ABPS Infrastructure Advisory. Legal and Policy Framework for promotion of RE.

ABPS Infrastructure Advisory

Legal and Policy Framework for

promotion of RE

Legal Framework

Federal Structure

Electricity is a concurrent subject.

Central legislation:

Electricity Act, 2003

Basic policy and regulatory framework

Regulatory Framework

Central level

Central Electricity Regulatory Commission (CERC) (inter-State issues)

Province level

State Electricity Regulatory Commission (SERCs) (intra-State issues)

Forum of Regulators - for harmonization

3

The Electricity Act, 2003 Enabling provisions

Section 86(1)(e): Specify Renewable Purchase Obligation

(RPO) from renewable energy sources

Section 61(h): Tariff regulations to be guided by promotion of

renewable energy sources

Section 3: National Electricity Policy, Tariff Policy and Plan

Section 4: National Policy permitting stand alone systems

including renewable sources of energy for rural areas

4

The Electricity Act, 2003: Sec. 86(1) (e)

The State Commission shall discharge the following

functions, namely:

“promote cogeneration and generation of electricity from

renewable sources of energy by providing suitable

measures for connectivity with the grid and sale of

electricity to any person, and also specify, for

purchase of electricity from such sources, a

percentage of the total consumption of electricity in

the area of a distribution licensee;”

5

The Electricity Act, 2003: Sec. 61(h)

The Appropriate Commission shall, subject to the

provisions of this Act, specify the terms and

conditions for the determination of tariff, and in

doing so, shall be guided by the following, namely:-

(h) the promotion of co-generation and generation of

electricity from renewable sources of energy;

6

Tariff Policy: (6th January 2006)

Appropriate Commission shall fix RPO and SERCs shall fix tariff

Initially Appropriate Commission to fix preferential tariffs

In future Discoms to procure RE through competitive bidding

within suppliers offering same type of RE

In long-term, RE technologies need to compete with all other

sources in terms of full costs

CERC to provide guidelines for pricing non-firm power if RE

procurement is not through competitive bidding

7

National Electricity Policy: (12th February, 05)

Urgent need of promotion of renewable sources of energy

Efforts need to be made to reduce the capital cost

Cost of energy can be reduced by promoting competition

Adequate promotional measures would have to be taken for

development of technologies and its sustained growth

SERCs to provide suitable measures for connectivity with grid

and fix percentage of purchase from Renewable sources

Progressively the such share of electricity need to be increased

8

National Action Plan on Climate Change (NAPCC), 2008

National level target for RE Purchase

5% of total grid purchase in 2010, to be increased by 1% each year

for 10 years: 15% by 2020

SERCs may set higher target

Appropriate authorities may issue certificates that procure RE

in excess of the national standard

Such certificates may be tradable, to enable utilities falling short to

meet their RPO

RE generation capacity needed: From 25000 to 45000 MW by FY2015

National Solar Mission, 2009

10

Target (grid connected)

20 GW by 2022: Phase I (upto 2013) – 1 GW, Phase II (2013-17) – 4 GW, Phase III

(2017-22) – 20 GW

Solar Purchase Obligation:

0.25% in the Phase I and to go up to 3% by 2022

Bundling of solar power with un-allocated quota of central

stations by NVVNL for resale to utilities

Bid invited for discount from CERC determined tariff

Regulatory Intervention

• Renewable Purchase Obligation (RPO)

• Preferential Tariff

• Facilitative Framework for Grid Connectivity

• Market Development (Tradable Renewable Energy Certificates)

11

12

Renewable Energy Tariff Design


GENERAL PRINCIPLESGENERAL PRINCIPLES

General Principles

Tariff Period

Tariff Design

Tariff Period

Control Period

Project Specific Tariff

Wind, Biomass, Bagasse based cogeneration projects:13 years Regulatory support during the 13 year tariff period will provide

certainty to the project developer to meet its debt service

obligations After this period, the competitive procurement of RE will

ensure that power is procured at most reasonable rate, and

benefit passed on the consumer

Small hydro projects below 5 MW: 35 years Solar PV and Solar thermal power projects: 25 years Biomass Gasifier and Biogas based power projects: 20 years

Longer duration of tariff support in view of smaller

size/nascent technologies

RE Tariff Regulations-2012 Regulation modified to substitute the expression “shall be thirteen

(13) years” by the expression “shall be for a minimum period of

thirteen (13) years”

General Principles

Control Period

Tariff Design

Tariff Period

Control Period


Short duration Control Period would lead to frequent revision of

tariff however, regulatory concern could be easily addressed due

to close regulatory monitoring Long duration Control Period would offer long term certainty of

regulatory principles, it might lead to situation when the underlying

tariff parameters would hold valid through the long duration of the

Control Period Benchmark capital cost for Solar PV and Solar Thermal projects

may be reviewed annually by the Commission

RE Tariff Regulations-2012 : Five (5) years Maturity level of the non solar technologies Coterminous with the five year plan and control period of REC

framework till FY 2016-17 Benchmark capital cost for Solar PV and Solar Thermal projects

may be reviewed annually by the Commission Biomass price will be reviewed at the end of the third year of the

Control period in order to take care of any price volatility

General Principles

Tariff Design

Tariff Design

Tariff period

Control Period


Generic tariff on levellised basis for the Tariff Period RE technologies having single part tariff with two components, tariff

shall be determined on levellised basis for fixed cost component

while the fuel cost component shall be specified on year of operation

basis For the purpose of levellised tariff computation, the discount factor

equivalent to weighted average cost of capital Levellisation to be carried out for the ‘useful life’

RE Tariff Regulations-2012 For the purpose of levellised tariff computation, the discount factor

equivalent to post tax weighted average cost of capital

• CERC followed the post tax method for determination of the

discounting rate for bid evaluation

• while taking the investment decisions developer considers post

tax WACC as the discount rate to post tax incremental cash flows

to arrive at NPV of the project.

General Principles


Tariff Design

Tariff period

Control Period


Municipal Solid Waste Projects Any other new RE technologies approved by MNRE Solar PV and Solar Thermal Power projects, if a project developer

opts for project specific tariff: Hybrid Solar Thermal Power plants Biomass project other than that based on Rankine Cycle

technology application with water cooled condenser Provided that the financial norms specified under these Regulations,

except for capital cost, shall be ceiling norms while determining the

project specific tariff

RE Tariff Regulations-2012 Other hybrid projects include renewable – renewable or renewable –

conventional sources, for which renewable technology is approved by

MNRE


FINANCIAL PRINCIPLESFINANCIAL PRINCIPLES

Financial Principles

Reg. 13: Debt Equity Ratio

Interest Rate

Return on Equity

Depreciation

RE Tariff Regulations-2012 Debt to equity ratio of 70:30 has been specified Further, for RE projects where equity employed is more than 30% (in

case of project specific tariff determination), the amount of equity for the

purpose for determining the tariff shall be limited to 30% only whereas in

case the equity employed is less than 30%, the actual equity employed

shall be considered.

The Tariff Policy notified by the Government of India, stipulates

consideration of debt equity ratio of 70:30 for financing all future projects. CERC Tariff Regulations, 2009 also provide for normative debt-equity

ratio of 70:30 for Generating Company/licensee. Regulatory Commissions across different States for RE projects have

been following the same principle laid down in the TP.

Loan Tenure

Debt Equity Ratio

Interest rate on WC

O &M Escalation

Sharing of CDM

Subsidy or Incentive

Taxes & Duties


Loan Tenure

Interest Rate

Return on Equity

Depreciation

RE Tariff Regulations-2009

• loan tenure of 10 years

Draft RE Tariff Regulations-2012

• Proposed loan tenure of 12 years

Comments received

• Majority of Stakeholders have suggested considering 10 years as loan

tenure for Renewable Energy projects.

• IREDA does not offer a term loan repayment period of 12 years

• Even if tenure beyond 10 years is offered then it comes with additional

interest rate

• Solar PV is still considered a nascent technology in Indian context, loan

repayment tenure of 10 years should be considered with proportionate

increase in depreciation so as to ensure loan repayment as per

envisaged repayment period.

RE Tariff Regulations-2012 loan tenure of 12 years

Loan Tenure

Debt Equity Ratio

Interest rate on WC

O &M Escalation

Sharing of CDM


Taxes & Duties


Reg. 14: Interest Rate

Interest Rate

Return on Equity

Depreciation

Loan Tenure

Debt Equity Ratio

Interest rate on WC

O &M Escalation

Sharing of CDM


Taxes & Duties


• 150 basis points above average SBI – LTPLR , as on 1st April of the

relevant year of the Control Period

• W.e.f. 1.07.2010, SBI replaced BPLR regime by regime of Base Rate

• IREDA/PFC classify borrowers/investors into four grades and depending

on the grade charge interest rate from 11 to 13.50% depending upon the

renewable energy technology.

• Matured technologies are being financed at lower interest rate

• RE Tariff Regulation-2012: Normative interest rate of 300 basis points

above Average SBI Base Rate prevalent during the first six months of

previous year of the relevant year of the Control Period

Grade I Grade II Grade III Grade IV

Schedule-A, AAA. Rated PSU

11.00

State Sector 11.00 11.25 11.50 11.75

Wind, Cogen, Hydro 11.75 12.00 12.25 12.5

Solar PV 12.25 12.50 12.75 13.00

Solar Thermal 12.50 12.75 13.00 13.25

Other Sectors 13.50


Reg. 13: Depreciation

Interest Rate

Return on Equity

Depreciation

RE Tariff Regulations-2009 : The depreciation rate for the first 10 years

of the Tariff Period shall be 7% per annum and the remaining

depreciation shall be spread over the remaining useful life of the project

from 11th year onwards.

