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Accelerating Renewable Energy Development at State Level

September 6, 2012

Agenda

1 2 3

Background Drivers and Barriers Points for Discussion

Page 1 5 12

Workshop Objectives

1) Potential of RECs and meeting the challenges of implementation 2) Discussion on status, opportunities, issues and challenges effecting development of renewable energy in India 3) Sharing good practice among states

Accelerating Renewable Energy Development at State Level PwC

September 6, 2012

Section 1 Background

Accelerating Renewable Energy Development at State Level PwC

September 6, 2012 1

Section 1 Background

Indias Energy mix and Power scenario

Installed Capacity in india (206 GW)
0.6% 9% 19% 2% 2% 2% 9% 57% 0.5%

India has an installed power capacity of 206 GW of which nearly 13% is based on renewable energy sources

Among renewable energy sources, nearly 75% of the capacity is contributed by Wind power alone

13%

Coal RES Gas Wind DSL Small Hydro Hydro Biomass Nuclear Solar

During last decade India faced an average energy deficit & peak demand deficit of 10% & 13% respectively.

Source: CEA
2002-03
0% -2% -4% -6% -8% -10% -12% -14% -16% -18%

Energy & Peak deficit

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Accelerating Renewable Energy Development at State Level PwC

Energy Surplus/Deficit

Peak Deficit

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Section 1 Background

Renewable Energy Development- An Imminent Need

Development of renewable energy sources is expected to play an increasingly important role in : Alleviating power shortages in the country Enhancing energy security through diversification of fuel sources Sustainable and environmentally efficient growth
60000 50000 40000 MW 30000 20000 10000 0 Wind SHP Biomass Potential (MW) Bagasse (Cogen) Installed (MW) WtE Solar 48500

Potential Vs Installed capacity

Indias Solar Potential is practically unlimited 20MW/ sq. km

17644

15000 3411

16000

1182

5000

2046

2700

93

1030

Accelerating Renewable Energy Development at State Level PwC

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Section 1 Background

New Market Models RPO/REC Mechanism

RPO Achievement by states in FY 11

RPO %

The deficit in RPO achievement across the non compliant states vary from 20% to 100%. Only Tamil Nadu and Karnataka have been able to fulfill RPO targets.

16 14 12 10 8 6 4 2 0

RPO Target (%)

RPO Target met (%)

Number of RECs

Demand Supply gap during REC trading 500000 400000 300000 200000 100000 0 Oct'11 June'11 Dec'11 March'11 March'12 June'12 Jan'12 April'11 Nov'11 Aug'11 Sep'11 Feb'12 April'12 May'11 May'12 July'11 July'12

Demand for REC was recorded highest in Jan12 RPO target compliance at the end of the year was the reason for surge in REC demand For the first time after April11, sell bid (volume) was higher than buy bid during Jujy12

Demand

Supply

Accelerating Renewable Energy Development at State Level PwC

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Section 2 Drivers and Barriers

... Influencing the pace of renewable energy development

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Section 2 Drivers and Barriers

Policy Initiatives to Promote RE

Section 3: National Electricity Plan and Policy for development of power system based on optimal utilization of RE sources Section 61(h): Tariff regulations by the regulatory commission to be guided by promotion of generation of electricity from RE sources Section86(1)(e): Regulatory Commission to specify purchase obligation from RE sources

Electricity Act, 2003

Section 5.2.20: Promote private participation in RE. National Electricity Policy, Section 5.12.1: Targets capital cost reduction in RE through competition. 2005 Section 5.12.2: States that SERCs should specify appropriate tariffs to promote RE and specify targets for RE. Appropriate discom shall fix the RPO and SERC shall fix RE tariff. CERC to provide guidelines for pricing non firm power if RE procurement is not done through competitive bidding

Tariff Policy, 2006

NAPCC, 2008

At National level for FY 10, target for RE purchase may be set at 5% of total grid purchase, to be increased by 1% each year for 10 years. Central & State Govts may set up a verification mechanism to ensure that renewable power is actually procured Appropriate authorities may issue tradable certificates that procure renewable power in excess of the national standard

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Section 2 Drivers and Barriers

Issues in Policy Regime

No separate RE law promulgated at the Central Level Limited stipulations on transferability of RE power from resource rich states to other states Development of state specific comprehensive RE policies. State government have announced renewable energy policies in technology specific forms. Multiplicity of policies and agencies governing the renewable energy sector makes integrated interventions difficult and undermines investors confidence. Non -Alignment of the state targets with national objectives Timely payments/revisions of tariff by states for renewable energy projects. Long term transmission planning by the STUs Specific issues pertaining to non availability of land and water

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Section 2 Drivers and Barriers

Rationale for RPO-REC Mechanism

Objectives of RPO Mechanism
Policy instrument with a legal mandate compelling the obligated entities to procure renewable energy as a percentage of their total power purchase. Supporting mechanism to resolve power shortage problems Effective measure towards harnessing locally available renewable energy sources for reducing reliance on the conventional power Act as genesis to innovative mechanisms such as RECs for promoting RE across states boundary

Why REC Mechanism?

Effective implementation of the RPS regime Overcome geographical constraints Reduce transaction costs of RE Reduce risks for local distribution companies by limiting its liability to only energy purchase

In view of hurdles faced in RE Development, it appears that these objectives should take precedence over others.

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Section 2 Drivers and Barriers

Implementation challenges with RECs

Absence of long term RPO planning and practice of midcourse changes in RPO levels leads to investor uncertainty. Lack of RPO enforcement framework. Renewable Energy Certificate Mechanism does not address following core issues Fixing a common floor and forbearance price for all nonsolar technologies, given

their different costs and different APPC rates across different states.
Lack of visibility with regards to floor and forbearance price beyond initial 5 years Subversion of APPC rates by the host state regulator by excluding costly resources (liquid fuel, short term), thereby reducing prices. RECs are not intended to solve every problem, for example on account of imbalances on amount of electricity generated in different parts of India

Accelerating Renewable Energy Development at State Level PwC

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Section 2 Drivers and Barriers

Best Practices adopted in RE space (1/2) Illustrations at State and Central Level
Policy Initiative Support

Development of the Energy Plantations on the Government lands including

waste lands in a bid to ensure feedstock availability (Rajasthan) Land Banks at concessional rates to be created for development of solar projects (Gujarat and Rajasthan) Creation of dedicated solar parks to support grid connected projects and

State level initiatives

manufacturing units (Rajasthan & Gujarat)

Central level initiatives

Dedicated policy to promote investment in solar manufacturing (Karnataka) Supporting Infrastructure Creation Approach roads constructed towards the project site owned by the State Water Resource department to be utilised by the project developer (Maharashtra) Grid connectivity from the wind farm substation to the nearest STU sub-station which is 100km away shall be done by the STU itself. (Gujarat) Creation of Energy Fund to support infrastructure development for off-grid projects (Karnataka)

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Section 2 Drivers and Barriers

Best Practices adopted in RE space (2/2) Illustrations at State and Central Level
JNNSM Supporting utility-scale power generation: constructing 20000 MW of grid

State level initiatives

connected solar projects by 2022 Providing sufficient support towards development of 2000 MW of off-grid powermeasure towards lighting homes of deprived and poor

Central level initiatives

Promoting R&D in solar space in India- creating conditions for research and

application
RPO-REC Mechanism
Obligated entities compulsorily need to procure certain percentage of renewable power as a percentage of total power procurement RECs earmarked as a tradable instrument to promote RE across state boundary.

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Section 3 Points for Discussion

Overall policy at state and central level REC opportunity and implementation Wider challenges in promoting RE development

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Thank You!

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