Workshop on DSM & RE: Regulatory Structure and Consumer Role

1. Training Workshop on DSM & RE Organized by VIKSAT 6th April, 2012, Ahmedabad, INDIA Overview of Regulatory Structure and Role of Consumer in Regulatory Process Dr. Omkar Jani Principal Research Scientist (Solar) Gujarat Energy Research and Management Institute (GERMI) omkar.j@germi.res.in

2. Outline • Electricity Act, 2003 • Important Policies • Important Government Organizations • Regulatory Commissions • Electricity Sector Overview • Renewable Energy Support Mechanisms • Gandhinagar Photovoltaic Rooftop Programme Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

3. Introduction • India: Federal system of Government • Central Government: Deals with intra-state issues • Transmission open access • Regulatory matters open to central generating stations • Additionally, funding to states for energy initiatives • So on. • Central Government owns: • National Thermal Power Corporation (NTPC) • National Hydro Power Corporation (NHPC) • States generate their own power at varying degrees • Balance is received from Central Generating Stations. Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

4. Total Installed Capacity, India (as on 29 Feb. 2012) Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

5. Electricity Act (EA), 2003 • Consolidates laws related to generation, transmission, distribution, trading and use of electricity. • Aims to • Promote competition, protect the interests of consumers • Ensure supply of electricity to all areas • Rationalize electricity tariffs • Ensure transparent policies regarding subsidies • Promote environmentally friendly policies. • The Act established the Central Electricity Authority and Appellate Tribunal. Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

6. Electricity Act (EA), 2003 (Contd.) • The Act recognizes the role of renewable energy technologies for supplying power to the utility grid as well as in stand-alone systems and provides for Independent Power Producers (IPP) to set up renewable power plants for captive use, third party sale, power trading and distribution. • The Act empowers the State Electricity Regulatory Commissions (SERCs) to promote renewable energy and specify, for purchase of electricity from renewable energy sources, a percentage of the total consumption of electricity in the area of a distribution licensee, i.e. Renewable Purchase Obligation (RPO). Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

7. Key Features of Electricity Act, 2003 • Central Government to prepare a National Electricity Policy in consultation with State Governments. • Thrust to complete rural electrification and provide for management of rural distribution by panchayats, cooperative societies, non-government organizations, franchisees, etc. • Provision for licence-free generation and distribution in rural areas. • Generation being de-licenced and captive generation being freely permitted. Hydro projects would, however, need clearance from CEA. • Transmission Utility at the Central, as well as State level, to be a company responsible for planned and coordinated development of transmission network. Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

8. Key Features of Electricity Act, 2003 (2) • Provision for private licensees in transmission and entry in distribution through an independent network. • Open access in transmission from the outset. • Open access in distribution to be introduced in phases with surcharge for current level of cross subsidy to be gradually phased out along with cross subsidies and obligation to supply. • Distribution licensees would be free to undertake generation, and generating companies, would be free to take up distribution business. • Redefinition of the roles of CERC, SERC and CEA. Establishment of SERC mandatory. Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

9. Key Features of Electricity Act, 2003 (3) • Provisions for payment of subsidy through budget. • Trading recognized as a distinct activity with the regulatory commissions authorized to fix ceilings of trading margins, if necessary. • Provisions for reorganization of State Electricity Boards. • An appellate tribunal to hear appeals against the decision of the CERC and SERCs. • Provisions relating to theft of electricity made more stringent. • Provisions for establishing an Ombudsman for addressing the consumers’ grievances. Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

10. Segment-wise Impact of Electricity Act 2003 Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

11. National Electricity Policy, 2005 • Objectives: • Access to electricity – Available to all households within the next 5 years. • Availability of power – Demand to be fully met by 2012. Energy and peaking shortages to be overcome and adequate spinning reserve to be available. • Supply of reliable and quality power of specified standards in an efficient manner and at reasonable rates. • Per capita availability of electricity to be increased to over 1000 units by 2012 • Minimum lifetime consumption of 1 unit/ household/ day as a merit good by year 2012. • Financial turnaround and commercial viability of electricity sector. • Protection of consumers’ interests. Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