Draft RE Tariff Regulations-2012 : The depreciation rate for the first 12

years of the Tariff Period shall be 5.83% per annum and the remaining

depreciation shall be spread over the remaining useful life of the project

from 13th year onwards.

Comments received

• Many stakeholders have suggested that that there is no such change in

scenario that the Depreciation rate must be decreased and have

demanded that the earlier clause of depreciation may be retained.

RE Tariff Regulations-2012 : Retained as per the draft regulations

Loan Tenure

Debt Equity Ratio

Interest rate on WC

O &M Escalation

Sharing of CDM


Taxes & Duties


Return on Equity

Interest Rate

Return on Equity

Depreciation

RE Tariff Regulations-2009 :Normative Return on Equity:

• pre-tax 19% per annum for the first 10 years :Considered 10 years tax

holiday benefit available under the Section 80-IA of Income Tax Act, 1961

and the Minimum Alternate Tax (MAT) would be applicable on book profit

of such undertaking

• pre-tax 24% per annum 11th years onwards

Comments received

• Return on Equity shall be adjusted for any variation in MAT/Corporate tax.

• Tariff should be tabulated on a post-tax basis by fixing the ROE and

assuming the present rate of Income tax; and permit tax to be a pass

through item.

• Suitable ROE may be provided so that investor get Post tax return of 20%

• Normative ROE should be revised to reflect the higher monetary rates

prevailing in the markets

. RE Tariff Regulations-2012:

Normative ROE of pre-tax 20% (=16%/(1- 20%)) per annum for the first 10

years and pre-tax 24% (=16%/(1- 32.445%)) per annum 11th years

onwards considering 20% MAT rate and 32.445% Corporate Tax rate

Loan Tenure

Debt Equity Ratio

Interest rate on WC

O &M Escalation

Sharing of CDM


Taxes & Duties


Working Capital

Interest Rate

Return on Equity

Depreciation

• RE Tariff Regulations-2009:

(a) Wind Energy / Small Hydro Power

(i) Operation & Maintenance expense for one month,

(ii) Receivables equivalent to 2 months of energy charges for sale of

electricity calculated on the normative CUF.

(iii) Maintenance spare @ 15% of operation and maintenance expenses.

(b) Biomass Power and Non-fossil fuel Co-generation

(i) Fuel costs for four months equivalent to normative PLF

(ii) Operation & Maintenance expense for one month,

(iii) Receivables equivalent to 2 months of fixed and variable charges for

sale of electricity calculated on the target PLF.

(iv) Maintenance spare @ 15% of operation and maintenance expenses

Comments received

• Receivables: 3 months instead of 2 months, Fuel cost : 6 months instead

of 4 months, O&M cost: 6 months instead of 1 month

• Maintenance Spares: 20% of O & M cost instead of 15%


• Retained as per 2009 Regulations

Loan Tenure

Debt Equity Ratio

Interest rate on WC

O &M Escalation

Sharing of CDM


Taxes & Duties


Interest on Working Capital

Interest Rate

Return on Equity

Depreciation

RE Tariff Regulations-2009 :100 basis points above average SBI–

LTPLR prevalent during the previous year of the relevant year of the

Control Period

Draft RE Tariff Regulations-2012: Average State Bank of India Base

Rate of the previous year plus 350 basis points

Comments received

• Interest Rate: SBI BR + 550-600 basis points, 2% more nterest on loan


• Normative interest rate for working capital of 350 basis points above

average SBI Base rate prevalent during the first six months previous

year of the relevant year of the Control Period

Loan Tenure

Debt Equity Ratio

Interest rate on WC

O &M Escalation

Sharing of CDM


Taxes & Duties


O & M Escalation:

Interest Rate

Return on Equity

Depreciation

RE Tariff Regulation-2012 : Escalation rate of 5.72%

Current trend in WPI and CPI

Loan Tenure

Debt Equity Ratio

Interest rate on WC

O &M Escalation

Sharing of CDM


Taxes & Duties

Sr. No. YearWPI for all Comodities

CPI for Industrial Workers

60% of WPI

40% of CPI

Comosite Series

1 1999 76.79 92 46.07 36.8 82.874

2 2000 81.59 95 48.95 38 86.954

3 2001 85.8 99 51.48 39.6 91.08

4 2002 87.92 103 52.75 41.2 93.952

5 2003 92.6 107 55.56 42.8 98.36

6 2004 98.72 111 59.23 44.4 103.632

7 2005 103.37 116 62.02 46.4 108.422

8 2006 109.59 123 65.75 49.2 114.954

9 2007 114.94 131 68.96 52.4 121.364

10 2008 124.92 142 74.95 56.8 131.752

11 2009 127.86 157 76.72 62.8 139.516

12 2010 140.08 176 84.05 70.4 154.448

13 2011 152.93 189 91.76 75.6 167.358

13 years CAGR 6.03%

10 Years CAGR 6.63%

8 Years CAGR 7.09%

5 years CAGR 8.37%


Sharing of CDM

Interest Rate

Return on Equity

Depreciation

Draft RE Tariff Regulations-2012: As per 2009 Regulations

Comments received

• Most of the stakeholders suggested that 100% gross proceeds of CDM

benefits are allowed to be retained by the project developer

• Sharing of CDM benefit, if any, shoulld be applicable only after the sale

proceeds from CERs are received by Project Developer


• As regards sharing of CDM benefits, Commission considered the

stipulations made under the tariff policy, recommendations by Forum of

Regulators (FOR) under its Report on Policies for Renewable Energy

and the similar provision in the tariff regulations for conventional power.

• Clarifed in the Statement of Reasons that the sharing of CDM benefit, if

any, shall be applicable only after the sale proceeds from CERs are

received by Project Developer and not from date of commissioning.

Loan Tenure

Debt Equity Ratio

Interest rate on WC

O &M Escalation

Sharing of CDM


Taxes & Duties


Subsidy and Incentives by the Central / State Government

Interest Rate

Return on Equity

Depreciation


Comments received

• MNRE capital subsidy should not be included

• capital subsidies available for bagasse cogeneration and Small Hydro

power project should also to be factored in Capital cost.

• Generation Based Incentive (GBI) being provided by the Government

should not be considered for arriving at the tariff

RE Tariff Regulation-2012

• Under cost plus regime, all reasonable costs and returns are being

allowed to be recovered through such preferential tariff, it is fair that any

subsidy, accelerated depreciation benefit or generation based incentive

(which is a substitute for accelerated depreciation benefits) be factored

in while determining tariff.

• Regarding capital subsidies available for bagasse cogeneration and

Small Hydro power projects if any, factored in the same in the final

Regulation.

Loan Tenure

Debt Equity Ratio

Interest rate on WC

O &M Escalation

Sharing of CDM


Taxes & Duties


Taxes and Duties

Interest Rate

Return on Equity

Depreciation


“Tariff determined under these regulations shall be exclusive of taxes and

duties as may be levied by the appropriate Government:

Provided that the taxes and duties levied by the appropriate Government

shall be allowed as pass through on actual incurred basis.”

Comments received

• Rajasthan Biomass Power Developers Association has submitted that it

is not clear whether this provision is applicable to capital cost of the

project. Excise duty, sales tax, works contract tax and other levies

charged by appropriate Government may be allowed at pass through on

the estimated capital cost also.

RE Tariff Regulations-2012 SOR clarified that this provision is not

applicable to excise duty, sales tax, works contract tax and other levies

charged by appropriate Government which form the part of the capital

cost of the project as normative Capital cost specified by the

Commission is inclusive of the same.

• Retained the provisions as specified under draft Regulations.

