Power

Power ministry asks plants to reduce coal imports

In a letter to power producers written the government has asked power plants which blend high quality imported coal with domestic fuel to “make best efforts to replace their imports with domestic coal”. Out of the 198.5 giga-watt (GW) of installed coal-based power plants more than 162 GW import coal for power generation. However, 144.6 GW of this capacity import coal for blending with the local variant, while 17.6 GW are designed to run specifi cally on imported coal. In FY20, power plants in the country imported 69.2 million tonne (MT) coal, up 12% annually. Of this, 45.5 MT were imported by plants designed to run on imported coal.

In the wake of power demand slowing down due to muted industrial and commercial activities amid the lockdown to contain the coronavirus, power plants currently have coal stocks of about 50 MT which can sustain them for 30 days. Since power plants are not very keen to lift coal as of now, it raises the risk of Coal India’s (CIL) output coming down for the second year in a row. If power plants, at the government’s behest, agree to reduce imports then CIL’s FY21 production target of 710 MT might become achievable. Bucking the upward trend of several years, CIL’s output declined 0.8% annually to 602.1 MT in FY20.

Power procurement through exchange by distribution utilities yields signifi cant savings: IEX The Indian Energy Exchange (IEX), an energy trading platform, has stated that it has witnessed heightened activity on exchange and the distribution utilities across India since the Covid-induced lockdown on March 25.

While the peak demand declined by almost 25 per cent, the exchange has witnessed high sell side liquidity, which is almost at 2.7 times the demand side, which is helping to keep the price in the market under check. The average price in IEX day-ahead market has been as low as ₹2.36 per unit during March 24 to April 20. “The distribution utilities are meeting their seasonal demand as well as replacing their costlier

generation with low cost power available on the exchange, thereby optimising procurement costs and saving significantly,” Rajiv Srivastava, Managing Director and CEO, IEX, said in a statement. IEX assures 24x7 access to its platform with the flexibility of trading in 15-minute trading block. This allows buyers to procure power to meet the fluctuating demand during different time blocks in a single day and ensure 24x7 power to consumers.

Rs 90,000 crore scheme in offing for power companies The government is looking to arrange low-cost finance for its Rs 90,000 crore liquidity infusion plan to prevent blackouts as troubled power generation plants are running out of cash amid a nationwide lockout. The power ministry has sought bonds under special window to the sector besides funds from multi-lateral agencies and institutions like LIC, EPFO and NSSF for the scheme. The loans are sought to be made available to Power Finance Corp (PFC) and REC Ltd, the two sectoral lending institutions in Indian power sector, for onward concessional lending to state electricity distribution utilities to help them clear bills of power generating companies.

The power ministry has also sought relaxation of exposure norms for banks and financial institutions to lend to state-run PFC and its subsidiary REC Ltd. A senior government official said the proposals are under consideration by the finance ministry and the final draft will have to be approved by the Union Cabinet.

Proposed electricity contract enforcement authority mired in confusion The Electricity Contract Enforcement Authority (ECEA) under Section 109 (A) of the proposed Electricity Bill will be set up to resolve matters relating to the contracts of sale, purchase, and transmission of power between two or more parties. The power ministry released the amendments made to the Electricity Act, 2003 last week, and invited public comments. While sector executives welcomed this new organisation, saying it will speed up judgment, some experts have questioned the ambiguity in powers prescribed to the ECEA. “The scope of adjudicatory jurisdiction of SERCs has been reduced, and the power to adjudicate disputes and enforce performance of contracts related to the purchase, sale, or transmission of power is now vested in the ECEA. They have tried to create a central body for adjudicating disputes,” said Aditya K Singh, associate partner at HSA Advocates.

A K Khurana, director general, Association of Power Producers (representative body of private power generators), said because the ECEA has been given the power of a civil court, it will help instill discipline among contracting parties to adhere to contractual obligations. “However we may waste great effort and time on fight for jurisdictional space between the ECEA and ERCs. For instance, on the multistate power purchase agreements (PPAs), it took three years to get clarity from the Supreme Court. There should be a clear demarcation between the two authorities,” he said.