12. National Tariff Policy, 2006 • The National Tariff Policy lays guidelines for attracting adequate investments to the electricity sector and ensuring reasonable charges for the consumers. • Stresses on competitive procurement of power. • Objectives: • Provide electricity to consumer at reasonable and competitive rates. • Ensure financial viability of the sector and attract investments • Promote competition, efficiency in operation and improvement in the quality of supply • Promote transparency, consistency and predictability in regulatory approaches across jurisdiction and minimise perceptions of regulatory risks. Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

13. Integrated Energy Policy (IEP), 2006 • Focuses on Energy Security • Covers • Access and availability, • Affordability and pricing, • Efficiency and environment, • Also covers specific measures to support renewable energy, including: • Power regulators must seek alternative incentive structures that encourage utilities to integrate wind, small hydro, cogeneration etc, into their systems. • Power regulators should mandate feed-in laws for renewable energy where appropriate, as provided under the Electricity Act. • Generation based incentives for megawatt scale grid connected solar PV and thermal power plants. • An additional tariff for new wind power plants which do not claim accelerated depreciation benefit. Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

14. Involvement of Government Institutions • Ministry of Power: • Planning, policy formulation and processing, monitoring and implementation of thermal and hydropower generation, transmission and distribution. • Ministry of Coal: • Responsibility of determining the policies and strategies for exploring and developing coal reserves, sanctioning important projects and deciding related issues. • Ministry of Oil and Gas: • Exploration and production, refining, distribution and marketing, import, export and conservation of oil and gas. • Determination of policies and strategies in this oil and gas sector. Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

15. Involvement of Government Institutions (Contd.) • Ministry of New and Renewable Energy (MNRE): • Nodal Ministry for all matters relating to new and renewable energy. • Responsible for planning and policy formulation, implementing programmes, developing and commercialising technology, providing fiscal incentives etc. • Planning Commission: • Power and Energy, Energy Policy and Rural Energy division of the Planning Commission guides the energy policies of the country. • It has set up a steering committee on energy sector and working group each on petroleum and natural gas, coal and lignite and power. • Central Electricity Authority (CEA): • Assistance to the Ministry of Power in all the technical and techno-economic matters. • Preparation of National Electricity Plan in accordance with the National Electricity Policy once every five years. Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

16. Involvement of Other Organizations • Energy Coordination Committee (Constituted on 13th July 2005): • Promote coordination in inter department action and functions in energy planning and security. • The Prime Minister Chairs the Committee and the members include: Minister of Finance, Minister of Petroleum and Natural Gas, Minister of Power, Minister of Coal, MOS for Non-conventional energy sources, Deputy Chairman, Planning Commission, Chairman National Manufacturing Competitiveness Council, National Security Advisor. • Indian Renewable Energy Development Agency (IREDA): • Established by MNRE to provide loans for renewable energy projects at low interest rates. • Power being a concurrent subject between the Central and the State Governments in India, the states have adopted the MNRE guidelines to varying degree. • Some states give additional benefits to renewables while others have diluted those proposed in the MNRE guidelines. Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

17. Involvement of Other Organizations (Contd.) • State Nodal Agencies (State-REDA): • The MNRE has issued a Directive requiring each State to establish an autonomous Nodal Agency for effective implementation of all the renewable energy and co-generation schemes. • The Central Government of India provides a grant to these Agencies for recurring and non-recurring expenditure. • Bureau of Energy Efficiency (BEE) (Established in 2002): • Statutory national body set up under the Energy Conservation Act, 2001 by the Government of India • Promote energy efficiency. • So far 30 states and union territories in India have notified designated agencies to coordinate, regulate and enforce the provisions of the Energy Conservation Act. • Most states have entrusted the task of initiating energy conservation programmes to the renewable energy development agencies. Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