Loan Tenure

Debt Equity Ratio

Interest rate on WC

O &M Escalation

Sharing of CDM


Taxes & Duties

TECHNOLOGY SPECIFIC NORMS: WIND ENERGY

Wind

Wind - Capital Cost

Capital Cost

O & M Cost

CUF


Year Date of

Order/Regulation

Capital cost

` Lacs/MW

2009-10 17.09.2009 515.00

2010-11 26.02.2010 467.13

2011-12 09.11.2010 492.52

Wind

Wind - Capital Cost

Capital Cost

O & M Cost

CUF

International Trend: Installed Project Cost - USA

U.S. Department of Energy’s report on “2010 Wind Technologies Market Report”: June - 2011 prepared by the Lawrence Berkeley National Laboratory (LBNL)

•1 GW of capacity that either have been or will be built in 2011 suggests

that average installed costs may decline in 2011

Wind

Wind - Capital Cost

Capital Cost

O & M Cost

CUF

International Trend: Turbine Cost - USA

U.S. Department of Energy’s report on “2010 Wind Technologies Market Report”: June - 2011 prepared by the Lawrence Berkeley National Laboratory (LBNL)

•In US total Project costs which were bottomed out in 2001-04; rose by

$850/kW on average through 2009; held steady in 2010 at around

$2,160/kW and appear to be dropping in 2011 at around $2000/kW

Wind

Wind - Capital Cost

Capital Cost

O & M Cost

CUF

Capital Cost considered by other SERCs

Name of the Commission Date of Order/Regulation Capital cost

` Lacs/MW

CERC (2009-10) 17.09.2009 515.00

KERC 11.12.2009 470.00 (inc. evacuation cost)

CERC (2010-11) 26.02.2010 467.13

MPERC 14.05.2010 500.00 (inc. evacuation cost)

OERC

(FY 10-11 to FY12-13)

14.09.2010 467.13 (As per CERC, w/o

escalation)

CERC (2011-12) 09.11.2010 492.52

MERC (2010-11) 29.04.2011 489.53 (As per CERC, with

escalation)

Wind

Wind - Capital Cost

Capital Cost

O & M Cost

CUF

Capital Cost: Actual Project cost approach

IREDA

• IREDA has financed 14 projects of total 790 MW during FY 2010-

11 and FY 2011-12

• Capital cost per MW ranges from `5.53 to `6.45

• Weighted average cost : ` 5.90 Cr./ MW

PFC

• PFC financed 3 projects of total capacity of 124.2 MW in 07-08

• Capital cost / MW ranges from `5.45 Cr./ MW to ` 7.10 per MW

• Weighted average cost : ` 6.15 Cr./ MW

• Since such capital cost data are prior to the CERC RE Tariff

Regulation-2009, the same has not been considered for the

determination of capital cost benchmark norm

UNFCCC

• Capital cost data of 19 projects of total 221 MW registered with

UNFCCC commissioned during FY 2009-11 analyzed

• Capital cost/MW ranges from `4.43 to `6.62 Cr./ MW

• Weighted average cost : `5.32 Cr./ MW

Wind

Wind - Capital Cost

Capital Cost

O & M Cost

CUF

Capital Cost: Market based approach

• Various private and public entities have set up wind farms

by inviting the tenders from various wind project developers

• Total 34.20 MW capacity awarded through tender process

during the FY2010-11 of total 5 wind projects

• Capital cost/ MW ranges from `5.82 Cr. to `6.18 Cr.

• Weighted average cost works out to `6.00 Cr./ MW

Wind

Wind - Capital Cost

Capital Cost

O & M Cost

CUF

Capital Cost:

• The average project cost in the industry stands higher at

around ` 5.23 to 6 Cr./MW depending upon the size,

capacity, sites as against the CERC’s normative ` 4.92

Cr./MW for 2011-12

Source No. of

Projects

MW

IREDA (FY 10-11) 10 570 `5.90 Cr./ MW

IREDA (FY 11-12) 4 220 `5.90 Cr./ MW

UNFCCC (FY 09-10) 14 137 `5.23 Cr./ MW

UNFCCC (FY 10-11) 5 84 `5.47 Cr./ MW

Tender (FY 10-11) 5 34 `6.00 Cr./ MW

Total 38 1045

Wind

Wind - Capital Cost

Capital Cost

O & M Cost

CUF

2.1 MW-S88

Component Breakup % cost Net Cost

SUPPLY OF WTG WITHOUT TT 58% 33265546

SUPPLY OF BLADE 9% 5284916

SUPPLY OF TT 12% 6761086

SUPPLY OF TRANSFORMER 1% 751232

ERECTION 2% 974985

COMMISSIONING 0% 108272

MEDA CHARGES 1% 315517

MEDA Application Fees 0% 5259

ZP Road charges 0% 210345

CIVIL WORKS 5% 2925897

ELEC LINE & SUPPLY 4% 2299406

LAND 3% 1442365

EVACUATION 5% 3155174

100% 57,500,000

Wind

Wind - Capital Cost

Capital Cost

O & M Cost

CUF

Major reason for the increase of the costs• Primarily due to increased cost of the balance of systems

• There has been a tremendous increase in the market value of the land, and the creation of infrastructure (viz. civil, electrical, crane charges, logistics etc.)

• As per the latest estimates the cost/MW (excluding the wind turbine) ranges from ` 1.10-1.35 Cr. per MW, against approximately ` 65-70 lakhs/MW two years ago.

Sr. No Particulars in lac `1 Land 15

CIVIL 2 Foundation 223 Internal Road 34 Area development 4 Total: 1to 4 29

5 DP Yard 8

6Internal lines & Poles (33 kV lines @ Rs 14 lacs per km) 14

Total: 5 to 6 22

7 Erection & Commissioning (assuming deployment of 500 T cranes) 22

8

EHV + Pooling station (assuming a 33 kV/132 kV : 100 MVA) Pooling station ((20 Cr - consisting of 2 x 50 MVA : 33 kV/132 kV, including bay + land) 20

9 Miscellaneous 1 Total : 8 to 9 21

10 Logistics 15Grant Total 114

Wind

Wind - Capital Cost: PSU/State Govt. companies

investment through Tenders for FY 2010-11

• PSU

Capital Cost

O & M Cost

CUF

Name of PSU/State

Government

Qty * MW Capacity

MW

Site/State Cost/MW (Rs. In

Crore including

Service Tax)

Hutti Gold Mines Ltd.

(HGML)

1 * 2.10 2.10 Chitradurga/Karnataka 5.85

Hindustan Petroleum

Corporation Limited

(HPCL)

17 * 1.50 25.50 Akal / Rajasthan 6.06

Surat Municipal

Corporation (SMC)

2 * 1.50 3.00 Adodar / Gujarat 6.15

Gujarat Energy

Development Agency

(GEDA)

1 * 1.50 1.50 Jamanwada / Gujarat 6.18

Gujarat Energy

Development Agency

(GEDA)

1 * 2.10 2.10 Jamanwada / Gujarat 5.82

Total 34.20 6.00

Wind

Wind - Capital Cost: IREDA - FY 2011-12

Capital Cost

O & M Cost

CUF

PROJECTS SANCTIONED DURING 2011-12Sr

No.Applicant Name Sector Descri

ptionState Capacity

(MW)Project Cost (Rs. Lakhs)

Cost/MW (Rs. Lakhs)

WTE

1 BHILWARA GREEN ENERGY LIMITED

Wind Maharashtra 51.00 32878.00 644.67 Regen

2 SURAJBARI WINDFARM DEVELOPMENT PRIVATE LTD

Wind Gujarat 18.00 13103.00 727.94 Vestas

3 VISH WIND INFRASTRUCTURE LLP.

Wind Gujarat 50.40 28320.00 561.90 Enercon

4 CAPARO ENERGY (INDIA) LTD.

Wind Rajasthan, Maharashtra,

Gujarat

100.80 55700.00 552.58 Suzlon

Wind

Wind - Capital Cost

Capital Cost

O & M Cost

CUF

• The comparison of capital cost variation in actual project

cost approach and market cost approach with the pooled regulated capital cost approach clearly indicates that the pooled regulated capital cost norm derived under regulatory approach is lower than the average capital cost norm derived under actual project database approach

RE Tariff Regulation -2012: Pooled cost of market based and actual cost approach as the normative capital cost for first year of the next Control Period which works out to ` 5.75 Cr./MW

Source No. of Projects MW

IREDA (FY 10-11) 10 570 `5.90 Cr./ MW

IREDA (FY 11-12) 4 220 `5.90 Cr./ MW

UNFCCC (FY 09-10) 14 137 `5.23 Cr./ MW

UNFCCC (FY 10-11) 5 84 `5.47 Cr./ MW

Tender (FY 10-11) 5 34 `6.00 Cr./ MW

Total 38 1045

Wind

Reg. 26: Wind: Capacity Utilisation Factor (CUF)

Capital Cost

O & M Cost

CUF

RE Tariff Regulations-2009 : CUF

• Wind Atlas as and when prepared by C-WET would be basis of

categorization of wind sties

• C-WET

• Published Indian Wind Atlas in February 2010

• Suggested that it is not advisable to use Atlas for tariff fixation and

the same is also mentioned in the preface of atlas

• Suggested that the theoretical energy in the WPD cannot really

represent the power getting out from today’s model of wind turbine

as actual performance is depends on the power curve and efficiency

of machine

• MNRE Circular dated 1.08.2011: No restriction will exist for WPD criteria

as far the development of wind power project is concerned

Annual Mean Wind Power Density

(W/m2) at 50 mtr hub heightCUF

200-250 20%

250-300 23%

300-400 27%

> 400 30%

Wind

Capital Cost

O & M Cost

CUF

• Electricity Markets and Policy Group, Energy Analysis Department:

Lawrence Berkeley National Laboratory

Historical Increase in Hub Height & Rotor Diameter: USA

Wind

Capital Cost

O & M Cost

CUF

Wind Energy Installation for year FY 2010-11

Developer State MAH KAR TN RAJ MP GUJ AP Total % Hub HeightSuzlon 107.2 93.95 191.55 333.5 42.6 183.1 951.9 40.48 65 75 78 80Enercon 31.2 116 112 103.2 78.4 63.2 504 21.43 50 56 57 65Vestas 39.6 115.5 20.4 175.5 7.46 70 78 80

