The Energy Solutions Company

Vol 76, Feb 2018

OPEN ACCESS

REConnect Energy Newsletter: Vol. 76, February 2018

From Team REConnect

Dear Reader,

Recently the Competition Commission of India (CCI) handed out an important judgement pertaining to denial of open access permission to a consumer. In this case, the consumer approached the CCI alleging “abuse of dominant position” on part of the state utilities.

The CCI found that prima facie denial of open access in the above case did result in violation of the Competition Act 2002. The CCI has ordered a detailed investigation in the matter.

The order may have far-reaching consequences in the electricity sector, as we see an outsider (CCI) stepping into an area where traditionally SERCs have played a rather tepid role. The main article analyses the judgment in detail.

REC demand has been very strong in the last 3 months. Trading was at record high in December (52 lakh RECs were traded). In the last 4 months, 84% of available Non-solar RECs have been sold.

The sudden spurt in demand has been broad-based, with several large utilities and large captive generators rushing to meet RPO requirements.

Demand is expected to remain robust in March as well, as this will be the last trade of the compliance period.

Trading in Solar RECs has remained suspended since May 2017, pending the order of ApTel. Hearings were completed in this case in the last week of February, and the order can be expected in due course.

Recent regulatory and other developments in the RE sector include: RERC declines backing down orders on electricity generation, UP releases Solar policy 2017 and tariff for FY 2017 till 2020, Wind tariff hitting a new low at Rs 2.43 per unit in an auction conducted by GUVNL, 5th amendment to KERC’s RPO regulation (solar RPO percentages have been increased by KERC), DSM regulations for the state of AP and the draft forecasting and scheduling regulations of Tamil Nadu and Punjab.

- Team REConnect

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CCI Order Analysis

Regulatory Updates

Trade Statistics

RE Generation Stats

About REConnect

REConnect Energy Newsletter: Vol. 76, February 2018

Analysis of Competition Commission’s order on denial of Open Access

In a recent judgement, the Competition Commission of India (CCI) considered the case of an electricity consumer that was repeatedly denied open access permission. In this case, the consumer approached the CCI alleging “abuse of dominant position” on part of the state utilities.

The case was filed by HPCL-Mittal Pipelines Limited (‘HMPL’) against denial of open access. In this case, “upstream network constraints” were cited to disallow OA application multiple times.

The CCI found that prima facie denial of open access in the above case did result in violation of Sec 4(2)(c) of the Competition Act 2002. This clause refers to “abuse of dominant position by denial of market access”. The CCI has ordered a detailed investigation in the matter.

The CCI also made certain other interesting observations in the case:

A. In the above case, it identified “conflict of interests situation” between the various constituents of the electricity utilities like the Discom, TransCo, SLDC, etc due to “structural linkages”, i.e. common holding structure. The order states the following:

“It appears that OP-2 has leveraged its dominant position in the relevant market to adversely affect the competition in the downstream market, where it is present through its group entity OP-3. The structural linkages between the OPs as depicted in the diagram illustrated earlier also points toward the conflict of interest that exists in the present case. Thus, given the conflict of interest situation that exists in the present case, anti-competitive motive behind such denial by OP-2 cannot be ruled out and may need to be tested in detailed investigation.”

A.B. The case dwells in depth on the

jurisdiction of the CCI to rule on such cases given that the EA2003 is also a special statute that deals with all matters of electricity.

The CCI finds that there are enough grounds and supporting case laws to justify its jurisdiction as far as competition related matters are concerned across all sectors.

This judgement is certainly a very interesting development for the electricity sector, as denial of open access permissions is a problem across most states.

The inherent conflict of interest is evident, as often the Discom - which stands to lose its best paying consumers - iis involved in approving OA applications.

The regulatory regime of the sector itself, especially the State Regulatory Commissions (SERCs) have so far taken a view that has supported the Discom’s, at the cost of the overall market and sector. Examples include setting of Cross-subsidy surcharges without regards to the formula and limits defined in the National Tariff Policies, upholding denial of open access in many cases, etc.

It is hoped that an outsider, for example CCI, which does not bring with it the baggage of the SERCs, or the “conflict of interest” that results from the government appointing the electricity regulator and owning the entire value chain, will catalyse real change in the electricity sector.

The judgement can be accessed here.

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Competition Commission rules on denial of Open Access to a consumer

REConnect Energy Newsletter: Vol. 76, February 2018

Tariff changes, RPO notifications, Regulatory changes and orders

Regulatory Updates

1. Development of Solar rooftop projects of capacity 4,300 MW by 2022.

2. Solar RPO of 8% by 2022.3. Installation of 10,700 MW

capacity of solar power till 2022.

Following are the salient features of the policy:

○ UPPCL plans to purchase 100% solar power generated through the first 2000 MW of solar projects and providing them “must-run” status.