18. Electricity Sector Overview • Electricity sector is administered by both Central and State Governments. State Government Government of India Policy Regulation and Overall Planning State Electricity Regulatory Commission Central Electricity Regulatory Commission Central Electricity Authority SLDC RLDC State Sector Generator/ Independent Power Producer State Transmission Utility Distribution Company Trader State Sector Generator/ Independent Power Producer State Transmission Utility Trader Operation Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

19. Central Electricity Regulatory Commission • Constituted under the 1998 Act to • Promote competition, efficiency and economy in bulk power markets, • Promote investments and • Advise the Government on removal of barriers to bridge the gap between demand and supply. • Main functions of CERC: • Regulate the tariff of generating companies owned or controlled by the Central Government • Adjudicate upon disputes involving generating companies or transmission licensee • Specify Grid Code having regard to Grid Standards • Specify and enforce the standards with respect to quality, continuity and reliability of service by licensees • Fix the trading margin in the inter-State trading of electricity, if considered necessary • Promote efficiency, competition and economy in the electricity industry. Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

20. State Electricity Regulatory Commission • Introduction: • As of 2009, all states of India except Sikkim, Arunachal Pradesh and Nagaland have an SERC. • A Joint Electricity Regulatory Commission (JERC) was constituted in 2005 and caters to Goa and Union Territories. • Constitution of SERC • Autonomous, statutory Commission • Quasi-judicial bodies with powers of a Civil Court. • Objectives of SERC: • Balance the interest of all stakeholders in the electricity industry • Promote healthy growth of Power Sector in the State. • Strive on cost optimization and improvement in consumer service by promoting competition • Implement the provisions of the Electricity Act, NEP, and NTP . Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

21. Functions of SERC • Determine the tariffs for generation, supply, transmission and wheeling of electricity, wholesale, bulk or retail, as the case may be, within the State • Issue licenses to persons seeking to act as transmission licensees, distribution licensees and electricity traders with respect to their operations within the State • Specify State Grid code • Specify or enforce standards with respect to quality, continuity and reliability of service by licensees • Fix the trading margin in the intra-state trading of electricity. Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

22. Regulatory Commissions and Renewable Energy • Electricity Act, 2003 gives responsibility for development of renewable energy to SERCs. • Section 61(h) prescribes promotion of cogeneration and and generation of electricity from renewable sources of energy’ as one of the criteria for tariff determination. • Section 86 (1) (e) requires the SERC to prescribe the percentage of purchase from renewable sources of energy by distribution licensees and others. • This Section also mandates the SERC to provide suitable measures for connectivity to the grid. • Under these provisions, a number of SERCs have: • Set specific tariffs for certain renewable energy sources (hydro, wind, solar, biomass) to encourage their development. • Conferred must run status on non-conventional energy projects • Allowed consumers taking power from non-conventional energy projects to have open access from day one Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

23. Renewable Energy Support Mechanism • Renewable Purchase Obligations/Quotas • General and Solar • Feed-in tariffs • Fiscal Incentives such as accelerated depreciation and tax holiday • Generation Based Incentive (GBI) • Renewable Energy Certificates • Non-solar and Solar • Capital Subsidies Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

24. Fiscal Incentives • 80% accelerated depreciation for tax calculation • Tax holiday for power generation through renewable sources • Excise duty/Import tariff concessions • Provision of banking, wheeling, and third party sale of renewable energy based power. Wheeling refers to the movement of electricity that is supplied by a generator to the consumer, over transmission and distribution lines that are owned neither by the generator nor the consumer. The fee charged by the owners of the (distribution and transmission) lines for letting others use them is known as the wheeling charge. The rates are determined by the regulator. • Other financial incentives/subsidies for devices with high initial cost • Automatic approval for foreign investors (100% equity participation) to enter into joint ventures (JV) with an Indian partner for financial and/or technical collaboration / setting up of renewable energy based power projects; or 100% foreign investment with approval of Foreign Investment Promotion Board. In addition, the government also encourages renewable energy technology transfer. Overview of Regulatory Structure and Role of Consumer in Regulatory Process, "Workshop on DSM & RE," VIKSAT, Ahmedabad, 6 Apr. 2012.