Maruti Windfarm 21.15 21.15 0.90RS Windfarm 41.25 41.25 1.75TS Windfarm 25 25 1.06Sriram EPC 1 25 2.5 28.5 1.21 41Vestas RRB 99 99 4.21 65Gamesa 213.35 14.45 227.8 9.69Regen 4.5 96 7.5 108 4.59 75 85SWPL 6 0.45 6.45 0.27 45GWL 31.93 3 34.93 1.49Pioneer Wind 2.25 28 2 32.25 1.37 50WinWind 29 29 1.23 70Cwel 14.03 14.03 0.60INOX 2 2 0.09 80Kenersys 10 2 12 0.51 80Shiva Wind 1.5 1.5 0.06 50TTG 0.25 0.25 0.01LeitWind 36.3 36.3 1.54 65IWPL 1 1 0.04

TOTAL 239.05 254.05 997.41 436.7 48.6 312.8 63.2 2351.81 100% 10.16 10.80 42.41 18.57 2.07 13.30 2.69 100.00 84.46

Wind

Capital Cost

O & M Cost

CUF

LBNL : Reassessing Wind Potential Estimates for India:

Source : LBNL

Wind

Wind: Capacity Utilisation Factor (CUF)

Capital Cost

O & M Cost

CUF


Annual Mean WPD (W/m2) at 50 mtr HH

CUF

Zone-1 200-250 20%

Zone-2 250-300 23%

Zone-3 300-400 27%

Zone-4 > 400 30%


WPD at 80 mtr

Zone-1 Upto 200 20%

Zone-2 200-250 22%

Zone-3 250-300 25%

Zone-4 300-400 29%

Zone-5 > 400 32%

Wind

Wind: Operation & Maintenance Cost

Capital Cost

O & M Cost

CUF


• Normative O&M expenses for the first year of the Control Period (i.e. FY

2009-10) : ` 6.5 Lakh per MW.

• Escalation Rate: 5.72% per annum over the tariff period to compute the

levellised tariff.

• FY 2010-11: ` 6.87 Lakh per MW, FY 2011-12: ` 7.26 Lakh per MW

Market data on actual project-level O&M costs are not readily available. O&M agreement being signed between the wind farm developers and

investors are in the range of ` 7 to 10 lakh/MW.Now Forecasting cost would be additional cost


• Commission considered 5.72% annual escalation over the normative

Operation and Maintenance Cost allowed for FY 11-12 along with

additional insurance cost was considered at 0.25% of capital cost as well

as forecasting cost: FY 2012-13 Rs. 9 Lakh/MW with 5.72% Esc.

Wind

Wind: RE Tariff

Capital Cost

O & M Cost

CUF

Annual Mean WPD (W/m2) at 50 mtr HH

CUF 2009-10 2010-11 2011-12

Zone-1 200-250 20% 5.63 5.07 5.33

Zone-2 250-300 23% 4.90 4.41 4.63

Zone-3 300-400 27% 4.70 3.75 3.95

Zone-4 > 400 30% 3.75 3.38 3.55

WPD at 80 mtr

2012-13

Zone-1 Upto 200 20% 5.96

Zone-2 200-250 22% 5.42

Zone-3 250-300 25% 4.77

Zone-4 300-400 29% 3.97

Zone-5 > 400 32% 3.73

TECHNOLOGY SPECIFIC NORMS:

SMALL HYDRO PROJECT

Small Hydro

Small Hydro - Capital Cost

Capital Cost

O & M Cost

Region Project SizeCapital Cost(FY 2009-10)(` Lakh/ MW)

Capital Cost(FY 2010-11)(` Lakh/ MW)


Himachal Pradesh, Uttarakhand and North

Eastern States

Below 5 MW5 MW to 25 MW

700630

634.94571.44

669.42602.48

Other StatesBelow 5 MW

5 MW to 25 MW550500

498.88453.53

525.97478.16


Small Hydro


Capital Cost

O & M Cost

Capital Cost considered by other SERCs

• MERC and UERC has followed CERC specified norm for capital cost

• MERC has followed indexation mechanism as per CREC

• UERC, OERC and KERC have not considered the year on year basis

variation in capital cost

• KERC has included evacuation/grid connectivity cost as part of Capital

Cost

KERC HPERC OERC MERC UERC

Project Cost (Cr/Mw)

4.75 6.5 6.7

FY 10-11: 4.98

for < 1 to 5MW and

4.53 for > 5 to 25 MW

indexation mechanism as per CERC For future years

Upto 5 MW: 7.0

5 MW to 10 MW: 6.85

10MW to 15 MW: 6.70

15 MW to 20 MW: 6.50

20 MW to 25 MW: 6.30

Projects Commissioned after

01.04.2009

Order Dec 2009 Feb 2010 May 2010 June 2010 July 2010

Small Hydro


Capital Cost

O & M Cost

Capital Cost : Actual Project Cost Approach

IREDA

PFC• PFC financed 10 projects of total cap. of 72.75 MW in 08-09.

• Capital cost per MW ranges from `7.89 Cr to `15.39 Cr

Source No of

Projects

Capacity, MW

IREDA 7 78.15 MW

PFC 12 83.45 MW

UNFCCC 1 15.00 MW

Total 20 176.60 MW

Region Project SizeNo. of

projects


No. of projects


Himachal Pradesh, Uttarakhand and North

Eastern States


12

796743

-

2

-

817


5 MW to 25 MW-1

-538

1-

518

Small Hydro


Capital Cost

O & M Cost

Capital Cost : Actual Project Cost Approach

PFC• PFC financed 2 small hydro projects in Kerala State of total

capacity of 10.7 MW in 2009-10.

UNFCCC• Capital cost data of 1 projects of total 15 MW commissioned in

Karnataka State registered with UNFCCC commissioned during

FY 2009-10 having per MW capital cost at ` 5.26 Cr./ MW

Region Project SizeNo. of

projectsMW


Other States: Kerala


11

3.2 MW7.5 MW

594458

Small Hydro


Capital Cost

O & M Cost

Capital Cost : Basis for Formulation of Capital Cost

Benchmark • weighted average capital costs under different categories under

actual cost approach in FY 2009-10 are compared with the CERC

considered cost in the same year as under

Region Project Size

Actual Capital Cost

(FY 2009-10)(` Lakh/ MW)

Actual Capital Cost

(FY 2010-11)(` Lakh/ MW)

Actual Capital Cost

(FY 2011-12)(` Lakh/ MW)


Himachal Pradesh, Uttarakhand and

North Eastern States


1

2

796

743

-

2

-

817

770

700


5 MW to 25 MW

1

2

594

503

-

1

-

538

1

-

518600

550

Small Hydro

Small Hydro: Operation & Maintenance Cost

Capital Cost

O & M Cost



• O&M cost for FY 11-12 escalated with 5.72% annual escalation

Region Project SizeFY09-10

O&M Expense(` Lakh/ MW)

FY11-12O&M Expense(` Lakh/ MW

FY121-13O&M Expense(` Lakh/ MW

Himachal Pradesh, Uttarakhand and North Eastern States

Below 5 MW 21 23.47 25

5 MW to 25 MW15 16.77 18

Other States

Below 5 MW 17 19.00 20

5 MW to 25 MW 12 13.41 14

Small Hydro

Small Hydro: Tariff 2012-13

Capital Cost

O & M Cost

09-10 10-11 11-12 12-13

HP, Uttarakhand and NE States (Below 5MW) ` /kWh

3.90 3.59 3.78 4.14

HP, Uttarakhand and NE States (5MW to 25 MW) ` /kWh

3.35 3.06 3.22 3.54

Other States (Below 5 MW) ` /kWh 4.62 4.26 4.49 4.88

Other States (5MW to 25 MW) ` /kWh 4.00 3.65 3.84 4.16


Biomass Based Power Projects with Rankine Cycle Technology

Biomass

Biomass Power Project: Capital Cost

Capital Cost

O & M Cost

Biomass Price


Year Date of

Order/Regulation

Capital cost

` Lacs/MW

2009-10 17.09.2009 450.00

2010-11 26.02.2010 402.54

2011-12 09.11.2010 426.30

Station Heat Rate

Gross Calorific value

Auxiliary Consumption

Biomass


Capital Cost

O & M Cost

Biomass Price

Capital Cost Approved by the SERCsSERCs Capital Cost

` Cr./MW

Indexation Mechanism

Order/ Regulation Remark

RERC 5.40 :

Water Cooled Condenser

5.85 :

Air Cooled Condenser

As per Formula Regulation 23/01/2009

GERC 4.25 Not provided Order No.5 of 2010:

17.05.2010

Took note of CERC determined CC for FY10-11, specified higher CC as common for water and Air cooled condenser

UERC 4.50 Not provided Regulation

Dated 06.07.2010

As per CERC

MERC 4.03

(2010-11)

As per CERC Regulation

07.06.2010

As per CERC

KERC 4.87

inclusive of transmission infrastructure costs

Not provided Order No.5 of 2010:

11.12.2009

Took note of CERC specified CC for 2009-10

JSERC 4.50 Not provided Regulation

Dated 27.01.2010

As per CERC

HERC 4.50 Not provided Order dated 27.5.2011

As per CERC

Station Heat Rate



Biomass


Capital Cost

O & M Cost

Biomass Price

Actual Project Cost Approach

FY2009-10 FY2010-11 FY2011-12

Source No of Projects

Capacity, MW

Capital Cost, Rs.

