Policy and Legal

MNRE Notification Extends Deadline for PM KUSUM Component A Completion

The Ministry of New and Renewable Energy (MNRE) has published a notification extending the deadline for projects allotted under Component A of PM KUSUM scheme to March 31, 2022. Component A refers to ground mounted projects on barren/waste land owned by farmers or in rural areas, with an overall target of 10,000 MW of such projects eventually. Solar Power plants of capacity 500 kW to 2 MW can be set up by individual farmers, groups of farmers, and panchayats. The current extension supersedes the extension already granted for Covid-19 linked delays. The MNRE, had granted a 75-day extension for projects with commissioning dates between April 1 and June 15, 2021 in June this year.

While developers who have been provided letter of awards will welcome the decision, we understand that offtake will be slow in 2021-22 in any case, so overall impact is unlikely to be really big. Component B of PM KUSUM, which provides for off grid solar pumps has been the most popular option availed till now, with Component C, that seeks grid connected solar pumps, faring poorly too. This year, there has been a distinct uptick in tenders under component A, with many states coming out with large tenders of upto 500 MW. In just this quarter, we have tracked close to 1500 MW of tenders under component A of PM KUSUM. The outcomes of most of these are not public yet, although the response to some of the recent ones has apparently been good, when we tried to speak to discom officials. These projects, especially where farmers or farmer organisations are involved, usually take longer to get going owing to the unfamiliarity of the promoters with the process and technicalities, and the risk of falling for scamsters. The MNRE has repeatedly warned people to beware of fraudsters posing as firms and agents that can get financing or approvals in place for PM KUSUM projects.

Bengal Tender for Empanelment Of

Rooftop Agencies for 50 MW Solar On Residential Buildings

The West Bengal State Electricity Distribution Company Limited (WBSEDCL) is seeking bids for the empanelment of agencies for the installation of 50 MW of grid-connected rooftop solar projects on residential buildings in West Bengal. The tender comes after a significant gap, with Bengal already one of the laggards on solar adoption. In fact, the state happens to have one of the dirtiest (involving use of unwashed coal) thermal energy, according to research from CSE. The state’s reluctance has been blamed on the abundant coal mined in the state, besides the power plants being run by the discoms in the state, especially CESC, which supplies to Kolkata.

The deadline to submit the bids online for this rooftop tender is September 27, 2021, and bids will be opened on September 29. The pre-bid meeting is scheduled to be held on September 8. The MNRE has also recently notified benchmark rates for rooftop solar, so expect bids to come in well below that.

Bidders are required to pay earnest money deposit (EMD) of Rs. 2,00,000. Micro, small, and medium enterprises (MSMEs) have been exempted from paying the EMD.

The tender document states that bidders will be empaneled under two categories of bidders (Category-A and Category-B).

Under Category-A, the bidder must have installed a minimum of 200 kW capacity of grid-connected rooftop solar projects in the residential sector before the bid submission date. Or, the bidder must have installed and commissioned a 1 MW capacity of any grid-connected systems in any sector, including residential, industrial, government, or other such programs. New entrepreneurs who are not covered under Category A will be accounted for under Category B.

Additionally, Category-A bidders must have an average turnover of Rs. 15 million per year during the last three financial years. Category-B bidders must have an average turnover of Rs. 1.5 million per year during the last three financial years. Bidders must have a positive net worth in the last three financial years.

Out of the total approved capacity of 50 MW, 35 MW has been reserved for Category A and 15 MW for Category B.

MoP Launches Regulatory Compliance

Division to Monitor Discoms

The Ministry of Power (MoP) has set up a regulatory compliance division to monitor the various regulatory parameters and their compliances by the DISCOMS (distribution companies) as well as state commissions.

The information was revealed in a recent interaction between Union Minister of Power and New & Renewable Energy R.K Singh and electricity regulators. The forum of regulators resolved to prepare norms on various regulatory parameters and issues, which would be adopted by the state commissions. This would help the state commissions in adopting the best practices for faster implementation of reform and regulatory policies, said an official statement.

Regulatory issues like financial viability of the distribution companies, payment of dues, reduction in AT&C losses, roll out of smart metering in prepayment mode, timely issuance of tariff orders, timely disposal of the petitions, promotional tariff for the EV charging stations etc. were discussed.

The forum of regulators had recently undertaken a study to analyse the impact of various factors on the retail tariff of electricity and to develop measures to address them. The Ministry of Power has already acted on most of the recommendations pertaining to the central government and has requested that the state commission should quickly act upon the recommendation so that the retail tariff for the consumers can be reduced, said the statement.

Draft Open Access Norms Can be a Tailwind

for New RE Projects: CRISIL

The Draft Electricity (promoting renewable energy through Green Energy Open Access) Rules, 2021, announced by the Ministry of Power, if implemented as is, could improve the certainty of cash flows for new renewable energy projects coming up through this route, finds CRISIL ratings.

In India, power distribution happens through three modes – state distribution companies, captive sources and open access. Under the open access route, which had a total installed capacity of ~11 GW as on March 31, 2021, renewable power producers sell electricity directly to commercial and industrial (C&I) consumers. These consumers pay open access charges to state distribution companies (discoms). Such open access projects are hobbled by state-level policy changes that make returns uncertain.

The draft rules aim to provide clarity on such open access charges – including, inter alia, cross-subsidy surcharge (to compensate discoms for loss of high paying C&I consumers), additional surcharge (to recover the fixed power purchase cost for stranded assets), and banking charges (for consuming energy on a later date) – and will help streamline the overall approval process to improve predictability of cash flows for renewable power producers.

The ministry has sought feedback on the rules from stakeholders, including state regulatory bodies and discoms.