25. Programme Overview 5 MW GANDHINAGAR PHOTOVOLTAIC ROOFTOP PROGRAMME

26. Outline • Introduction to Programme • Technical Design • Programme Structure • Govt. Roles • Transaction Structure • Financial Structure • Status • Activities Undertaken • Activities Remaining • Government Rooftops • Social Initiative 5 MW Gandhinagar Photovoltaic Rooftop Programme - Update; 26 Mar. 2012.

27. Gandhinagar Photovoltaic Rooftop Programme • The Gandhinagar Photovoltaic Rooftop Programme (the “Programme”) marks the first distributed power generation programme in India in its true sense. • True Public Private Partnership, brings together… “Kilowatt-programme at a megawatt-scale” 5 MW Gandhinagar Photovoltaic Rooftop Programme - Update; 26 Mar. 2012.

28. Aim of Programme • Gandhinagar Photovoltaic Rooftop Programme aims for… • net 5 megawatt of photovoltaic installations… • in distributed kilowatt-sized photovoltaic systems… • through a PPP mode… • to promote clean energy and energy security... • as a part of the Gandhinagar Solar City Initiative. • Greater outcome of this pilot Programme: • Establish a practice/ philosophy of distributed solar and other energy generation. • Bring a level of comfort to all stakeholders for further scale-up. • Encourage public participation. 5 MW Gandhinagar Photovoltaic Rooftop Programme - Update; 26 Mar. 2012.

29. Typical PV System Architecture Photovoltaic Modules (Approx. 1 – 100 kWP) Grid-tied inverter Meter 2: Solar Electricity Generation Meter 1: Conventional Electricity Consumption Transformer Grid 5 MW Gandhinagar Photovoltaic Rooftop Programme - Update; 26 Mar. 2012.

30. Advantages of PV System Architecture • Relatively simple to install, operate and maintain. • Most popular and globally accepted configuration. • Disadvantage: No availability when grid is down. Photovoltaic Panel (Approx. 1 - 5kWP) Grid-tied inverter Meter 2: Solar Electricity Generation Meter 1: Conventional Electricity Consumption Transformer Grid 5 MW Gandhinagar Photovoltaic Rooftop Programme - Update; 26 Mar. 2012.

31. Govt. Department Involvement • Energy & Petrochemicals Dept., GoG: Project Proponent • GEDA: Advisory and Nodal Agency • GERMI: Structuring of Project • IFC: Transaction Structure Advisors • Deloitte: Commercial and Technical Consultants • CMS Cameron McKenna & Hemant Sahay Associates: Legal Consultants • GPCL: Project Implementing Agency • Participating GoG Departments: 5 MW Gandhinagar Photovoltaic Rooftop Programme - Update; 26 Mar. 2012.

32. Transaction Structure among Stakeholders GoG/ EPD (Project Proponent) GEDA (Nodal Agency) IFC & Consultants (Transaction Str. Advisor) G.R. Funding GPCL (Implementing Agency) GERMI (Project Str., Bid Process) GoG (For Govt. Approval) Project Implementation Agreement (PIA) Screening & Selection Selection through RFP Approvals GERC (For Regulatory Approval) 2 MW Govt. Rooftops 2.5 MW 0.5 MW Private Rooftops Project Developer 1 (Capacity: 2.5 MW) PPA, based on GERC solar tariff Green Incentive 2 MW Govt. Rooftops Project Developer 2 (Capacity: 2.5 MW) Torrent Power Ltd. (Off-taker) 2.5 MW 0.5 MW Private Rooftops 5 MW Gandhinagar Photovoltaic Rooftop Programme - Update; 26 Mar. 2012.