Cr/MW

No of Projects

Capacity, MW

Capital Cost, Rs.

Cr/MW

No of Project

s

Capacity, MW

Capital Cost, Rs.

Cr/MW

IREDA 2 19.90 4.79 1 9.90 5.00

UNFCCC 4 36.8 4.74 2 24.5 5.39

Total 4 36.8 4.74 4 44.4 5.12


Station Heat Rate


Biomass


Capital Cost

O & M Cost

Biomass Price

Actual Project Cost Approach: 12 MW Plant in RajasthanSub Head Rs. In Cr.

Civil Work, Land & Site Development, Building Structure and Infra development for Residential Building for more than 100 persons, Labour quarters admin building, office block, canteen, store, godown

7.58

Civil Work, Building Structure and foundation for plant boiler, TG, ESP ACC, fuel yard, fuel shed, weighing system

3.84

Sub TOTAL (A) 11.42ACC 6.13Biomass Infra - Chippers 2.06Biomass Infra - Tractors 0.45Boiler 16.65Chimney 0.91Conveyor Systems 2.48Cooling Tower 0.05DG Inverter 0.60Electrcial & Fabrication 0.59ESP 2.72Fire Hydrant 0.31Furniture & Fixtures 0.55Instrumentation & Control 0.06Lab Equipemnts 0.12Metering Systems 0.60Office Equipement 0.61Overhead Line 0.08Plant Lighting 0.18Power Receving Facilities 0.32Steam Piping & Exhaust Piping 2.22Switchyard 1.17TG 9.42Transfarmer 1.44Vehicles 0.13Weigh Bridge 0.13Workshop, Tools & Tackels & Stores 0.45WTP 0.94

Sub TOTAL (B) 51.38Preliminary & Pre-Operative Exp. 5.50Interest during Construction 3.70Margin Money for Working Capital 1.50

Sub TOTAL (C) 10.70

GRAND TOTAL (A+B+C) 73.50

Station Heat Rate



Biomass


Capital Cost

O & M Cost

Biomass Price

12MW biomass based power project in Tehsil Gangapurcity Dist.

Sawai Madhopur in Rajasthan

(Rs. in Lacs)

S.N. Particulars Total Cost

1 Land 250.00

2 Site Development 35.00

3 Buildings and Civil Works 866.12

4 Plant & Machinery 5149.00

5 Other Misc Assets 55.00

6 Preliminary & Pre-operative Expenses 206.72

7 Finance Charges and IDC 639.60

8 Working Capital Margin 183.83

9 Contingencies on 1 to 5 317.76

Total 7703.03

Total Project Cost 7703.03

The Project cost as appraised by SBI Caps is Rs. 7703.03 Lacs with the following breakup: The Project cost as appraised by SBI Caps is Rs. 7703.03 Lacs with the following breakup:

Station Heat Rate



Biomass


Capital Cost

O & M Cost

Biomass Price

10MW biomass based power plant at Merta, Dist Nagaur in Rajasthan

Particulars Total Cost

Land 155.16

Site Development 18.00

Buildings and Civil Works 644.15

Plant & Machinery 4321.92

Other Misc Assets 92.61

Preliminary & Pre-operative Expenses 146.32

Finance Charges 28.29

IDC 551.82

Total 5958.27

Station Heat Rate



Biomass


Capital Cost

O & M Cost

Biomass Price

Pressure

Configuration

(ata)

Biomass Power (` Crore/MW)

6 MW 7.5 MW 10 MW

44 4.03 3.93 3.79

66 5.38 5.19 5.03

86 5.59 5.37 5.15

102 5.93 5.77 5.61

110 6.05 5.89 5.72

IREDA Benchmark for financing biomass projects for FY

2011-12

Basis for Formulation of Capital Cost Benchmark:• Normative capital cost of Rs 4.45 Cr./MW (with Water Cooled

Condenser and with out Transmission lines) is proposed for

first year of the Control Period

Station Heat Rate



Biomass

Biomass Power Project: Biomass Price

Capital Cost

O & M Cost

Biomass Price


State

Biomass price

(Rs/MT)

2009-10

Biomass price

(Rs/MT)

2010-11

Biomass price

(Rs/MT)

2011-12

Andhra Pradesh 1301 1,342.81 1,460.75

Haryana 2168 2,237.67 2,434.21

Maharashtra 1801 1,858.87 2,022.14

Madhya Pradesh 1299 1,340.74 1,458.50

Punjab 2092 2,159.23 2,348.88

Rajasthan 1822 1,880.55 2,045.72

Tamil Nadu 1823 1,881.58 2,046.84

Uttar Pradesh 1518 1,566.78 1,704.39

Other States 1797 1,854.75 2,017.65

Station Heat Rate



Biomass


Capital Cost

O & M Cost

Biomass Price

Proposal in Draft Regulation-2012

• Approach considered was Median value of SERC determined price

escalated with 5% to bring at FY12-13, MNRE suggested price and

equivalent heat approach

State

Biomass price

(Rs/MT)

2009-10

Biomass price

(Rs/MT)

2010-11

Biomass price

(Rs/MT)

2011-12

Proposed in

draft Reg.

Andhra Pradesh 1301 1,342.81 1,460.75 2315

Haryana 2168 2,237.67 2,434.21 2635

Maharashtra 1801 1,858.87 2,022.14 2116

Madhya Pradesh 1299 1,340.74 1,458.50 1507

Punjab 2092 2,159.23 2,348.88 2756

Rajasthan 1822 1,880.55 2,045.72 2300

Tamil Nadu 1823 1,881.58 2,046.84 2277

Uttar Pradesh 1518 1,566.78 1,704.39 2355

Other States 1797 1,854.75 2,017.65 2283

Station Heat Rate



Biomass


Capital Cost

O & M Cost

Biomass Price

Comments received:

Station Heat Rate


State

As proposed in draft

RegulationFY2012-13

(` /MT)

Comments received

(` /MT)

Andhra Pradesh 2315 e- auction coal price

Haryana 2635 -

Maharashtra 2116 3000-3800

Madhya Pradesh 1507 2864-3000

Punjab 2756 3000

Rajasthan 2300 2415-3215

Tamil Nadu 2277 2500

Uttar Pradesh 2355 -

Other States

2283 Karnataka: 3200, Gujarat 3000,

Orissa: 3000


Biomass

Reg. 44: Biomass Price :

Capital Cost

O & M Cost

Biomass Price

Station Heat Rate

Staff views

• Latest norm specified by the respective State Commission as

well as detailed study if any carried out by the States

whichever is maximum.


State

Draft

Regulation

Biomass

Price

Rationale

Andhra 2315 2315 APERC norms escalated with 5% to bring at FY 2012-13

Haryana 2635 2635 HERC norms escalated with 5% to bring at FY 2012-13

Maharashtra 2116 2695 As reviewed by MERC

Madhya 1507 2476 Shifted to other state category

Punjab 2756 2756 PSERC norms escalated with 5% to bring at FY 2012-13

Rajasthan 2300 2300 As proposed in the draft

Tamil Nadu 2277 2277 As proposed in the draft

UP2355 2355 As proposed in the draft

Other States 2283 2476 Average of the above States


Biomass

Biomass Price : Escalation

Capital Cost

O & M Cost

Biomass Price

Station Heat Rate

Proposal: Fuel price Indexation formula or 5% escalation

Comments received

•Most of the stakeholders suggested that normative escalation

factor of should be 10% -11% annum instead of 5% annually

escalation.

•Some of the stakeholders have suggested that biomass

price/tariff should be fixed annually.



Biomass

Biomass Price : Escalation

Capital Cost

O & M Cost

Biomass Price

Station Heat Rate


Year

WPI for all

Commodities WPI of HSD

WPI for

non coking

coal

20% of

WPI

20% of WPI

of HSD

60% of WPI of

Non Cocking

coal Composite Series

1999 76.79 44.29 64.77 15.358 8.858 38.862 63.078

2000 81.59 60.49 67.07 16.318 12.098 40.242 68.658

2001 85.8 69.88 80.19 17.16 13.976 48.114 79.25

2002 87.92 72.65 81.38 17.584 14.53 48.828 80.942

2003 92.6 81.71 85.31 18.52 16.342 51.186 86.048

2004 98.72 95.34 96.5 19.744 19.068 57.9 96.712

2005 103.37 115.39 102.6 20.674 23.078 61.56 105.312

2006 109.59 129.68 102.5 21.918 25.936 61.5 109.354

2007 114.94 125.62 104.01 22.988 25.124 62.406 110.518

2008 124.92 135.66 112.7 24.984 27.132 67.62 119.736

2009 127.86 130.33 116.53 25.572 26.066 69.918 121.556

2010 140.08 147.91 131.2 28.016 29.582 78.72 136.318

2011 152.93 160.37 160.91 30.586 32.074 96.546 159.206

13 years CAGR 8.02%

10 Years CAGR 7.81%

8 Years CAGR 7.38%

5 years CAGR 9.55%


Biomass

Review of Biomass Fuel prices for the projects

commissioned in the earlier control period

Capital Cost

O & M Cost

Biomass Price

Station Heat Rate

Proposal:

•The biomass base price shall be revised at the end of the

control period for the next Control Period and same shall also be

applicable to project commissioned under this Control Period.

