Bridge India

New tariff policy can be a significant reform for the power and renewable sector

Last week, India’s Cabinet Committee on Economic Affairs (CCEA) approved amendments to the National Tariff Policy 2005 (refer). While the policy document has not yet been released, the draft version issued by the Ministry of Power in April 2015 is available (refer). This policy is meant to guide central and state regulators for determining tariffs and other regulations.

  • The policy proposes several reforms for overall health of the power sector but as usual, implementation will be the challenge
  • Promotion of renewable power has been added as a key objective of the policy
  • Implementation of Renewable Energy Generation (RGO) on a cost-plus basis will have serious ramifications for renewable IPPs

Key proposed elements for the power sector include: i) existing power generation plants have been allowed to conditionally increase their capacity by up to 100% (the mechanics are not clear); ii) a provision has been made for “periodic (monthly/ quarterly)” revision of tariffs by distribution companies; iii) an amendment has been made such that the state regulatory commissions shall “necessarily” be guided by the principles and methodologies specified by the central regulatory commission for determination of tariff, and; iv) a provision has also been made for timely transition to smart meters to allow time-of-day metering.

Another major highlight of the policy is the strong impetus on renewable sources. Promotion of renewable generation sources has, in fact, now been added as a key objective of the policy. Other existing objectives include: ensuring availability of power, ensuring financial viability of the sector, promoting transparency and promoting competition.

Under the amendments, Renewable Purchase Obligation (RPO) targets have been enhanced and its trajectory would be announced by the Ministry of Power and the MNRE, pass through of RPO’s financial impact to customers has been allowed through regular revision in tariffs, the concept of RGO for thermal power generators has been introduced on a cost plus basis and inter-state transmission charges for solar and wind power have been waived off.

There is some ambiguity in solar specific RPO target, which as per the press release (refer) has been revised to 8% by 2022 but as per the Ministry of Power draft, the 8% target is for 2019 and not 2022 (refer). As per MNRE, solar RPO target should be 10.5% to get to 100 GW by March 2022.

Implementation of RGOs on a cost plus basis will result in serious ramifications on the solar sector and especially renewable specific independent power producers. BRIDGE TO INDIA’s analysis on the topic can be read in our earlier blog on the subject (refer).

The amendments are now expected to be tabled in the Parliament next month. But with political impasse in the last two sessions and with several other important bills pending, the timeframe for passing this bill remains uncertain. Effective implementation will be another challenge.

Other news

Foundation stone laying ceremony for the interim secretariat of the International Solar Alliance

French President Francois Hollande and Indian Prime Minister Narendra Modi will lay foundation stone for the interim secretariat of the International Solar Alliance (ISA) today. ISA is conceived as a coalition of solar resource rich countries to address their special energy needs and will provide a platform to collaborate on addressing challenges through a common, agreed approach. BRIDGE TO INDIA’s view on the alliance can be read in our earlier blog (refer).

450 MW projects allocated to eight companies by SECI in Maharashtra

SECI announced the results of this tender where developers were asked to offer a discount on tariff of INR 4.43/kWh or seek Viability Gap Funding (VGF) of up to INR 10/MW. The lowest bidder, Bhageria Industries, offered a tariff of INR 4.41/kWh and other winners asked for VGF in the range of INR 4.6-5.4 million/MW.  Welspun, Suzlon and Solar Arise are some of the prominent companies that won capacities in the tender.

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