Presentation Title

Presentation Subtitle

1

Policy Incentives for Wind &

Biomass Power Generation

17th Dec „09

~ Amulya Charan

1

Overview

Generation Based Incentive

Wind

Biomass

Solar Energy

Future Agenda

Agenda

Overview

2

Generation Based

IncentiveOverview

GBI

Wind Biomass

Solar Energy

Future Agenda

Indian Power Sector- An Overview

3

• India has 5th largest generation capacity in the world – 1,53,694 MW

(Oct „09)

• Acute power deficit ~ 11.9% (peak power deficit)

Raw Materials

Generation

Trading

Transmission

End User

• T&D network is third largest – 1,43,000 MW transmission capacity and

17,000 MW inter-regional power transfer capacity

• Power trading stands at 4.7% of power generated in „08 – „09

• Increase in power capita consumption (NEP expects 1000 kWh in 2012

compared to 704 kWh in „07 – ‟08)

Source % Contribution to Capacity

Thermal 64%

Hydro 24%

Nuclear 3%

Renewable 9%

As of Oct„09

Value Chain

Source: InfralineEnergy Research and Information Services, CEA, MoP

Industry Installed capacity (MW)

.

Sl. Region Thermal Nuclear Hydro R.E.S.@ Total

Coal Gas DSL Total (Renewable) (MNRE)

1 Northern 20,062 3,563 13 23,638 1,180 13,310 1,856 39,986

2 Western 27,015 8,143 17 35,175 1,840 7,448 4,021 48,485

3 Southern 17,822 4,160 939 22,921 1,100 11,107 6,984 42,112

4 Eastern 16,395 190 17 16,602 0 3,904 272 20,779

5 N. Eastern 60 766 143 969 0 1,116 171 2,256

6 Islands 0 0 70 70 0 0 6 76

7 All India 81,354 16,822 1,200 99,375 4,120 36,885 13,310 153,694

Source: CEA, Monthly Review of Power Sector (Executive Summary) Jul ‟09, CRISIL Annual Report

As on Oct‟09

Projected

Captive Generating Capacity connected to the Grid = 19509.49 MW

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Renewable Power

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Wind (69%)

Small Hydro (16%)

Biomass (14%)

Solar & Others

(1%)

Break-up of RE capacity – FY ‘09

• 13,310 MW installed capacity10,000 MW of wind and balance of

micro hydel, co-generation, solar and biomass.

9% of total installed generating capacities

• Growth from 5% to 9% in the last couple of years

• India’s gross renewable energy potential (up to 2032) is estimated at 220 GW

• Factors providing impetusPower supply deficit

11.9% (FY ‘09)Need for greater energy security

Coal fired thermal plants: 64% Depleting fuel reserves

Environmental concerns

Growing Clean Energy Capacity

Total RE potential in IndiaType Total Potential

Wind 48,561 MW

Small Hydro 15,000 MW

Biomass 16,000 MW

Source: MoP, MNRE, CEA

Generation

Based

Incentive

6

Generation Based

AgendaOverview

GBI

Wind Biomass

Solar Energy

Future Agenda

Generation Based Incentive

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• Wind PowerRs 0.50/unit for 10 years

Initially available for first 49 MW

projects, now for 4000 MW

Available for >5 MW projects

Not applicable for 3rd party sale/ captive

use/ merchant sales

• Solar PowerUp to Rs12/unit -solar photovoltaic

power

Up to Rs10/unit-solar thermal power

Available for > 1 MW projects

Available for 10 years

GBI & Tariff combined to not exceed Rs

13/unit

GBI’s- A positive step

Would encourage genuine power

project developers

Could bring new technologies

(from developed countries)

Can promote R&D in the

sector

Wind mills not to be viewed as a

Financial investment- but an

Infrastructural investment

Can indirectly create a lock-in for

the project developers

Can help enhance the availability

of wind farms

Issues to Focus-Third Party Sales

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Open Access Regulations

• Counter to the spirit of Open Access regulations?

• Demand-supply distortions in the market

RPO Obligations

• Fulfilling RPO obligations for “less potential” states could become more difficult

• Could lead to excess power beyond RPO in selected states

• Case of Tamil Nadu- 4000 MW of installed wind power

Price discovery

• Interferes with price discovery mechanism -could deprive the seller from getting the best price

• Suggested solution

• To remove double benefits, adjustments can be made-to not provide GBI for 3rd party sales where tariff is more than state utility price +GBI incentive

Issues to Focus-Captive Projects

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Disincentive to industries

• It could dis-incentivize industries from aiming for maximum generation from captive wind/solar units?