○ For solar projects selling power to third party or for 100% captive use, exemption of 50% on wheeling charges/ transmission charges will be provided.

○ Also, CSS and wheeling/ transmission charges will be exempted completely for intrastate transmission on interstate sale of solar power.

The policy can be accessed here

UPERC releases retail tariff for FY 2017 - 18:

The UPERC has determined retail tariff for FY 2017-18 for consumers of various categories. Following are the rates determined in the order:

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Petition on backing down orders on electricity generation dismissed by RERC:

A petition has been filed by Renew Wind Energy, Ostro Renewables, Mytrah Vayu and CLP Wind Farms against Rajasthan SLDC and Rajasthan Rajya Vidyut Prasaran Nigam Ltd against the unlawful and unpredictable instructions issued by SLDC for backing down of generation of electricity. Wind generation companies argued that SLDC had issued backing down orders in the past giving grid stability as one of the reason. They also pointed out that the backing down orders were random in nature and were given despite being provided regular day-ahead forecasts to SLDC

To this the SLDC had responded that such orders were given to RE generators only after they had been given to the generators of conventional energy. Also, the reasons for the orders had been duly noted by the SLDC.

The commission held a hearing after which they decided to dismiss the petition after warning the SLDC to issue backing down orders to RE generators strictly based on the Grid Code and to maintain a record of backing down which should include it’s cause.

The order can be accessed here.

UP releases Solar Policy:

UPNEDA has released the solar policy for the state for 2017. The main aim of the policy is to increase the participation of Private Sector and investment opportunities for setting up of solar power projects in UP.

● Target mentioned in the policy are as follows:

REConnect Energy Newsletter: Vol. 76, February 2018

Cross Subsidy Surcharge:

Following is the cross subsidy surcharge proposed in the tariff order:

Transmission charges: The transmission charges approved for all the DISCOMs are as follows:

Transmission Losses: The inter-state transmission losses for FY 2017-18 to 2019-20 for all DISCOMs in the state have been determined at 3.79%.

KERC releases fifth amendment to procurement of energy from renewable energy sources:

KERC has released the fifth amendment to the regulation on procurement of Energy from Renewable Sources. Following are the amendments suggested in the regulation:

● Non solar RPO for distribution licensees:

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The tariff for industrial category of consumers has remained unchanged since last year.

The change in energy charge for commercial consumers can be seen as per the graph below:

Wheeling charges: Wheeling changes determined for FY 2017-18 are Rs 0.88/kWh, for FY 2018-19 are Rs 0.886/kWh and for 2019-20 are Rs 0.876/kWh.

Wheeling Loss:

Category Fixed Charge (Rs/kVA/month)

Energy Charge (Rs/kVAh)

Industrial

Supply at 11 kV 250 6.65

Supply between 11 kV and 66 kV

240 6.35

Supply between 66 kV and 132 kV

220 6.15

Supply over 132 kV

220 5.95

DISCOM Distribution loss

PVVNL 18.18%

DVVNL 20.07%

MVVNL 19.16%

PuVVNL 19.73%

KESCO 15.28%

Source 2017-18 2018-19

Non-Solar 6% 7%

Solar 3.50% 6.75%

REConnect Energy Newsletter: Vol. 76, February 2018

● Solar RPO distribution licensees:

● Following graph depicts the change in RPO compliance through solar sources:

● Those DISCOMs which have not achieved their RPO compliance for the financial year but have achieved compliance to the extent of 85%, shall be permitted to carry forward the shortfall to the next financial year. Such carryforwards shall not be permitted for more than 2 consecutive years.

In our opinion, this clause goes against the order of ApTel in earlier cases, which said that carry-forwards should generally not be allowed.

● The compliance to be carried out by grid connected captive consumers is:

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The order can be accessed here.

AP releases procedures for implementation of DSM for Wind and Solar generation

Andhra Pradesh Transmission Corporation, AP SLDC has released the procedures for implementation of DSM for Wind and Solar generation. Following are the salient features of the regulation:

● The generators shall appoint a QCA through consensus. The appointment of QCA shall take place by 25th December 2017 and forecasting should be done by 1st January 2018.

● Only one QCA shall be allowed within a pooling station having common SEM. Also, forecast for more than one pooling station can be aggregated by the QCA as virtual pool. Forecasts for wind and solar generation shall be submitted separately.

● Role of the QCA shall be to provide the real time parameters at turbine/ inverter level to SLDC after which the SLDC shall forecast the wind and solar generation in the SLDC control area and this shall be published in the APSLDC portal.

● The QCA shall be separately provided the user login into the SLDC DSM tool for accessing forecasting related Data. Its role shall be to provide power forecast, schedules and AVC on Week ahead, day ahead and intra-day bases to SLDC.

