SolarQuarter Research : Policy Debrief - August 2020

POLICY DEBRIEF AUGUST 2020

POLICY DEBRIEF

POWER MINISTRY ADVISES GENCOS AND TRANSCOS TO CHARGE LATE PAYMENT SURCHARGE AT 12% PER ANNUM In order to alleviate the financial stress in the power system , all Generating Companies and Transmission Companies have been advised by Ministry of Power to charge Late Payment Surcharge at a rate not exceeding 12% per annum (simple interest) for all payments made under the Liquidity Infusion Scheme of PFC and REC under Atmanirbhar Bharat. With this measure the financial burden on Discoms will ease out.In general, the applicable rate of Late Payment Surcharges is quite high despite the fact that interest rates in the country have softened over the last few years. The rate of LPS in many cases ranges upto 18% per annum and has adversely impacted Discoms during this difficult phase of lockdown imposed on account of COVID-19 pandemic.

MNRE SEEKS SUGGESTIONS FROM STAKEHOLDERS ON REVISED STANDARDS OF SPV MODULES AND SOLAR INVERTER BY SEPTEMBER 7 The Ministry of New and Renewable Energy (MNRE) seeked recommendation of the Experts Committee on the revised Indian Standards on SPV Modules and Inverter notified by BIS for implementation.The Ministry of New and Renewable Energy(MNRE) is implementing a Quality Control Order on SPV Systems, Devices and Components Goods Order 2017 under BIS Act(Compulsory Registration Scheme). This order includes SPV Modules, Inverter and Battery Storage with specified Indian Standards adopted from IEC Standards . On 14th June 2019, BIS vide gazette published the revised Indian Standards for SPV Modules and inverter, and suggested that MNRE may hold stakeholder consultations for concurrent running of the same before 11.6.2020 but it has extended t to 9th September 2020 due to Covid 19 lockdown.The Ministry had invited comments and suggestions from all the stakeholders on the recommendations of the experts committee.The last date for submitting their suggestion is 07 September 2020.

MNRE ISSUES ORDER ON PARTIAL RELEASE OF BANK GUARANTEES OF RE CONTRACTS The Ministry of New & Renewable Energy (MNRE) issued notification on partial release of Performance Security/ Bank Guarantees to the extent contracts are partially completed.On order dated 17.04.2020 MNRE had directed all RE implementing agencies of the MNRE to treat lockdown due to COVID-19, as Force Majeure and that they may grant an extension of time for RE projects equivalent to the period of lockdown and additional 30 days for normalization after the end of such lockdown. States and UTs were also requested to treat Lockdown as Force Majeure and to consider granting appropriate time extension on account of such lockdown.

COVID-19 UPDATE: CABINET TO PROVIDE ONE-TIME RELAXATION TO DISCOMS The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, has approved a one-time relaxation to Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) for extending loans to Distribution Companies (DISCOMs) above limits of working capital cap of 25% of last year’s revenues under Ujwal DISCOM Assurance Yojana (UDAY).One-time relaxation would help in providing liquidity to the power sector and ensure payments by State Governments to DISCOMs. BERC RELEASES DRAFT TARIFF REGULATIONS FOR RENEWABLE ENERGY PROJECTS The Bihar Electricity Regulatory Commission (BERC) has recently released draft tariff regulations for RE projects.

These regulations will be valid for the control period of the financial year FY 2020-21 to FY 2022-23. The Commission has invited suggestions and comments from all stakeholders on the draft regulation by 25 September 2020.The Commission proposes to hear this matter on 06.10.2020 at 11.OO AM.These regulations will be applied to Biomass power based on Rankine cycle, non-fossil fuel based cogeneration projects, Solar PV , Solar Thermal power projects, Biomass gasifier, Biogas power project, Municipal solid waste and Refuse derived fuel based power projects.For determination of generic tariff and project specific tariff,the debt equity ratio of 70:30 is being considered by the commission.