• Projects would become mere “Financial” investments

Modified GBI incentives

• Can industries be incentivized with some modified GBI incentives

• Lesser GBI incentives from 3rd/4th year to promote generation

Promotion of Innovative uses

• Would new ways be treated- captive consumption and hence no GBI?

• Solar power for use at construction sites/ small medical centers etc.

• Solar energy for milk chilling plants in Gujarat

• If yes, GBI‟s could discourage industries to look for applications of solar energy to industrial applications

Issues to Focus-Project PLF

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Project feasibility under GBI‟s

• For lower PLF‟s, GBI‟s might not be sufficient to make project feasible vis-a-vis accelerated depreciation

Regional concentration of projects

• Could lead to concentration of wind/solar farm‟s in few regions/states

• Would lead to regional disparities

RPO Obligations

• Uneven distribution of wind projects could further increase in RPO deficit of “non attractive” states

• Power loses “green” tag on crossing state borders

Issues to Focus-GBI vs. JNNSM ?

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Off Grid vs Grid interactive projects

• JNNSM seeks to promote off grid applications and stand alone power plants in special category states, border areas etc.

• GBI scheme doesn‟t allow captive use

Different incentives

• JNNSM specifies tariff as per CERC regulations vis-à-vis overall limit of Rs 13/unit as per GBI scheme

• New reports suggest Rs 17.5/unit flat tariff being considered by government

• CERC recommended generic tariff of Rs 18.44/unit (Solar PV) and 14.35/unit(Solar Thermal)

Difference in spirit

• JNNSM aims to provide incentives to discoms and indirectly incentivisegenerators

• Recent RIL PPA‟s with Rajasthan discom‟s- @ tariff of Rs 15.78/unit

Wind Power

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Generation Based

IncentiveOverview

GBI

Wind Biomass

Solar Energy

Future Agenda

Wind Power – Indian Portfolio

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16%

48%21%

7% 8%

Diversified Conglomerate

Industry

Turbine Manufacturers

Foreign Players

Real Estates

• India‟s Wind generation capacity: 10 GW

• 5th largest installed base in the world

• Total global capacity: 122.2 GW

• Wind energy capacity growth

(28 GW, 30% y-o-y )

• Multiple asset ownersMany have < 5 MW

• Top 25 asset owners Just over 3 GW / 10 GW (total installed base)

• Only TASMA, Enercon & DLF have portfolios

> 200 MW

• Domestic construction and Real Estate Majors

(DLF, Lanco Group) some of the largest players

Top 25 wind portfolio holders

Open Issues

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RPO Obligation

• RPO obligation defined- but not enforced?

• Why applicable to captive consumers?

Land availability

• Market distortions

• Land acquisition process complex

Transmission

charges

• Charges are on per MW basis

• Low PLF of renewables-should be on a per unit basis

Loses Green Tag on crossing State boundary

Open Issues Contd….

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Wind Power maps

• Fresh wind power maps should be prepared

Clarity on tariffs

• Rates defined only for sale to Discoms

• Can Discom‟s absorb CERC tariffs?

• Generic tariff of Rs 3.75-5.63/unit

Third party sale

• Nebulous regulation for third party sale

Open Issues Contd….

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Wind power scheduling

• Due to its nature, wind power can not be easily scheduled

• Risk of heavy UI charges- for scheduling attempts

• Tata Power‟s attempts

• Experiments being conducted on wind power forecasting

• Forecasting techniques already in use in developed economies

• Scheduled GFL, Sadiya wind power (Rajasthan) to Maharashtra & Andhra Pradesh

Grid connectivity

• Wind farms connectivity an issues- lack of cohesive response from state/centre

• Tata Power‟s Supa wind farm

• Large wind farms should be given direct connectivity to National grids

• Farms greater than 50/100 MW can be connected to CTU directly

Biomass

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Generation Based

IncentiveOverview

GBI

Wind Biomass

Solar Energy

Future Agenda

Biomass Based Generation

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Distributed Generation

• Good potential for semi urban/rural areas

• Decentralized Distributed Generation model

• Should be actively promoted in states with less wind/solar power potential

Limited Potential

• Total potential of ~15000 MW in the country

• Solar-Biomass hybrid models should be actively considered

• JNNSM envisages setting up of 100-150 MW solar hybrid project

Biomass availability

• Total availability of 120 - 150 million tons of surplus biomass per year

• Catchment area becomes limited for the plant

• Catchment area dependent on cost of transportation fuel (diesel)

• Suggested solution

• Dedicated cultivation of specific crops for biomass

Solar Energy

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Generation Based

IncentiveOverview

GBI

Wind Biomass

Solar Energy

Future Agenda

National Solar Mission

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Fiscal Incentives

• Different incentives under GBI scheme and JNNSM

• Lack of clarity on tariff

• CERC framework or flat Tariff?

