Petition No. 256/2010 (Suo-Motu). Case: In Re: Central Electricity Regulatory Commission (Terms and Conditions for Tariff determination from Renewable Energy Sources 2009) and Central Electricity Regulatory Commission (Terms and Conditions for Tariff determination from Renewable Energy Sources) (First Amendment 2010) Vs. Central Electricity Regulatory Commission
| Case Number | Petition No. 256/2010 (Suo-Motu) |
| Judges | Pramod Deo, Chairperson, S. Jayaraman, V.S. Verma and M. Deena Dayalan, Members |
| Issue | Electricity Law |
| Judgement Date | November 09, 2010 |
| Court | Central Electricity Regulatory Commission |
Order:
(New Delhi)
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The Central Electricity Regulatory Commission (Terms and Conditions for Tariff determination from Renewable Energy Sources) Regulations, 2009, (hereinafter referred to as "the RE Tariff Regulations") provide for terms and conditions and the procedure for determination of tariff of the following categories of renewable energy generating stations:
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Wind Power Project;
(b) Small Hydro Projects;
(c) Biomass Power Projects;
(d) Non-fossil fuel-based co-generation Plants; and
(e) Solar Photo Voltaic (PV) and Solar Thermal Power Projects.
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The Regulations empowers the Commission to determine the generic tariff on the basis of the suo-motu petition, for the RE technologies for which norms have been provided in the Regulations. Generic Tariff is different from the project specific tariff for which a project developer has to file petition before the commission as per the format provided in the RE Tariff Regulations. Pertinently, project specific tariff has been envisaged for the new RE technologies and the technologies which are still at the nascent stage of development, and the Commission shall determine the project specific tariff for such technologies on a case to case basis.
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Clause (1) of Regulation 8 of the RE Tariff Regulations provides that "the Commission shall determine the generic tariff on the basis of suo-motu petition at least six months in advance at the beginning of each year of the Control period for renewable energy technologies for which norms have been specified under the Regulations." The Commission has notified the RE Tariff Regulations on 16.9.2009 and subsequently issued two generic suo-motu tariff orders, which were applicable for the renewable energy projects to be commissioned during first year of the control period (i.e. FY2009-10) and second year of the control period (i.e. FY2010-11). The Commission, in due discharge of the mandate under Regulation 8(1) of the RE Tariff Regulations has determined the generic tariff of the RE projects for the third year of control period (i.e. FY 2011-12) through this order.
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The Commission has made the following provision in Regulation 8 through the CERC (Terms and Conditions for Tariff determination from Renewable Energy Sources) (First Amendment) Regulations, 2010, as under:
(2) Notwithstanding anything contained in these regulations, a) the generic tariff determined for Solar PV projects based on the capital cost and other norms applicable for the year 2010-11 shall also apply for such projects during the year 2011-12; and
b) the generic tariff determined for Solar thermal projects based on the capital cost and other norms for the year 2010-11 shall also apply for such projects during the years 2011-12 and 2012-13,
provided that (i) the Power Purchase Agreements in respect of the Solar PV projects and Solar thermal projects as mentioned in this clause are signed on or before 31st March, 2011; and (ii) the entire capacity covered by the Power Purchase Agreements is commissioned on or before 31st March, 2012 in respect of Solar PV projects and on or before 31st March, 2013 in respect of Solar thermal projects.
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In pursuance of First Amendment to the RE Tariff Regulations, the Commission, through its suo-motu Order (Petition No. 53/2010) based on the financial principles and technology specific parameters, determined tariff for FY 2010-11 and FY 2011-12 in case of solar photovoltaic power projects and for FY 2010-11, FY 2011-12 and FY 2012-13 in case of solar thermal power projects, subject to the condition that power purchase agreement (PPA) for such Solar PV and Solar thermal power projects are signed before 31.03.2011 and entire capacity is commissioned on or before 31.03.2012, in case of solar PV projects and on or before March 31, 2013 in case of thermal projects.
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As specified in Regulation 6 of the RE Tariff Regulations, the benchmark cost for Solar PV and Solar Thermal may be reviewed by the Commission annually. The Tariff for the Solar photovoltaic power projects and Solar thermal power projects for FY 2011-12, whose PP As are to be signed after March 31, 2011 would be based on the benchmark capital cost norm for Solar PV and Solar thermal projects for the FY 2011-12.
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The Commission issued Order proposing the "Determination of generic levellised generation tariff for renewable energy sources, applicable during FY 2011-12" (Petition No. 256/2010 (suo-motu) dated 15th September, 2010 for inviting comments/suggestion/objections from the stakeholders.
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The Commission vide its public notice No. (Petition No. 255-256/2010 (suo-motu) dated 17th September, 2010 invited comments from the various stakeholders. In response to the same written comments/suggestions received from following stakeholders:
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M/s Everstone Investment Advisors Pvt. Ltd.