Credit profile of Indian power utilities likely to remain steady: Fitch

The credit profile of regulated Indian power utilities like NTPC will remain largely unaffected despite cash collection delays amid the coronavirus pandemic. The rating of these entities is due to favourable regulatory frameworks that ensure stable operating profits, according to Fitch Ratings. “We believe any delays in recovering accrued revenue will be recouped with interest costs, in line with slated regulations,” the rating agency said in a statement. The assets of NTPC Limited (BBB-/Stable) and the Adani Electricity Mumbai Limited (AEML) obligor group (US dollar bonds: BBB-) are based on a cost-plus tariff framework. This provides regulatory certainty till March 2024 from the

central regulator and till March 2025 under the Maharashtra regulator, when the current fiveyear tariff period ends. These arrangements also cover most of Power Grid Corporation of India Ltd (POWERGRID, BBB- /Stable) and Adani Transmission Limited's (ATL, BBB-/Stable) projects. There is no price risk in return-based frameworks, so, if there are temporary tariff cuts, losses will be recovered in the next review, Fitch said.

The transmission assets at POWERGRID and ATL that are not covered by the framework are awarded under tariff-based competitive bidding (TBCB), with prices fixed for a duration of 25 to 30 years.

Power firms' dues to CIL rise Rs 2,000 crore in 15 days Coal India's dues from the power sector increased almost Rs 2,000 crore in the first two weeks of April to cross Rs 15,000 crore for the first time as generators are unable to pay, which will make the state firm’s cash flow negative if the situation does not change. Almost 80% of the company’s output goes to power plants, and the biggest dues were from state-owned power firms in West Bengal, Tamil Nadu and Uttar Pradesh.

Coal India is continuing supply to state power firms despite default, as advised by the government, to give states some respite from the ongoing liquidity crisis. Distribution companies are not paying power generators, which makes them unable to pay for coal. Coal India’s sales are also down. About 40 power plants in a few states, including Haryana, Punjab and Rajasthan, have stopped lifting coal either because they have enough stocks, or to reduce inventory cost. Subsidiary, Central Coalfields is the worst hit. Almost all its power sector consumers are refusing to accept supplies and make payments.

Discoms to suffer Rs 30K cr revenue loss, face Rs 50K cr liquidity crunch due to lockdown: CII

In its report, CII has suggested host of measures like easy credit facility for discoms (from PFC and REC) to pay off its dues to Gencos, lower tariff especially for industrial and commercial consumers and deferral of indirect taxes like electricity duty, coal cess etc. Industry body CII said discoms are likely to suffer a net revenue loss of around Rs 30,000 crore and liquidity crunch of about Rs 50,000 crore due to the coronavirus-induced nationwide lockdown. According to government data, the discoms owe Rs 92,602 crore to Gencos as of February. CII also suggested lower tariff especially for industrial and commercial consumers and deferral of indirect taxes like electricity duty, coal cess etc. According to the report, power sector, one of the essential services under the lockdown till May 3, is battling the twin issues of demand and liquidity compression. Latest data indicates that total demand per week seen 25-28 per cent reduction. Further, 20 to 25 per cent of debt of renewable energy projects comes from overseas lenders, to whom the 3-month moratorium by RBI will not apply, it pointed out..

Discoms obligated to pay for electricity within 45 days: Power Ministry With its relief being construed as a moratorium on payments, the Union Power Ministry has clarified that electricity distribution companies will continue to be obligated to pay for power within 45 days of presentation of the bill. It, however, lowered late payment charges for the period between March 24 and June 30. "It is made clear the obligation to pay for the power within 45 days of the presentation of the bill (or the period given in the power purchase agreement) remains the same," a letter addressed to heads of power/energy departments of all states, said.

As per the relief granted last month, the distribution companies will need to either deposit or give Letter of Credit (LoC) for 50 per cent of the cost of power they want to buy. The remaining

will have to be paid within the period given in the PPA, failing which the delayed payment surcharge will apply. On March 28, the Union Government approved a financial relief package for the power sector that provided for easing of payment security mechanism for three months and reduced payment security amount by half for future power purchases..

States to allow construction activities at thermal, hydro plants outside municipal limits The power ministry has asked states to allow construction activities at thermal and hydro power plants falling outside the municipal corporation limits during the lockdown. The Ministry of Home Affairs (MHA) has allowed construction of hydro power plants outside the municipal limits in the states from April 20 in its directive issued on April 15, 2020. In an advisory to states, the Ministry of Power stated, "It is requested to allow the construction activities in thermal/hydro power generation projects outside the limits of municipal corporations and municipalities as per para 16(i) of the MHA order on April 15."

The ministry also asked the stated to allow the intrastate and interstate movement of construction materials, equipment, spares and consumables, etc, for these under construction power projects. The advisory has been issued to all the state/UT secretaries of power, district magistrates, police commissioners/ superintendent of police and CEOs of urban local bodies (ULBs) of all states and UTs in the country.