DISCOM Year

2017-18 2018-19

BESCOM 12% 13%

MESCOM 12% 13%

CESC 12% 13%

HESCOM 8.55 9.5%

GESCOM 6.0% 7.0%

HRECS 8.5% 9.5%

DISCOM Year

2017-18 2018-19

All Discom’s 3.50% 6.75%

Source 2017-18 2018-19

Non-Solar 6% 7%

Solar 3.50% 6.75%

REConnect Energy Newsletter: Vol. 76, February 2018 7

● Day ahead forecasts and AVC shall be provided by 10:00 am everyday for the next day and may be revised by 3:00 pm.

● 16 intraday revisions for wind generators and 9 for solar shall be allowed.

● Energy account and Deviation charges shall be calculated and for each pooling station by SLDC on a monthly basis.

● QCA shall carry out the de pooling of deviation charges among the generators.

● Commercial settlement forecasting deviations including payment of deviation charges to the state pool account shall be undertaken by QCA. It shall also undertake commercial settlement of any other charges and any other ancillary and incidental matters.

The regulation can be accessed here.

Wind Power tariff hits new low:

In a recent auction held for Gujarat based utility GUVNL, the tariff for wind power hit a low at Rs 2.43 per unit. This was a new low considering the lowest tariff was determined before this for SECIs 1 GW capacity was Rs 2.64 per unit.

The auction was held for a capacity of 500 MW and this tariff has been quoted by a company called Sprng Energy for a capacity of 197.5 MW.

Tamil Nadu releases draft forecasting and scheduling regulations:

TNERC has released Forecasting, Scheduling and Deviation settlement and related matters for Solar and Wind Generation Regulations, 2017. Following are the salient features of the regulation:

● Mechanism for Deviation Settlement shall be calculated using the following formula:

● These regulations shall be applicable to all the wind and solar energy generators in the state connected to Intra-State Transmission System or Distribution System, including the ones connected through Pooling Sub-Stations.

● Deviation Charges payable to state DSM Pool for under and over injection for sale or self consumption of power within TN are:

● For the calculation of deviation charges for Solar and Wind energy generators selling or consuming power outside TN, the error bands shall remain the same.

% Absolute Error in 15-minute time blocks

Deviation charges

< = 10% None

>10% but <=20% At Rs. 0.50 per unit

>20% but <=30% Charges of Rs 0.50 per unit for deviation between 10% and 20% + Rs 1 per 5 unit for deviation between 20% and 30%.

>30% Charges of Rs 0.50 per unit for deviation between 10% and 20% + Rs 1 per 5 unit for deviation between 20% and 30% + Rs 1.50 per unit for deviation beyond 30%

REConnect Energy Newsletter: Vol. 76, February 2018

● A significant difference in these regulations as compared to the other forecasting and scheduling regulations is that deviation charges are only applicable in case of over injection of electricity in the model regulations.

● Stakeholder comments on the regulation are invited till 28.01.2018.

The regulation can be accessed here.

PSERC releases draft forecasting and scheduling regulations:

Punjab State Electricity Regulatory Commission has released the draft forecasting and scheduling and deviation settlement regulations for the state. Following are the salient features of the regulations:

● Applicability: The regulation shall be applicable to wind and solar generators with a capacity of 5 MW and above connected to the State transmission system/ distribution system or combined capacities of 5 MW and above connected through the pooling stations to the state transmission/ distribution system.

● Role of QCA:

○ Coordination between the generator and STU/ SLDC for metering, data collection/ transmission and communication.

○ It shall also be responsible for undertaking commercial settlement on behalf of the generator, de-pooling of payments on behalf of the generators of the pooling station from/to the state pool Account.

○ Commercial settlement of any other charges on behalf of the generators.

● Deviation charges for intra-state transactions have been determined by the commission as follows:

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Deviation charges for inter-state transactions in case of over injection of electricity are as follows:

The regulation can be accessed here. The staff paper can be accessed here.

Absolute Error in the 15-minute time block

Deviation charges payable

<= 10% None

>10% but <=20% Rs 0.50

>20% but <=30% Rs 0.50 for excess or shortfall between 10% and 20% and Rs 1 for shortfall between 20% and 30%.