Comments received

•Most of the stakeholders suggested that the prices need to be

revised every quarterly or half yearly or annually instead of at the

end of the Control Period. RE Tariff Regulations-2012

•The biomass price shall be reviewed in the third year of the

control period in order to capture the volatility in the biomass fuel

market as well as more realistic prices.



Biomass

Reg. 39: Biomass Project: Operation & Maintenance Cost

Capital Cost

O & M Cost

Biomass Price

Proposal in Draft Regulations

• 24 Lakh/MW for FY 2012-13 (which are determined by applying annual

escalation factor of 5.72% per annum on the O&M cost norm applicable for

FY 2011-12)

Comments received

• Separate norm for project with water-cooled and air-cooled condensers

• Separate norm for smaller biomass power plant

• 6.5% to 9.39% of the Capital cost

• Suggestions received in the range of ` 32 .4 Lakh /MW to ` 50 Lakh/MW

• Annual escalation factor should be 7%

• CERC speciifed norm for :200 MW sets: ` 21.51 Lac/MW, Tanda: ` 31.02

Lac/MW, Badarpur: ` 34.12 Lac/MW, Talchar: ` 38.70 Lac/MW


• Retained the norm as provided in the draft Regulations

Station Heat Rate



Biomass

Reg. 38 : Biomass Project: Station Heat Rate

Capital Cost

O & M Cost

Biomass Price

• RE Tariff Regulations-2009: 3800 Kcal/kWh

• Proposal in draft RE Tariff Regulations-2012: 4000 Kcal/kWh

• Comments received:

• Some of the stakeholders suggested that SHR of

4200kCal/kWh and 4400kCal/kWh should be considered for

project with water-cooled condensers and air-cooled

condensers

• Some of the stakeholders requested to consider the SHR as

4500kCal/kWh as per CEA study

• Station Heat Rate of 4400 kcal/kwh for paddy straw fired biomass

power plant should be considered

• Dalkia Energy Services has recommended to consider SHR as 4100,

4400 and 4150kCal/kWh for rice husk based (> 5MW), straw based

and other fuel based biomass power plants.

Station Heat Rate



Biomass

Reg. 38 : Biomass Project: Station Heat Rate

Capital Cost

O & M Cost

Biomass Price

• MNRE recommendation on SHR for different technology :

• National Productivity Council conducted a field study for MEDA for

assessment of heat rate of commissioned biomass power plants in

Maharashtra.

• RE Tariff Regulations-2012

• Station Heat Rate at 4000 kCal/kWh

Station Heat Rate

Biomass Source

IPP (> 5 MW)

Tail End (< 2 MW)

Rice Husk 4100 5200Straw 4400 5500Others 4150 5200


Project with Boiler Type

Station Heat RatekCal/KWh

AFBC 4000 – 4100Traveling Grate 4150 - 4250


Biomass

Reg. 38 : Biomass Project: Gross Calorific value

Capital Cost

O & M Cost

Biomass Price

RE Tariff Regulations-2009: State wise GCV specified, Average GCV

was 3462 kCal/kg

Proposal in draft RE Tariff Regulations-2012: 3300 kCal/kg

Comments received

• CEA, National Productivity Council and MNRE recommended GCV

have not considered degradation in GCV of these seasonal fuels

over the non-seasonal period.

• Due to the rains, storage, contamination by fuel suppliers and

inherent mud in agricultural residues there is a significant

reduction in GCV of biomass fuels.

• Actual GCV in rice husk is between 3000-3100 kCal/kg.

• GCV of cotton stalk available in Gujarat is around 3600-3700

kcal/kg and average GCV of the biomass would be around 3500

kCal/kg.

• Some of the stakeholders suggested that average GCV should be

taken as 3000 kCal/kg considering loss of GCV during storage,

which is a practical requirement.

Station Heat Rate



Biomass

Reg. 43 : Gross Calorific value

Capital Cost

O & M Cost

Biomass Price

• MNRE Recommendation

• MNRE also mentioned that there are other losses which are being

encountered during the storage and handling of biomass due to

land settlement, loss of fuel during sand storm,

• GCV loss due to decaying of biomass. MNRE referred a recent

survey has been carried out by DESL under mandate from

Rajasthan Renewable Energy Corporation Ltd. (RREC) to assess

such losses which are in the range of 3.2 to 3.5%.

• MNRE recommended that there should be provision of loss of fuel

during storage at around 2%.

• MNRE recommended following general principles can be adopted

for the GCV as under:

Station Heat Rate


Biomass GCV (kCal / kg)

Rice husk 3200

Straw/Stalks/Other husks 3300

Plantation 2800


Biomass

Reg. 43 : Gross Calorific value

Capital Cost

O & M Cost

Biomass Price

• The National Productivity Council (NPC) in its study mentioned

that based on the fuel analysis report from the different plants,

GCV & moisture variation found as under:


• Normative GCV of biomass at 3300 kCal/kg

• Use of 15% of coal (average coal GCV at 3600 kCal/kg) and

85% uses of Biomass fuel of 3200 kCal/kg.

• The weighted average GCV works out to around 3300

kCal/kg.

Station Heat Rate


Biomass GCV (kCal / kg)

Variation in Moisture

(%)

Rice husk 3000-3200 12-18

Maize Bhutia 3500 21

Cotton Stalk (Air Dried Basis) 3250 8


UNFCCC: FIFTH MONITORING REPORTBiomass in Rajasthan – Electricity Generation

from Mustard Crop Residues

As per above data SFC: 1.27 kg/kWhAs per our proposal SHR 4000 kCal/kWh GCV : 3200 Kcal/kg: SFC: 1.25 kg/kWh

Biomass

Reg. 37 : Biomass Project: Auxiliary Consumption

Capital Cost

O & M Cost

Biomass Price

• RE Tariff Regulations-2009: 10%

• Proposal in draft RE Tariff Regulations-2012: 10%

Comments received

• Many stakeholders have suggested to increase the same which

are ranges from 11.5% to 14%

• Separate norm for projects with water cooled and air cooled

condensers

• Higher auxiliary consumption during stabilisation period

• Separate norm for straw fired plants, Auxiliary Consumption

should be considered at 14% for Water Cooled Condenser and

16% for Air Cooled Condenser

RE Tariff Regulations-2012: 10%

Station Heat Rate



Biomass Based Power Plant Tariff

Biomass TariffCapital Cost: ` 4.26 Crore/MW (FY11-12)Capital Cost: ` 4.45 Crore/MW (FY12-13)

2011-12` /kWh

2012-13` /kWh

Andhra Pradesh 3.78 5.18

Haryana 4.97 5.65

Maharashtra 4.31 5.74

Punjab 4.94 5.83

Rajasthan 4.28 5.16

Tamil Nadu 4.58 5.12

Uttar Pradesh 4.06 5.24

Others 4.41 5.42

30 MW Bagasse Cogen project at a Sugar Mill in Maharashtra


Non-fossil fuel based Cogeneration Projects

Bagasse based cogeneration


- Capital Cost

Capital Cost

O & M Cost

Bagasse Price

Proposal in Draft RE Tariff Regulations-2012: ` 420 Lakh /

MW

Comments Received

• IL&FS RE Ltd.

• Capital cost of bagasse based co-generation projects should be `

550 Lakhs/MW.

• Capital Cost of two projects (36 MW and 44 MW) commissioned

by IREL under Urjankur Nidhi initiative on Boot basis incurred

project cost of ` 530 Lakh/MW and ` 550 Lakh/MW respectively

for projects with 110 ata pressure and 5400 C temperature.

RE Trariff Regulations-2012

• While proposing the normative capital cost of ` 420 Lakh / MW

we considered the capital cost norm developed by IREDA for

financing the project during FY 2011-12 considering the typical

size of the project for 2500 TCD with 66 bar / 480 o C

configuration.




- Capital Cost

Capital Cost

O & M Cost

Bagasse Price

IREDA Benchmark for financing biomass projects for FY 2011-12

• It can be seen that higher capital cost is justified if one opts

for higher temperature and pressure configuration.

• Commission reatained the norm of Capital Cost at ` 420

Lakhs/MW which is also in line with the benchmark capital

cost norm developed by IREDA

Pressure

Configuratio

n

Kg/ cm2

Bagasse Co-gen (` Crore/MW)

2500

TCD3500 TCD 5000 TCD

>5000 TCD

44 3.70 3.58 3.53 3.46

66 4.13 4.06 4.00 3.93

86 4.77 4.70 4.66 4.60

102 5.42 5.12 4.83 4.77

110 5.53 5.22 4.93 4.87




- Bagasse Price

Capital Cost

O & M Cost

Bagasse Price

Proposal

• Bagasse price assumption for FY2012-13 (`/MT) across

States: ‘equivalent heat value’ approach for landed cost of

coal for thermal Stations for respective States

State Bagasse Price (`/MT)

Andhra Pradesh 1307

Haryana 1859

Maharashtra 1327

Madhya Pradesh 946

Punjab 1636

Tamil Nadu 1408

Uttar Pradesh 1458

Other States 1420




- Bagasse Price

Capital Cost

O & M Cost

Bagasse Price

Proposal Draft RE tariff Regulations-2012

• Bagasse price assumption for FY2012-13 (`/MT) across

States: ‘equivalent heat value’ approach for landed cost of

coal for thermal Stations for respective States

State Bagasse Price (`/MT)

Andhra Pradesh 1307

Haryana 1859

Maharashtra 1327

Madhya Pradesh 946

Punjab 1636

Tamil Nadu 1408

Uttar Pradesh 1458

Other States 1420




- Bagasse Price

Capital Cost

O & M Cost

Bagasse Price

Comments Received

IL&FS RE Ltd. : Considering both crushing season and off-season,

average price of bagasse delivered at project site is ` 1750-2000

for the FY 2010-11 in Maharashtra.

