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Renewables Energy Sources- Regulatory perspective

Presentation by Prashant ChaturvediSecretary, MPERC

Factors of Growth-World wideItem Year 1800 Year 2000 Factor

(x times)

World Population(Billion)

1 6 6

Life expectancy (Years)

35 75 2

World income (Trillion $)

0.5 36 72

Global Energy Use (Gtoe)

0.3 10 35

Carbon Energy(GtC)

0.3 6 22

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Issues faced by the World

Average temperature rose upto 0.74 degree Celsius between 1906 and 2005

Average rise in sea level on a per year basis between 1961and 2003 is 1.8 mm

Possible temperature rise upto 2100-4.5 degree Celsius

Melting of glaciers Species endangered Depleting fossil fuel reserves Rising oil prices

Observations of increases in global average air and ocean temperatures (accounting for human effects…GHG driven)

Widespread melting of snow and iceRising global mean sea level

IPCC 4th Assessment Conclusions

Climate Changes

•Temperature

•Precipitation

•Sea Level Rise

Health Impacts•Weather-related Mortality•Infectious Diseases•Air Quality- Respiratory Illnesses

Agriculture Impacts•Crop Yields•Irrigation Demands

Forest Impacts•Forest Composition•Geographic Range of forests•Forest health and productivity

Water Resources Impacts•Water supply and quality•Competition for water

Impacts on Coastal Areas•Erosion of beaches•Inundation of coastal lands•Additional cost to protect coastal communities

Species and Natural Areas•Loss of habitat and species

Direct Impacts

Longer TermImpacts

Large-scale Migrations

Geo-PoliticalChaos

5

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Why India needs Energy Security?

India- a Trillion (US) Dollar economy As per projections made

GDP of India is likely to increase four fold to US Dollar 4 Trillion by 2030

GDP of India may cross that of US in 2024 on PPP basis if Indian economy grows at 10 % p.a. and US economy at 3 %

In terms of Energy requirement for this growth, India is likely to need between 760000 to 790000 MW of installed capacity (Current installed capacity as on 30.11.2010 is 167077.36 MW)

To sustain the projected growth the report suggests taking initiative to increase energy efficiency to lower energy consumption by 22 % and reduce carbon emissions by 45 %

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Issues faced by India

Possible temperature rise upto 2080-4.3 degree Celsius

Effect of climate change on food security/ drinking water availability

Heavy dependence on oil import to meet energy requirements Currently 75 % of crude oil requirement is met through

imports It is estimated that this may go upto 90-93 %

Due to global Recession our trade balance deficit has increased

Range of Commercial Energy requirement in India for FY 31-32 and import requirementFuel Range of

requirementLikely Domestic production

Range of imports

Import as %

Oil (Mt) 350-486 35 315-451 90-93

Natural Gas (Mtoe)Including Coal bed Metahne

100-197 100 0-97 0-49

Coal (Mtoe) 632-1022 560 72-462 11-45

Total 387-1010 29-59

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Trade balance of India in Rs Crore

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The current position of Trade balance and current account deficit Trade balance deficit (12 months)- $ 123.3 bn Current A/c deficit (12 months) - $ 53.1 bn With crude prices hovering around $ 90 per

barrel the current account deficit is likely to be more than 3 % of GDP in 2010-11.

If the oil prices average $100 per barrel ,the deficit may rise to 4.4 % of GDP in the coming year.

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Energy crisis may cripple the economy? Energy crisis may lead to severe economic

crisis Kirit Parikh stated that it was not wrong to

say that exchange crisis of India in 1991 was in fact the energy crisis

Situation may again be alarming, if the export declines due to possible double dip recession and India is not only importing oil but coal as well

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Indian Scenario -GDP vs. ElectricityFinancial

Year

GDP

Growth, %

Growth in electricity generation

Peak

Shortage, %

Energy shortage, %

2004-05 7.5 5.2 11.7 7.3

2005-06 9.5 5.1 12.3 8.4

2006-07 9.7 7.3 13.8 9.6

2007-08 9.0 6.3 16.6 9.9

2008-09 6.7 2.7 12.0 11.0

2009-10 7.4 6.6 13.3 10.1

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Can we address the following issues by roping in renewables? GDP growth must be sustained and lack of

energy availability should not pull it down. Exchange crisis should not recur due to

bulging Oil and coal import bills Climate change is a concern and countries

with low per capita income are more vulnerable to the effects of climate change

The answer seems to be yes.

Why have an Electricity Regulator?

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Infrastructure Regulation

Electricity is Infrastructure There are elements of natural monopoly There is lack of market and competition in

natural monopoly Free market is considered efficient In the absence of market, Regulator has to

mimic market

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What is perfectly competitive market? Many buyers – Many consumers with the willingness

and ability to buy the product at a certain price, Many Sellers – with the willingness and ability to supply

the product at a certain price Due to competition no seller can abuse his position and control

prices Firms aim to sell where marginal costs meet marginal revenue

Homogeneous Products – The products of the different firms are similar

Low-Entry/Exit Barriers – It is relatively easy to enter or exit as a business

Perfect Information - For both consumers and producers

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What does market do?