State regulators haven’t been fully backing open access projects fearing their discoms would lose high-tariff paying C&I customers. Consequently, they raise levy of cross-subsidy and additional surcharges, or change banking provisions by removing/ lowering the banking period. Since renewable projects have a lifespan of 25 years, uncertainty around open access charges and tightened banking norms make project returns more vulnerable, thereby influencing the viability of these projects.

For instance, some of the key states having a majority share of open access capacities have levied cross-subsidy and additional surcharges of Rs 1.5-2.0 per unit – on average – in the past three fiscals. On the other hand, some states have either removed or lowered the banking period, which affords flexibility to developers (to bank their unsold power with discoms if the offtake of a C&I consumer is affected for a few days).

Says Ankit Hakhu, Director, CRISIL Ratings, “Every 10 paise increase in crosssubsidy and additional surcharges results in a ~150 basis points (bps) reduction in returns for open access project developers. Reducing the banking period with state discoms increases the risk to the revenue of developers if the offtake by C&I consumers is affected for a few days.”

Open access projects also face hurdles related to timely approvals and states reneging on policy support. For instance, developers faced approval delays in Uttar Pradesh, Chhattisgarh and Maharashtra, while Karnataka, Haryana and Maharashtra have tried to change their policy support features.

The draft rules propose to address these issues. The document states that crosssubsidy surcharge should not be increased by more than 50% for a 12-year period from the date of project commissioning. Also, any additional surcharge cannot be levied on these projects. This is to ensure predictability on open access charges and thus the cash flows of developers.

The draft rules also propose to limit how much power can be banked with state discoms – up to 10% of the annual consumption of the consumer. This will allow the C&I consumer to draw banked power from discoms later, thereby providing some stability to the cash flows of developers

Further, a central nodal agency is to be set up to streamline the approval process. All open access applications have to be submitted on the agency’s portal and subsequently routed to the state nodal agency for approval. If approval is not granted within 15 days, the application will be deemed approved subject to the fulfilment of the technical requirement to ensure timely execution of these projects and minimise any risk of cost escalations.

Says Aditya Jhaver, Director, CRISIL Ratings, “Given the government’s target of installing 450 GW of renewable capacity by 2030, the draft rules, if finalised as is, would be a timely measure as these can provide a fillip to open access renewable energy capacity addition. Considering C&I consumers account for almost 50% of all power consumption in India, and have their own go-green initiatives, the open access route can support likely strong demand pull from these consumers.”

The final shape of the rules and their implementation will be the key monitorables, says CRISIL.

Judicious Land Use Needed

for Net-zero India: IEEFA

Judicious planning of land use for solar and wind generation will help India to achieve its renewable energy ambitions, according to the Institute for Energy Economics and Financial Analysis’ (IEEFA) new report which examines how much land would be needed for the country to reach net-zero emissions by 2050.

IEEFA has calculated that if India were to implement a mid-century net-zero target, solar could occupy in the range of 50,00075,000 square kilometres (km2) of land, while wind could use a further 1,500-2,000 km2 (for the land area directly impacted by turbine pads, sub-stations, roads and buildings) or 15,000-20,000 km2 (the total project area including space between turbines and other infrastructure).

The amount of land that could be needed for solar is equivalent to 1.7-2.5% of India’s total landmass, or 2.2-3.3% of non-forested land.

The report’s author Dr Charles Worringham, researcher and IEEFA guest contributor, explains that the higher end of the land-use range is deliberately generous to allow plenty of leeway for planning.

“This is a precautionary approach for the purposes of planning and putting in place smart land-use policies today for future renewable infrastructure,” he says.

Comparing the effects of large-scale renewable expansion to those of meeting electricity requirements from additional coal-fired power, Worringham noted that the locations for renewable energy generation can be chosen using India’s preferred social and environmental criteria and can be widely distributed across the country.

“Additional coal can only come from already heavily mined districts or from new coal blocks, which are often in significant forest areas and where displacement of Adivasi communities is an issue.

“Nor does renewable energy permanently alter land and natural resources in the same way as coal.”

The report notes the potential for landuse conflict to arise over renewable energy installations, even in sparsely populated areas, slowing the rollout of infrastructure.

Beyond reinforcing the need to accelerate energy efficiency gains and reduced grid transmission losses to reduce the total growth in demand, the report discusses how to maximise the benefits and minimise the costs of land use for the energy transition and makes recommendations in three categories:

• Minimising total land-use requirements through offshore wind, distributed rooftop solar, and solar on artificial water bodies. • Optimising the identification and assessment of land. Measures include developing clear environmental and social criteria for rating potential sites; undertaking comprehensive independent assessments of potential sites against these criteria in advance of tenders or project proposals; incentivising the selection of tenders on sites where there is no land conflict; limiting concentration of generation in single regions and

supporting widely distributed renewable generation at a range of scales. • Increasing the stock of potentially suitable geographically diverse lands by boosting the uptake of agrivoltaics where crops, soils and conditions are suitable and yields can be maintained or improved. • Agricultural land has the potential to host a much larger proportion of renewable generation, providing a boost to the rural economy and reducing pressure on other land, according to the report. • Nurturing an Indian agrivoltaics sector could provide benefits to farmers such as a second income stream, says

Worringham.

“Whether or not India commits to a midcentury net-zero emissions target, its huge expansion of renewable energy capacity over the coming decades will enhance energy security enormously, but this requires a large amount of land for infrastructure,” he says.

“The energy transition will also require important choices about where this infrastructure should be located. But careful planning and solutions like agrivoltaics, distributed energy systems and offshore wind can also greatly reduce the potential for renewable generation to conflict with social and environmental values whilst diversifying and strengthening India’s national grid. By bringing more generations closer to both urban and rural loads, transmission costs could also be kept in check.”