• Fuel prices particularly for the state of Maharashtra should be

specified at a price of at least ` 1850/MT with normative

escalation factor of 10% per annum instead of ` 1327/- with

annual escalation of 5%. RE Tariff Regulations-2012

• Commission retained the approach proposed in the draft

Regulations i.e. ‘equivalent heat value’ approach for landed cost

of coal for thermal Stations for respective States with a variation

in order to take into account State specific prevailing prices of

bagasse as may be considered by the respective Commission if

the same is higher than the price. Accordingly Maharashtra State

price revised to Rs. 1832/MT and MP shifted to other States

category



- Bagasse Price

Capital Cost

O & M Cost

Bagasse Price

Comments Received• IL&FS RE Ltd.

• considering both crushing season and off-season, average price of

bagasse delivered at project site is ` 1750-2000 for the FY 2010-

11 in Maharashtra.

• Fuel prices particularly for the state of Maharashtra should be

specified at a price of at least ` 1850/MT with normative

escalation factor of 10% per annum instead of ` 1327/- with

annual escalation of 5%.

Staff View

• We may retain the approach proposed in the draft Regulations i.e.

‘equivalent heat value’ approach for landed cost of coal for

thermal Stations for respective States with a variation in order to

take into account State specific prevailing prices of bagasse as

may be considered by the respective Commission if the same is

higher than the price.




- Bagasse Price

Capital Cost

O & M Cost

Bagasse Price

StateBagasse Price

(`/MT)

Andhra Pradesh 1307

Haryana 1859

Maharashtra 1832

Punjab 1636

Tamil Nadu 1408

Uttar Pradesh 1458

Other States 1583



- O & M Expenses

Capital Cost

O & M Cost

Bagasse Price

Proposal in Draft Regulations-2012

• ` 16 Lakh/MW for FY 2012-13

GUVNL

• O&M expanses should be consider at ` 14.75 Lakh/MW as

considered by the SERCs with annual escalation at 5.72%

Staff View

• Normative O&M Expenses for non‐fossil fuel co‐generation

projects for the year 2012‐13 has been specified as ` 16 Lakh

per MW which shall be escalated at the rate of 5.72% per

annum over the tariff period



Reg. 50: Non-fossil fuel based Cogeneration Projects

- Auxiliary consumption

Capital Cost

O & M Cost

Bagasse Price

Proposal in the draft RE Tariff Regulations: 8.5%

Comments received

IL&FS RE Ltd.

• Auxiliary consumption for the bagasse based cogeneration

projects should be considered as 10%

• It is difficult to achieve an auxiliary consumption of 8.5%, for

projects with technical configuration of 110 ata steam and

5400 C temperature parameters.

RE Tariff Regulations-2012: 8.5%

• Since the non-fossil fuel based cogeneration plants have

some of the auxiliary equipments common between the sugar

mill and the power generation unit. Also, the bagasse require

less processing compared to the biomass.

• We may retain the norm as specified under Draft Regulations



Tariff: Non-fossil fuel based Cogeneration Projects

Capital Cost

O & M Cost

Bagasse Price


Bagasse based Co-generation: ` /kWhCapital Cost: ` 4.21 Crore/MW (FY11-12)Capital Cost: ` 4.20 Crore/MW (FY12-13)

States09-10

` /kWh10-11

` /kWh11-12

` /kWh12-13

` /kWh

Andhra Pradesh 4.93 4.23 4.51 5.06

Haryana 5.78 4.86 5.21 5.73

Maharashtra 4.80 4.05 4.34 5.42

Punjab 5.75 4.84 5.19 5.30

Tamil Nadu 5.10 4.29 4.60 4.61

Uttar Pradesh 5.21 4.45 4.76 5.35

Others 5.17 4.38 4.68 5.20


SOLAR PV POWER PLANT

Solar PV

Solar Photovoltaic (PV) Power Project

- Capital Cost & Module Cost

Module Cost

O & M Cost

Non Module Cost

Proposal

• Normative capital cost: ` 1000Lakh/MW

Comments Received• Prayas has suggested that, procurement of solar power

should be only through the competitive based reverse bidding process with the feed‐in‐tariff acting as a ceiling.

• CESC Limited parameters assumed on higher side• Torrent Power Limited :` 1100 Lakh including

evacu.ation cost• ACME: ` 1152 Lakh/MW• EMCO Limited ` 1200 Lakh/MW as reduction in cost of

various items considered is not achievable in actual practice and exchange rate for US$ should be considered as ` 54 and in order to take care of fluctuation in the rate of US $ a suitable mechanism is needed to be devised and it may be made pass through.

Module Degradation

Solar PV


- Capital Cost & Module Cost

Module Cost

O & M Cost

Non Module Cost

Proposal

• Normative capital cost: ` 1000Lakh/MW

Comments Received

• Reliance Power Ltd.: `1300 - 1400 Lakh/MW

• SDS Solar Private Limited:

• Only module cost has gone down and other non

module cost components have gone up.

• Solar PV project cost should be considered under

two head: (1) Project upto Max of 2 MW and (2)

bigger projects.

Module Degradation

Solar PV

Reg. 57: Solar Photovoltaic (PV) Power Project

- Capital Cost: Module cost

Capital Cost

O & M Cost

CUF

Solar PV modules price: Energy Trend’s survey

weekly spot prices per watt as on 28/12//2011

Module Degradation

Solar PV


- Capital Cost: Module Cost

Capital Cost

O & M Cost

CUF

• Current average thin film module price Crystalline module

price varies in the range of $0.80 to $0.89/Watt.

• Most of the international studies reveal that the prices are

expected to decline in future.

• It is proposed that we may specify module cost at $ 0.85$/W.

With the current exchange rate of ` 53/US$, the module cost

comes out to be ` 450 lakh/MW.

Module Degradation

Solar PV


- Capital Cost: Non-Module Cost

CUF

O & M Cost

Capital Cost

Non Module Cost

Benchmark project cost of Solar PV projects

• Total cost of Solar Photo voltaic power projects for the FY2012-13 as `

9.34 Crore/MW

• Taking care of degradation in the module output over a period of time,

the total cost of Solar Photo voltaic power projects for the FY2012-13

proposed at ` 10.0 Crore/MW

Sr. No. Particulars

Capital Cost Norm

FY 2011-12 (` Cr/MW)

Capital Cost Norm

FY 2012-13 (` Cr/MW)

1 Land Cost 0.15 0.162 Civil and General Works 0.95 0.903 Mounting Structures 1.05 1.004 Power Conditioning Unit 1.60 0.98

5Evacuation Cost up to Inter-connection Point (Cables and Transformers)

0.90 1.00

6

Preliminary and Pre-Operative Expenses including IDC and contingency

1.22 0.80

7 Total Non Module Cost 5.87 4.84

Solar PV


- Capacity Utilization Factor

Capital Cost

O & M Cost

CUF

Proposal :Normative CUF: 19%

Comments Received• EMCO Limited :

• Normative CUF should be considered at 17-18 % as only few States like Rajasthan and Gujarat are able to achieve a CUF of 19%.

• EMCO Limited has further suggested that the auxiliary consumption for solar PV projects should be considered as 1% of the total generation as the energy consumption by inverters, air conditioning, and water treatment and pumping, lighting is high. GERC draft Sola PV Tariff order has also considered the same.

• Torrent Power Limited • Actual data from the operating site should be collected,

analyzed and be used as the basis for determination of CUF for Solar PV projects.

• Aannual degradation of 1% in CUF annually should be considered in the Regulation.

• GUVNL • CUF should be specified on zonal basis which will ensure

benefit to consumers in areas where high solar radiation are received

Solar PV



Capital Cost

O & M Cost

CUF

Comments Received• NTPC Limited

• Country may be divided into 4-5 solar zones • Degradation of solar modules with age should be considered. • Auxiliary Consumption of 5.5% for solar PV stations should be

considered while determining tariff. Break up of 5.5% are as under:

• Transformer losses = 3.0% (remain charged for 24 hrs)• Station facilities, lighting, washing arrangement, etc =

2.5%.• ACME

• CUF should be considered at 17% for Solar for Crystalline Technology & 19% for Thin Film Technology as a reference point to reflect the all India average.

• Projects where interconnection point is at the end of transmission line, an additional provision of 2.5% towards transmission losses be considered.

• 1.1% as auxiliary consumption factor should be taken in account various loads at the project site such as lighting, inverter auxiliary as well as some common facilities.

• Shri Shanti Prasad • Auxiliary consumption and de-ration to be considered

Solar PV



Capital Cost

O & M Cost

CUF

• A study carried out by the Commission on “Performance of Solar Power Plants In India” reveals that the average CUF at more than 80% locations works out to be more than 19% for solar PV plant based on thin film technology. Similarly, the average CUF at more than 50% locations works out to be more than 19% for solar PV plants based on crystalline technology.