33. Transaction Structure Features • Project: 2.5MW Quota x 2 Developers • 2MW (x 2) on Government/ Commercial rooftops • 0.5MW (x 2) on Private Residences • (Qualified) Bidder Selection Criteria: QUOTED TARIFF • Torrent will buy as per GERC tariff order. • GoG (through GPCL) will fund the viability gap. • For example, • Green Incentive (instead of Lease Rent): min. Rs. 3 / kWh 5 MW Gandhinagar Photovoltaic Rooftop Programme - Update; 26 Mar. 2012.

34. Financial Transaction Model Torrent Power Ltd. (Off-taker) • Private Rooftops: 1 MW • Govt. Rooftops: 4 MW • R&B • Education • Legal • Forest & Environment • Industries & Mines • Agriculture • Health & Family Welfare • Vigilance • Collectorate • Revenue • (Can be replaced by Commercial Rooftops/ Terraces) P P A Power Purchase Agreement based on GERC solar tariff Rs. 15 (& 5) for 12 (& next 13) years ‘Green Incentive’ Agreement 2 x Project Developer (Capacity: 2.5 MW ea.) Generation-based, minimum Rs. 3 per kWh P I A Project Implementation Agreement for ‘Viability’ tariff funding GPCL (Implementing Agency) 5 MW Gandhinagar Photovoltaic Rooftop Programme - Update; 26 Mar. 2012.

35. Viability Funding: Sensitivity Analysis • The amount of Feed-In Tariff quoted by the Bidder beyond the GERC tariff shall be borne by GoG. • The minimum specified Green Incentive will have a direct impact on the required Govt. funds. 5 MW Gandhinagar Photovoltaic Rooftop Programme - Update; 26 Mar. 2012.

36. Green Incentive: Aid to Roof-owners • ‘Green Incentive’ is the minimum generation-based incentive for participating Roof-owners specified by GoG. • Advantages: • Encourage awareness and participation among roof-owners. • Will be correlated to home-owner’s electricity bill. • Should not be compared to ‘constant’ (or ‘dead’) lease rental. 5 MW Gandhinagar Photovoltaic Rooftop Programme - Update; 26 Mar. 2012.

37. Activities & Milestones Achieved (1) 5 MW Gandhinagar Photovoltaic Rooftop Programme - Update; 26 Mar. 2012.

38. Activities & Milestones Achieved (2) 5 MW Gandhinagar Photovoltaic Rooftop Programme - Update; 26 Mar. 2012.

39. Activities & Milestones Achieved (3) 5 MW Gandhinagar Photovoltaic Rooftop Programme - Update; 26 Mar. 2012.

40. Activities & Milestones Achieved (4) Further Activities 5 MW Gandhinagar Photovoltaic Rooftop Programme - Update; 26 Mar. 2012.

41. Status with Government Departments 5 MW Gandhinagar Photovoltaic Rooftop Programme - Update; 26 Mar. 2012.

42. Status of Social Initiative • Draft EOI content is prepared for inviting general public to offer their property’s roof top for this program. • Draft Application Form has been prepared. • Draft General Terms and Conditions for participation by general public for Programme has been prepared. • Web-based interactive Application program has been prepared. • Help desk space (Programme Office) in Gandhinagar is finalized. 5 MW Gandhinagar Photovoltaic Rooftop Programme - Update; 26 Mar. 2012.

43. Future Outlook • New Cities: • Mehsana : 5 MW • Rajkot : 5 MW • Surat : 5 MW • Vadodara : 5 MW • Incorporation of Rooftop Photovoltaics at Policy and Regulatory Level. • Explore different implementation models: • Feed-in or net metering? • Third party/ Developer driven or private ownership? 5 MW Gandhinagar Photovoltaic Rooftop Programme - Update; 26 Mar. 2012.

44. Training Workshop on DSM & RE Organized by VIKSAT 6th April, 2012, Ahmedabad, INDIA Overview of Regulatory Structure and Role of Consumer in Regulatory Process Dr. Omkar Jani Principal Research Scientist (Solar) Gujarat Energy Research and Management Institute (GERMI) omkar.j@germi.res.in