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M/s Bloomberg New Energy Finance
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M/s Gujarat Flurochemicals Limited
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M/s Chhattisgarh Biomass Energy Developers Association (CBEDA)
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M/s NSL Renewable Power Pvt. Ltd.
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M/s Gujarat Urja Vikas Nigam Limited
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Assam Electricity Regulatory Commission (AERC)
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Subsequently, a public hearing was held on 19th October, 2010 and following stakeholders expressed their views/suggestions/comments in person:
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M/s Abengoa Solar
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M/s ACME
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M/s Tata BP Solar
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M/s Chhattisgarh Biomass Energy Developers Association (CBEDA)
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The Commission has analysed the views/comments/suggestions of the stakeholders and the Commission's decisions are as below;
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Wind Energy Projects
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Capital Cost of Wind Energy Projects
Comments
As per RE Tariff Regulations capital cost is calculated excluding the EHV lines between wind farm pooling substation and utility sub-station. However, the wind farms are constrained to construct this line. (M/s Everstone Investment Advisors Pvt. Ltd.)
Our recent survey and analysis done on capital costs of wind projects reveals that the proposed normative capital costs of ` 492.52 lakh/MW for FY 2011-12 is lower than the current capital costs observed in the market. Further, average capital cost of 133 projects, which applied for CDM between January 2009 and July 2010, comes to around ` 557 lakh/MW. (Bloomberg New Energy Finance)
Revised normative capital cost is still not truly reflective of current market price which are ruling upwards of ` 650 lakh/MW and requested to review the same in view of vastly changed market conditions and substantial increase in the cost of machineries, materials, equipment, transportation and labour. (Gujarat Flurochemicals Limited)
Analysis and Decision
The RE Tariff Regulations specifies the base capital cost for FY 2009-10. The capital cost for FY 2011-12 has been determined based on the indexation formulae as specified in the Regulation. Capital cost includes evacuation infrastructure up to inter-connection point. The review of the base Capital cost of Wind Energy Project and consideration of the cost of evacuation beyond the inter-connection point is not the subject matter of present regulatory process which has been initiated for determination of generic tariff for FY 2011-12.
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O&M Cost of Wind Energy Projects
Comments
A recent survey reveals that majority of project developers expect the O&M costs /MW for wind projects to be higher than 1.5% of the total project cost as against the normative O&M cost in the first year which translates into 1.47% of the capital of ` 492.52 lakh/MW. (Bloomberg New Energy Finance)
Analysis and Decision
The review of the base O&M Expenses of Wind Energy Projects, as specified in the RE tariff Regulation for the FY 2009-10, is not the subject matter of present regulatory process which has been initiated for determination of generic tariff for FY 2011-12.
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Capacity Utilization Factor (CUF) Based on Wind Zone
Comments
The WPD data specified in the RE Tariff Regulations are more generic and not practical enough for implementation. It is suggested that the Wind Power Density (WPD) data at 50 m level as uploaded on the C-WET website should be used as reference. (M/s Everstone Investment Advisors Pvt. Ltd.)
Analysis and Decision
Regulation 7 of the RE Tariff Regulation specifies CUF norms for the control period specified for 4 wind zones based on the annual mean Wind Power Density (WPD) to be measured at 50 meter hub-height. Said Regulation further provides that for the purpose of classification of wind energy project into particular wind zone class, the State-wise wind power density map prepared by Centre for Wind Energy Technology (C-WET) would be considered. The same is also enclosed as Schedule to the RE Tariff Regulations. The comments reflect gap in understanding of RE Tariff Regulations.
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Biomass Based Power Projects
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Capital Cost
Comments
Project cost considered for the base year is unrealistic. Present project cost is in the range of ` 500 to 525 lakh/MW as against projected benchmark capital cost as ` 426.03 lakh/MW for FY2011-12. Power evacuation cost should be included in the project cost. (M/s Chhattisgarh Biomass Energy Developers Association (CBEDA))
Analysis and Decision
The RE Tariff Regulation specifies the base capital cost for FY 2009-10. With regard to Capital Cost for Biomass Power Projects for FY 2011-12, the Commission has specified the Capital Cost Indexation formulae under Regulation 35 of RE Tariff Regulations. The review of the base project cost of Biomass power plant and consideration of the cost of evacuation is beyond the inter-connection point, are not the subject matter of present regulatory process which has been initiated for determination of generic tariff.
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O&M Cost
Comments
The Commission has proposed to consider at O&M Expenses at ` 22.63 lakh/MW which is not sufficient and same may be set at ` 42 lakh/MW. (M/s Chhattisgarh Biomass Energy Developers Association (CBEDA))
Analysis and Decision
The Regulation 39 of RE Tariff Regulations provides the normative O& M expenses for biomass based projects for the year 2009-10 to be ` 20.25 lakh/MW and which shall...
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