1/6/ Renewables Energy Sources - Regulatory perspective Presentation by Prashant Chaturvedi Secretary, MPERC

Factors of Growth-World wide ItemYear 1800Year 2000Factor (x times) World Population (Billion) 166 Life expectancy (Years) World income (Trillion $) Global Energy Use (Gtoe) Carbon Energy (GtC) /6/20162

3 3 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 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 ice Rising global mean sea level IPCC 4 th 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 Term Impacts Large-scale Migrations Geo-Political Chaos 5

1/6/ 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 to MW of installed capacity (Current installed capacity as on is 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 %

1/6/ Issues faced by India Possible temperature rise upto 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 % Due to global Recession our trade balance deficit has increased

Range of Commercial Energy requirement in India for FY and import requirement FuelRange of requirement Likely Domestic production Range of imports Import as % Oil (Mt) Natural Gas (Mtoe) Including Coal bed Metahne Coal (Mtoe) Total /6/20168

Trade balance of India in Rs Crore 1/6/20169

The current position of Trade balance and current account deficit Trade balance deficit (12 months)- $ 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 If the oil prices average $100 per barrel,the deficit may rise to 4.4 % of GDP in the coming year. 1/6/201610

1/6/ /6/ 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

1/6/ /6/ Indian Scenario -GDP vs. Electricity Financial Year GDP Growth, % Growth in electricity generation Peak Shortage, % Energy shortage, %

1/6/ /6/ 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? 1/6/201614

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 1/6/201615

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 1/6/201616

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 1/6/201617

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 1/6/201618

RENEWABLES 1/6/201619

Renewable Energy Potential and current scenario 1/6/ SourcePotential (MW)Installed (MW)Gap (MW) Wind Power Biomass Small Hydro Cogeneration Waste to Energy Solar power> Total (Other than Solar)

National Solar Mission- Proposed Road Map SegmentTarget ( ) Target ( ) Target ( ) Solar Collectors (million sq. meters) Off grid Solar applications, MW Utility grid power including rooftops, MW /6/201621

Demand growth in MP as per 17 th Power survey 06/01/2016 MPERC Presentation 22

Renewable Energy potential In MP SourcePotential (MW)Installed (MW)Gap (MW) Conventional Sources (other than Central Sector) RENEWABLES Wind power Small Hydro Bio mass- Agro1386 Bio mass- Forest & Wasteland /6/201623

Estimated additional units on tapping renewable sources in MP 1/6/201624

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 1/6/201625

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: 1/6/201626

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, 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. 1/6/201627

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 1/6/201628

Existing Tariff for Wind ( ) Rs (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 1/6/201629

Existing Tariff for Biomass( ) 1/6/201630

Existing Tariff for Bagasse based Cogeneration ( ) 1/6/201631

Existing Tariff for SHP Upto 5 MW under Govt. Policy of free power 1/6/201632

Existing Tariff for SHP under Govt. Policy of free power (>5-10 MW) 1/6/201633

Existing Tariff for SHP under Govt. Policy of free power (>10-25 MW) 1/6/201634

Solar Tariff 1/6/201635

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 1/6/201636

RPO for Distribution Licensees in MP 1/6/201637

1/6/ /6/ Thanks An M.P.E.R.C. Presentation Website: Tel Fax