AUGUST 2020

POLICY DEBRIEF

MINISTRY ANNOUNCES WAIVER OF ISTS CHARGES ON SOLAR AND WIND ENERGY PROJECTS TILL 30 JUNE 2023 The Ministry of Power recently issued a waiver of inter-state transmission charges and losses on transmission of the electricity generated from solar and wind sources of energy.Revised Tariff Policy provides that “In order to further encourage renewable sources of energy, no inter-State transmission charges and losses may be levied till such period as may be notified by the Central Government on transmission of the electricity generated from solar and wind sources of energy through the inter-state transmission system for sale.”Ministry of Power’s earlier decided that no inter-state transmission charges and losses will be levied on transmission of the electricity generated from following power plants for a period of 25 years from the date of commissioning of the power plants which criteria set by the ministry.This following order is issued with the approval of the Minister of State (I/C) for Power and NRE and is applied from 5th August.

INR 68 CRORE LOANS RELEASED UNDER DISCOMS LIQUIDITY SCHEME Rs 68,000 crore loans have been sanctioned so far under Rs 90,000 liquidity scheme for the stressed power distribution utilities , a source stated.In May, Finance Minister Nirmala Sitharaman announced Rs 90,000 crore liquidity infusion to discoms due to the lockdown to COVID-19.The amount was used by DISCOMS to pay their dues to Transmission and Generation companies.“State-run non-banking finance firms REC Ltd NSE 2.22 % and Power Finance Corporation NSE 2.17 % (PFC) have sanctioned loans worth about Rs 68,000 crore so far under the Rs 90,000 crore liquidity infusion package for discoms announced in May,” a source said to PTI. The source further informed that, “The first tranche of credit has also been released to Andhra Pradesh, Telangana and Uttar Pradesh.”

The Rs 90,000 crore package would be fully utilised after Tamil Nadu (Rs 20,000 crore) and Bihar (Rs 3,500 crore) submit their formal proposals under the package, the source added.

INTER-STATE TRANSMISSION CHARGES AND LOSSES REGULATION TO BE ENFORCED FROM NOVEMBER 2020 The Central Electricity Regulatory Commission (CERC) has recently issued notice that regulations for sharing of InterState Transmission Charges and Losses, 2020 shall come into force with effect from 01.11.2020. Earlier, Central Electricity Regulatory Commission published about Regulations of Sharing of Inter-State Transmission Charges and Losses Regulations, 2020. in the Gazette of India Extraordinary.The transmission charges shall be shared amongst the DICs every month based on the Yearly Transmission Charges such that:- the Yearly Transmission Charges are fully recovered, and Any adjustment on account of revision of the Yearly Transmission Charges are recovered. Yearly Transmission Charges for transmission system shall be shared every month by DICs.Long Term Access or Medium Term Open Access for projects shall not be considered for apportionment of Yearly Transmission Charges.These regulations shall be applied to Power Exchange, Market Participants and OTC Market.These regulations shall also be applied to contracts transacted on the Power Exchange, contracts relating to Renewable Energy Certificates, contracts relating to Energy Saving Certificates, contracts in the OTC Market. and any other contracts, as may be approved by the Commission.

CERC DRAFTS AMENDMENT TO GRANT CONNECTIVITY TO ISTS PROJECTS BASED ON RENEWABLE SOURCES The Central Electricity Regulatory Commission (CERC) has recently issued a Draft Amendment to Detailed Procedure for Grant of Connectivity to Projects Based on Renewable Sources to Inter-State Transmission Systems.CERC also invited comments/ suggestions/ objections from the stakeholders and interested persons on the provisions proposed to be amended. The Detailed Procedure for “Grant of Connectivity to projects based on renewable sources to inter-State transmission system” made under Regulation 27 of the Central Electricity Regulatory Commission (Grant of Connectivity, Long-term Access and Medium-term Open Access in inter-State Transmission and related matters) Regulations, 2009 was issued on 15.5.2018.

AUGUST 2020

POLICY DEBRIEF

MNRE GRANTS FIVE-MONTH EXTENSION FOR RENEWABLE PROJECTS Ministry of New and Renewable Energy. MNRE recently issued an order on time extension in the scheduled commissioning date of Renewable Energy (RE) Projects considering disruption due to lockdown due to COVID-19.RE developers requested the Ministry to grant a general time extension on account of lock down (due to COVID-19) and additional time required for normalization after such lockdown. This issue has been examined by the Ministry and it has been decided that all Renewable Energy (RE) implementing agencies of the Ministry of New & Renewable Energy (MNRE) will treat lockdown due to COVID-19, as Force Majeure.The Ministry ordered that all RE projects under implementation as on the date of lockdown, i.e. 25th March 2020, through RE Implementing Agencies designated by the MNRE or under various schemes of the MNRE will be given a time extension of 5 months from 25th March 2020 to 24th August 2020. This blanket extension, if invoked by the RE developers, will be given without case to case examination and no documents/evidence will be asked for such extension.