Renewables sector misses FY20 target due to headwinds, Covid-19

The renewable energy capacity addition fell short of its target for 2019-20, adding only about three-fourth of the target for the fiscal. As against the capacity addition target of 11,802 MW for 2019-20, the renewable energy sector added only about 8,711 MW, or about 74 per cent. In 2018-19, the sector added 8,432 MW of new capacity to the grid. With lower addition in FY20, the sector has missed its capacity addition target for the fourth year in a row. The sector added 11,754 MW in 2017-18 and 11,320 MW in 2016-17, its highest-ever additions. But in the last two years, new capacity addition slipped below 10,000 MW.

As on March 31, 2020, cumulative grid-connected installed renewable power capacity in India stood at 87,027 MW.

Renewable energy projects get 30 days extension for commissioning beyond lockdown period The Ministry of New and Renewable Energy (MNRE) has granted an extension of 30 days for commissioning of renewable energy projects beyond the lockdown period. This will be a blanket extension and there will be no requirement of case to case examination, as also there will be no need to ask for any evidence for extension due to lockdown, the statement aid. The ministry has also said that all implementing agencies of the MNRE will treat lockdown due to COVID-19, as force majeure.

Referring to the renewable energy departments, the ministry has asked them that they may also treat lockdown due to COVID-19, as force majeure and may consider granting appropriate time extension on account of such lockdown. The MNRE had, earlier on March 20, 2020, issued directions to SECI, NTPC and Additional Chief Secretaries / Principal Secretaries / Secretaries of Power / Energy / Renewable Energy (RE) Departments of state governments/ UTs/ Administrations, to treat delay on account of disruption of the supply chains due to spread of coronavirus in China or any other country, as force majeure.

Covid-19: India woos renewable energy equipment makers

India is eyeing renewable energy equipment manufacturers looking to shift base from China following the Covid-19 outbreak. “At a time when many companies are planning to shift their manufacturing base from China, it is an opportune time for India to bring policy changes to facilitate and catalyse manufacturing in India,” a statement from the Ministry of New and Renewable Energy (MNRE) said.

MNRE has set up the renewable energy Industry Facilitation and Promotion Board to facilitate investment in the sector. “The three power and renewable energy sector non-banking financial companies, namely, Power Finance Corporation Ltd, REC and Indian Renewable Energy Development Agency (IREDA), have reduced their repayment charges to 2 per cent to enhance funds availability for new projects,” the statement said. MNRE has also written to state governments and port authorities to identify land parcels of 50-500 acres to set up renewable energy manufacturing parks. Tuticorin Port Trust, Madhya Pradesh and Odisha have expressed their interest in setting up these parks, the statement said. Currently India has around 10 GW of wind equipment manufacturing capacity. It imports about 85 per cent of its solar cells and modules requirement.

States may soon get hydro power purchase targets The power ministry is soon likely to notify guidelines giving states hydro power procurement targets on the lines of renewable energy purchase obligations, a senior official said. The move comes soon after the nine-minute lightsoff feat when the grid survived 32 GW demand drop for a few minutes backed by flexible generation from hydropower resources.

“We will be notifying the quantum of obligation for hydropower till 2030 on discoms. This will be given only to projects commissioned after March 9, 2019 and those plants which did not have power purchase agreement s(PPA) on that date,” the official said. Power regulator Central Electricity Regulatory Commission (CERC) is likely to issue directions on trading of hydroelectric certificates like renewable certificates that will enable discoms with more hydro generation to trade with discoms which do not have access to such plants.

Hydroeletric stations help in maintaining power grid stability with flexibility to ramp up and down generation as they take less time to start and stop as compared to other sources of power production. Hydropower stations are being considered as compliment to India’s large-scale renewable energy addition programme.

India's wind installation for 2020 likely to fall drastically

The coronavirus-led lockdown has blown away India’s wind energy target for 2020, as all major turbine manufacturers, including Siemens Gamesa, Vestas, GE and Inox Wind, have suspended production.

Bloomberg NEF has lowered its expectation of how much wind energy capacity India will add in 2020 to 1.95GW from an earlier forecast of 2.56GW. “We cut that down by 24% due to the 21-day nationwide lockdown,” it said.

Siemens Gamesa’s spokesperson said, “Considering the situation, operations at our manufacturing facilities at Mamandur, Redhills, Nellore and Halol will be suspended during the 21-day lockdown period.”

This is a big blow for the sector which was already troubled by low ceiling tariffs, renegotiation of power purchase agreements (PPAs), and connectivity delays for the last two years.

Experts say it will take a few weeks for normalcy of operations to resume but the Inox executive said operations can resume quickly. “We are different from the solar industry because we do not have equipment from China entering India. And those items we import are already us in our inventory,” he said.