• Considering the same and in the absence of actual data of full one year, we to retain the benchmark CUF as proposed in the draft Regulations for the next Control Period for determination tariff.

Solar PV


- O & M Expenses

Capital Cost

O & M Cost

CUF

Proposal

• Normative O&M Expenses: ` 11.00 lakh/MW

Comments Received

• GUVNL has suggested that O&M expanses should be

considered at ` 8.35 Lakh/MW as considered by other SERCs

with annual escalation at 5.72%.


• Considering the current inflation trend, the normative O & M

Expenses considered as proposed in the draft Regulations.

Tariff: Solar PV

Technology2009-10

` /kWh2010-11

` /kWh2011-12

` /kWh2012-13

` /kWh

Solar PVCC: ` 14.42 Cr/MW (FY11-12)

CC: ` 10 Cr/MW (FY12-13)

18.44 17.91 15.39 10.39


SOLAR THERMAL POWER PLANT

Solar Thermal

Solar Thermal Power Project

- Capital Cost

Module Cost

O & M Cost

C U F

• Capital cost of solar thermal project is dependent on the solar

irradiation level at a particular location

• Variation of solar irradiation level at different locations result in

variation in electricity output, CUF and capital costs.

• For solar thermal power projects, the electricity output is

computed by the formula:

=Annual average solar irradiation (KWh/m2/year) x Plant

Efficiency (%) x Solar Field size (m2)

• Solar field size is the one of the most decisive factor in deciding

the cost of the project.

• The solar field, comprising of mirrors, concentrates the incident

solar irradiation onto heat absorber tubes which absorb the

thermal energy and transfers it to a heat transfer fluid. Heat

exchangers transfer thermal energy to generate steam that

drives a conventional turbine.

Solar Thermal

Solar Thermal Power Project - Solar Field Size

Module Cost

O & M Cost

C U F

• Designing the ‘right’ size of solar field to generate sufficient

thermal heat required to drive the turbine continually

throughout its operation is depend on the solar irradiation level

which varies according to the ‘time of day’ (maximum in the

afternoon, low in the mornings and evenings) and ‘month of

year’ (lower during monsoon, higher during summer months).

• A larger than necessary (or a smaller) solar field may result in

excess (or deficient) solar energy required to drive the turbine

thereby causing solar energy to be dumped.

• Based on the solar field efficiency, hourly incident irradiation,

and the thermal to electric plant efficiency, solar simulation

software is used to compute the thermal heat of steam required

by the system to drive the steam turbine for different solar field

sizes, along with electric output, capital costs, and CUF.

Solar Thermal

Solar Thermal Power Project

- Capital Cost & CUF

Module Cost

O & M Cost

C U F

• The CUF is dependent on solar field size and no. of hours of

storage which are optimized for minimum LOCE.

• Project cost is dependent on the CUF projected and

corresponding solar field size.

• Solar irradiation varies from location to location across the

country. Therefore field size requirement and in turn the project

cost would also vary for a particular CUF across the country.

• Parabolic Trough technology has achieved close to full

commercial status while cost data for the power Tower, Fresnel

and Dish Stirling technologies are in the process of being

established.

• Therefore, available cost data of Parabolic Trough technology is

considered for the determination of benchmark capital cost

norm for solar thermal projects for the year 2012-13.

Solar Thermal

Solar Thermal Power Project - Capital Cost & CUF

Module Cost

O & M Cost

C U F

• Relation between solar field size, corresponding CUF and dumped

energy for a 111 MW plant with net generation of 100 MW

SM Solar Field Output CUF E-Dump Dump/Output

1.64 843,660 229,802,081.00 26.30% 145,249,200 63.2062%

1.48 761,910 221,261,862.00 25.30% 83,002,880 37.5134%

1.415 729,210 216,570,205.00 24.70% 61,464,410 28.3808%

1.35 696,510 211,657,613.00 24.20% 42,340,810 20.0044%

1.26 650,730 202,454,388 23.10% 20,579,080 10.1648%

1.25 644,190 200,980,390 23.00% 18,134,440 9.0230%

1.245 640,920 200,233,277 22.90% 16,970,220 8.4752%

1.195 614,760 193,631,312 22.10% 9,262,562 4.7836%

1.15 591,870 187,090,149 21.40% 4,788,951 2.5597%

1.11 572,250 181,053,466 20.70% 2,215,236 1.2235%

1.07 552,630 174,750,605 20.00% 712,963 0.4080%

1.035 533,010 168,054,750 19.20% 78,549 0.0467%

1.03 529,740 166,854,200 19.10% 39,564 0.0237%

1.02 526,470 165,810,786 18.90% 13,534 0.0082%

1.015 523,200 154,522,901 18.80% 1,392 0.0009%

1.01 519,930 163,352,776 18.70% -

1 516,660 162,145,245 18.50% -

SAM Modeling

LocationJodhpur

DNI: 2074 kWh/m2/year

Solar Thermal

Solar Thermal Power Project - Capital Cost & CUF

Module Cost

O & M Cost

C U F

SAM Modeling: Location Jodhpur, DNI:2074 kWh/m2/year

Sol

ar F

ield

Siz

e Dum

ped Energy

C U F

Solar Thermal

Reg. 61: Solar Thermal Power Project - Capital Cost & CUF

Module Cost

O & M Cost

C U F

SAM Modeling: Location Jodhpur, DNI:2074 kWh/m2/year

Sol

ar F

ield

Siz

e Dum

ped Energy

C U F

Solar Thermal


Module Cost

O & M Cost

C U F

SAM Modeling: Location Jodhpur, DNI:2074 kWh/m2/yearSolar Field (m2 )/MW 5804

Sr. No. Particulars € per m21 Structure 302 HCE (Absorber Tubes): 413 Mirrors 35

4 Labour charges for assembling, welding, allignment and topography 125 Solar Field Piping 206 HTF System (pumps, tanks, Heat exchangers etc.) 357 HTF Fluid 158 Electrical system 109 Control and Instrumentation 12

10 Civil Works 25 Total Solar Field cost € /m2 235A Total Solar Field cost ` Crore / MW 9.00 Power Block 1 Steam Turbine and alternator € per kW 225

2 Balance of Plant* 175 Total Power Block cost € per kW 400

B Total Power Block cost per MW ` Crore / MW 2.64 Other Cost elements 1 Land cost: (6.25 Acre/MW `3 lakh/Acre) ` Crore / MW 0.192 Site development ` Crore/MW 0.46

3 Erection and commissioning charges: 2.5% of total A+B 0.29

4 Preliminary & Pre-Operative Expenses including IDC and contingency and other costs 1.25

C Other Cost elements ` Crore / MW 2.19

Total Project Cost: A+B+C ` Crore / MW 13.83

*

Steam generation system, Cooling tower, condensation system, Auxiliary System, water treatment plant, Cooling Tower, compressed air system, water pumping from catchment area, effluent treatment, fire protection, maintenance workshop, Control and instrumentation, Civil works, Electrical substation, lines and installation

Solar Thermal


Module Cost

O & M Cost

C U F

http://www.shriramepc.com/pdf/Shriram-EPC-Clip-aug-24-2011.pdf

Solar Thermal

Solar Thermal Power Project – O & M Cost

Module Cost

O & M Cost

C U F

• There is hardly any operational experience of MW scale thermal

power projects in India to ascertain norms for O&M expenses.

• Regulation 63 of the RE Regulations-2009

• Normative O&M expenses for solar thermal power projects

FY2009-10: ` 13.00 Lakh/MW to be escalated at the rate of

5.72% per annum

• FY 2011-12: ` 14.53 Lakh/MW


• FY2012-13: ` 15 Lakh/MW

Solar Thermal

Technology2009-10

` /kWh2010-11

` /kWh2011-12

` /kWh2012-13

` /kWh

Solar ThermalCC: ` 15 Cr/MW (FY11-12)CC: ` 13 Cr/MW (FY12-13)

13.45 15.31 15.04 12.46

Biomass Gasifier and Biogas

StateLevellised Fixed Cost

Variable Cost (FY 2012-13)

Applicable Tariff Rate

(FY 2012-13)

Benefit of Accelerated

Depreciation (if availed)

Net Levellised Tariff

(upon adjusting for Accelerated

Depreciation benefit) (if availed)

(`/kWh) (`/kWh) (`/kWh) (`/kWh) (`/kWh)

Biomass Gasifier Power ProjectAndhra Pradesh

2.29 3.22 5.51 0.11 5.40

Haryana 2.34 3.66 6.00 0.11 5.89

Maharashtra 2.35 3.74 6.09 0.11 5.98

Punjab 2.36 3.83 6.19 0.11 6.08Rajasthan 2.29 3.19 5.48 0.11 5.37

Tamil Nadu 2.28 3.16 5.44 0.11 5.33

Uttar Pradesh 2.29 3.27 5.56 0.11 5.45

Others 2.32 3.44 5.76 0.11 5.65

Biogas based power projectBiogas 3.06 3.38 6.44 0.21 6.23

Thank You

ABPS Infrastructure Advisory. Legal and Policy Framework for promotion of RE.

Documents

Transcript of ABPS Infrastructure Advisory. Legal and Policy Framework for promotion of RE.