INDIA EXTENDS IMPOSITION OF SAFEGUARD DUTY ON IMPORTED SOLAR CELLS BY ANOTHER YEAR The Ministry of Finance has extended the safeguard duty on imported solar cells and modules for another year based on the recommendations of Directorate General of Trade remedies (DGTR).The Safeguard duty rate for July 30, 2020 – January 29, 2021 is 14.90% and for other six months ie. January 30, 2021 – July 29, 2021 the rate is 14.50%.The safeguard duty will be imposed on solar cells falling under tariff items 8541 40 11 or 8541 40 12 of the First Schedule to the Customs Tariff Act, when imported into India.These duties will not apply to any developing country with the exception of China, Thailand and Vietnam.

MNRE ISSUES AMENDMENT OF COMPONENT-C UNDER PM-KUSUM The Ministry of New & Renewable Energy (MNRE) issued an amendment in Guidelines for Implementation of Component-C of Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyaan (PM-KUSUM) Scheme.

Following is the Amendment Of Guidelines for Implementation of Component-C: IA will be responsible to invite bids for empanelment of vendors through a transparent bidding process. Empanelment may be state-wide or feeder-wise, as per decision of the concerned State.

To ensure quality and post installation services, IAs shall allow either one or both of the following two categories to participate in the tender for empanelment of vendors: i. manufacturer of solar panels or manufacturer of solar water pumps ii. joint venture of manufacturer of solar panels or manufacturer for solar water pumps with system integrators.

A single vendor might be given responsibility as a feeder to ensure better services and accountability.

MNRE ISSUES GUIDELINES FOR PROCUREMENT OF RTC POWER FROM RENEWABLE ENERGY PROJECTS The Ministry of New & Renewable Energy (MNRE) recently issued notice announcing guidelines for Tariff Based Competitive Bidding Process for Procurement of Round-The Clock Power from Grid Connected Renewable Energy Power Projects, complemented with Power from Coal Based Thermal Power Projects. The successful bidder will sign Power Purchase Agreement (PPA) for 25 years with elaborate mechanism for risk apportionment and compensations, payment security, etc. The main objective of guidelines are to provide Round-The-Clock (RTC) power to the DISCOMs from renewable energy sources complemented/balanced with coal based thermal power, To facilitate renewable capacity addition and fulfilment of Renewable Purchase Obligation (RPO) requirement of DISCOMs, To provide a transparent, fair, standardized procurement framework based on open competitive bidding with appropriate risksharing between various stakeholders to enable procurement of power at competitive prices in consumer interest, improve bankability of projects and ensure reasonable returns to the investors; and to provide for a framework for an Intermediary Procurer as an Aggregator/Trader for the inter-state/ intra-state, long-term, sale-purchase of power.

AUGUST 2020

POLICY DEBRIEF

MNRE EXTENDS DEADLINE FOR BIS CERTIFICATION OF SOLAR INVERTERS TILL DECEMBER 31 inverters.Earlier deadline for deadline was June 30, 2020 which now has been extended to 1 st December 2020.Due to COVID 19 lockdown disruption the industry sought more time for compliance and hence six-month extension was announced , ministry stated.The extension would only apply to manufacturers holding valid International Electrotechnical Commission (IEC) certificates.The quality certification has previously extended from 30.06.2018 to 30.06.2020.

CERC SANCTIONS INTRODUCTION OF GREEN TERM-AHEAD MARKET CONTRACTS ON IEX The Central Electricity Regulatory Commission (CERC) has recently approved introduction of the Green Term-Ahead Market (Renewable Energy) Contracts at Indian Energy Exchange Ltd.IEX highlighted that the proposed contract will provide a market-based mechanism where RE surplus and RE deficit States can trade RE and balance their RPO targets. This proposal would lessen the burden on RE-rich Order on 18 States and incentivize them to develop RE capacity beyond their own RPO,it added.IEX also highlighted that the proposed contract will promote RE merchant capacity addition which will eventually help in achieving RE capacity addition targets of the country.

AUGUST 2020