>30% Rs 0.50 for excess or shortfall between 10% and 20% + Rs 1 for shortfall or excess between 20% and 30% + Rs 1.50 per unit for excess/ shortfall beyond 30%

Absolute error in 15-minutes time block

Deviation charges payable to state deviation pool

<= 15% PPA rate

>15% but <=25% PPA rate + PPA rate*1.1

>25% but <=35% PPA rate + PPA rate*1.1 + PPA rate* 1.2

>35% PPA rate + PPA rate*1.1 + PPA rate* 1.2 + PPA rate*1.3

Absolute error in 15-minutes time block

Deviation charges payable to state deviation pool

<= 15% PPA rate

>15% but <=25% PPA rate + PPA rate * 0.9

>25% but <=35% PPA rate + PPA rate * 0.9 + PPA * 0.8

>35% PPA rate + PPA rate * 0.9 + PPA * 0.8 + PPA rate * 0.7

REConnect Energy Newsletter: Vol. 76, February 2018 9

Trade Statistics

REC trade results for February 2018

Non-Solar RECs:

REC trading in the last four months have seen record high demand. The scale of the trading can be appreciated by considering these figures:

● In the last 4 months, approx. 84% of the entire RECs in the markets have been sold● RECs trading in the last 11 months from April 2017 till Feb 2018 has been almost equal to the

trading in the previous 28 months● Total trading value (at Rs 1,500 per REC) was in excess of Rs 1,600 crore● RECs sold in the last 4 months equal to issuances in the last 17 months (from Oct 2016 to

Feb 2017)

The market volume graph shown below depicts the trend in REC trading since its commencement. In this year, a number of states such as Delhi, Bihar and Maharashtra have released RPO order demanding stricter compliance from the obligated entities.

REConnect Energy Newsletter: Vol. 76, February 2018 10

Trade Statistics

REC trade results for February 2018

Non-Solar RECs:

December month saw the highest ever trade of RECs. In total 52.17 lakh RECs were traded (1,136% higher than December 2016, and 136% higher than in November 2017), and clearing ratios on IEX and PXIL were 46.09% and 58.15% respectively. Total traded value was Rs 782 crores.

In January, a total of 12.30 lakh RECs were traded (19.04% lower than January 2017, and 76.41% lower than in December 2017), and clearing ratios on IEX and PXIL were 7.83% and 30.55% respectively. Total traded value was Rs 184 crores. In the month of February clearing ratios on IEX and PXIL were 19.84% and 69.80% respectively. Total traded value was Rs 353 crores (This value is calculated considering the rate of Rs 1500 per REC out of which Rs 1,000 go to the generator and Rs 500 is retained with CERC pending decision of ApTel on Floor and Forbearance prices).

REConnect Energy Newsletter: Vol. 76, February 2018

RE Generation

RE power capacity and generation statistics for the month

The Central Electricity Authority (CEA) releases monthly reports giving the installed capacity of renewable energy sources such as wind, solar, bio power and small hydro power. As per the report, the compounded annual growth rate of the installed capacity of these sources has been increasing. Installed capacity of wind power plants has grown by 9% since December 2014. A higher increase by 46% can be observed in the installed capacity of solar power plants. BioPower (including bagasse and biomass plants) has increased by 2% in the past four years. Small hydro has seen the minimum percentage growth in the past four years, by 2%.

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The generation from RE sources has been following a similar trend since the past few months. The generation from solar plants has increased by 86% from April to December 2017 as compared to generation during the same time frame in 2016. Similarly, the generation from wind power plants increased by 17%. The generation from sources such as bio-power has shown a decreasing trend as compared to last year by 9%. Small hydro has slargely remained the same.

Source: Reports from CEA

REConnect Energy Newsletter: Vol. 76, February 2018

RE Generation

RE power capacity and generation statistics for the month

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About REConnect

About REConnect Energy: REConnect Energy is India’s largest renewable energy services company with

services offered under energy transactions management and predictive analytics for energy markets. In

predictive analytics, the Company offers its energy forecasting and scheduling services to various utilities

and wind/solar project developers. The current renewable energy forecasting portfolio stands at about

10,500MW at wind/solar farm level forecast and about 26,000MW at utility scale forecast where

state/regional level forecasting is provided to some of the largest utilities in India. Under renewable energy

certificate (REC) market, the Company represents about 45% of the market at national level. The Company

is also supported by INFUSE Ventures, a venture fund supported by MNRE.

Awards & Industry Recognition

★ Best Indian Start-up, Indo-German Boot Camp (GIZ), Social Impact Lab - Berlin, Germany★ Top 30 Global Energy Start-ups, NewEnergy Expo-2017, Astana, Kazakhstan ★ Top 50 Indian Start-ups, The Smart CEO - 2016, Bangalore, India★ Best Wind Energy Forecaster of the Year (2014/15/16/17), Indian Wind Energy Forum★ Technology Start-up Enterprise of the Year (Energy & Utilities) - 2017, 24MRC Network, India★ Top 100 Global Energy Start-ups, Start-up energy transition Awards, Berlin, Germany★ Times Network Award in Innovation in Digital Energy Solutions, New Delhi, May 2017

Interview Video Links

Smart Startup of the Year, Platinum Award ISGF Innovation Awards, 2018

To be awarded on 8 March, 2018 in New Delhi

REConnect Energy Solutions wins