty. “The methodology is transparent: The best fit bidder will get the suitable mine. The government is asking for the bidder’s preparedness to use the mine allotted. In almost all cases, the existing owner is the best prepared with end-use,” said a senior executive in the know of the matter.
The industry stakeholders consulted by the government while designing the final auction rules are hoping the government will not let the investments made in end-use plants, especially those for power projects, go waste.
The gazette notification also mentions the capacity of the specified end-use project shall be in proportion to the capacity of the Schedule-II or Schedule-III coal mine a company is bidding for.
The Centre plans to conduct a two-stage bidding under the Coal Mines Special Provisions Ordinance, promulgated to reallocate the cancelled blocks. Power sector executives believe the government, by asking for technical bids first, has already separated the men from the boys. The bidder qualifying in the first stage will be asked to make a financial bid under e-auctioning. The rules specify the technical and financial qualification of participants in the auction.
“Unlike last time, we will see serious bidders during this (first) phase of auction; the criteria for technical bids will bring the current owners back in the game,” said a senior industry official who did not wish to be named. He said new players might enter, if the compensation- and penalty-related issues were taken care of well, but it would be in the larger industry interest that the existing owner got its mine back after paying a penalty ordered by the Supreme Court.
The court had cancelled 204 block allocations, made through the screening committee route over the past two decades, terming those “illegal” and “unconstitutional”. It had given the government time till March 31 to reallocate operational mines and asked mine owners to pay a fine of Rs 295 per tonne of coal.
(Source: Business Standard, December 15, 2014)