Balances the Demand and Supply Gives proper price signals to the buyers and

sellers Allows sellers to recover its marginal costs Reduces information asymmetry for the

consumers Benefits consumer as the seller cannot

charge exorbitant prices

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What is Regulator supposed to do? Introduce competition, where possible Mimic competition elsewhere

Reduce entry/ exit barriers Increase the number of sellers i.e. generators Allow open access

Take measures such that supply and demand is matched or almost matched

Give proper price signals to sellers and consumers

Reduce information asymmetry

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RENEWABLES

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Renewable Energy Potential and current scenario

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Source Potential (MW) Installed (MW) Gap (MW)Wind Power 45195 11807 33388

Biomass 16881 1097 15784

Small Hydro 15000 2735 12265

Cogeneration 5000 1456 3544

Waste to Energy 2700 111 2589

Solar power >100000 14 -

Total (Other than Solar)

84776 17220 67570

National Solar Mission- Proposed Road MapSegment Target

(2010-13)Target(2013-17)

Target(2017-22)

Solar Collectors(million sq. meters)

7 15 20

Off grid Solar applications, MW

200 1000 2000

Utility grid power including rooftops, MW

1000-2000 4000-10000 20000

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Demand growth in MP as per 17th Power survey

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Renewable Energy potential In MPSource Potential (MW) Installed (MW) Gap (MW)

Conventional Sources

- 8457(other than

Central Sector)

RENEWABLES

Wind power 1019 213 806

Small Hydro 400 71 329

Bio mass- Agro 1386

Bio mass- Forest & Wasteland

2060

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Estimated additional units on tapping renewable sources in MP

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The need of renewable Power in India To mitigate carbon emission To augment supply To have optimum utilization of all available

resources To reduce India’s dependence on import to

meet energy requirement

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Legal framework to promote Renewables Section 86(1) (e) of the Electricity Act 2003 mandates

the SERC to promote co-generation and generation of electricity from renewable sources of energy by providing suitable measures

Section 61 provides that the Commission shall specify the terms and conditions for the determination of tariff, and in doing so, be guided by the principles listed in

Clauses (a) to (i) of that Section. 61(a) ….. (g) 61(h) the promotion of co-generation and generation of electricity

from renewable sources of energy; 61(i) the National Electricity Policy and Tariff policy:

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Legal framework (contd.) Tariff Policy Clause 6.4

(1) Pursuant to provisions of section 86(1)(e) of the Act, the Appropriate Commission shall fix a minimum percentage for purchase of energy from such sources taking into account availability of such resources in the region and its impact on retail tariffs. Such percentage for purchase of energy should be made applicable for the tariffs to be determined by the SERCs latest by April 1, 2006.

It will take some time before non-conventional technologies can compete with conventional sources in terms of cost of electricity. Therefore, procurement by distribution companies shall be done at preferential tariffs determined by the Appropriate Commission.

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MPERC provided for Preferential Tariffs for Wind, Bio-mass,

Bagasse, Small Hydro Generation and Solar Generation

Renewable Power Purchase obligation for Distribution Licensees and RE Certificate mechanism Regulations

Conducted public hearing for revision of Bio-mass and Bio-gas Tariff

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Existing Tariff for Wind (14.5.2010) Rs. 4.35 (Levellized) for 25 years Wheeling charges 2 % CDM benefits sharing by the Developer

(100 % in the first year and 50 % minimum) Incentive/ penalty on prompt/ delayed

payment by Discom Incentive on payment through LoC Default provision for third party sale

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Existing Tariff for Biomass(7.8.2007)

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Existing Tariff for Bagasse based Cogeneration (3.9.2008)

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Existing Tariff for SHP Upto 5 MW under Govt. Policy of free power

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Existing Tariff for SHP under Govt. Policy of free power (>5-10 MW)

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Existing Tariff for SHP under Govt. Policy of free power (>10-25 MW)

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Solar Tariff

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Renewable Energy Certificate (REC) Mechanism CERC Regulations have enabled REC Under this mechanism

RE shall have 2 components Sale of electricity at a price not exceeding pooled cost of

power purchase of Discom for last year or through mutually agreed price to any other licensee/ open access customer or at the market price at the power exchange

Sale of Tradable Certificates (Solar and Non Solar) in denomination of 1 MWh each to Distribution Licensees, who have failed to fulfill renewable power purchase obligation fixed by SERC

Floor and Forbearance price to be determined by CERC

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RPO for Distribution Licensees in MP

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Thanks

An M.P.E.R.C.Presentation

Website: www.mperc.org

E-mail: secmperc@sancharnet.in

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