• State Discom‟s required to buy power at Rs 5.5/unit(3% escalation)

• Would discom‟s would buy power at this rate in absence of any penalty?

• Concurrence of SERC‟s /State Govts to share this higher cost?

• Central government resources to support this huge subsidy bill?

NVVNL‟s role

• How would energy blending be done ?

• Would central unallocated quota can keep pace with proposed solar capacity addition- 20000 MW by 2022?

• Would state‟s be willing to share the fiscal burden of higher tariffs?

Future Agenda

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Generation Based

IncentiveOverview

GBI

Wind Biomass

Solar Energy

Future Agenda

Developed Market Models

US Market

• PJM

• Settlement of scheduling deviations in the real- time energy market

• If generation exceeds schedule provide market prices

• The New York ISO (NYISO)

• The wind generator can bid into the NYISO‟s hour-ahead market

• resets the wind generator‟s schedule to actual metered delivery before the market is settled in real-time.

• California ISO

• Wind generators have metering equipment installed with them permitting real-time telemetry of operation and weather data to the ISO.

• Electric Reliability Council of Texas (ERCOT)

• Exempts from scheduling penalties, as long as generation is 50% and 150% of schedule.

Developed Market Models…

European Market

• Denmark

• Existence of environmental premium system. Paid the power spot price (approximately Rs.2.5/kWh) plus a premium of upto Rs 1 /kWh.

• France

• Buys all the wind energy produced at a fixed price and not subject to balancing obligations. This basically put the wind power out of the competitive market.

• Germany

• Wind power is prioritised in dispatch and usually not curtailed for economic or operational reasons unless security of supply is at risk

• Convert the wind power generation to a flat profile equal to the long-term avg generation of the installed wind farms

• Netherlands

• No special rules. Bid at marginal cost. The actual price that wind power receives is determined by the matching process on the APX.

• Spain (OMEL)

• Penalty exist for deviation: Regulated tariffs, Pool price + premium +incentive

Future Agenda

Issues in GBI scheme

should be addressed

Third party sale of wind

power to open access

customers

Intra day scheduling of

wind power to minimise

imbalances

Grid connectivity of large

wind farms

Renewable Energy

Obligation extended

beyond distribution

companies

Clarifications on JNNSM

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Modes for sale of wind power

Mode 1

Calls for mandatory sale of wind energy to

Discom which is similar to scheduling in

practice in France

Mode 2

No separate schedule for wind power. The

entire wind generation is treated as generation

of the host utility (similar to the Netherlands)

Mode 3

Calls for lifting of any Standby/Excess demand

charge Levied by host utility as the

intermittencies in schedule are absorbed by

national grid (as in Germany)

Mode 4

Calls for sale of wind power to grid as UI.

Similar to PJM Market where Wind developers

are themselves responsible for the

consequences of UI.

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Lies in “Green Power”

And We Shall Endeavor

To unlock the maximum potential

The key to the future

Additional Data

Vision & Mission

• “To be the most respected and one of the leading Power Trading Companies in India”Vision

• To evacuate power from surplus regions/entities thereby helping them in optimum resource utilization.

• To serve power customers in deficient States/regions in a reasonable manner.

• To conduct trading of power in a transparent manner assuring both suppliers and customers of dependable and efficient service.

• To make power trading business a growth oriented business with good future potential in various regions in India and bordering countries.

• To emerge viable in a strong competitive environment by using relevant technology and deploying talented people.

Mission

Tata Power Trading Background

• A wholly owned subsidiary of The Tata Power Company Limited

• Tata Power Trading Company - Incorporated on 31st Dec „03

• Registered as a Limited company - On 16th Feb „04

• First company to be awarded a power trading license by CERC - On 9th

Jun „05

• Has been at the forefront of shaping India‟s Vibrant Power Trading Market

with a host of innovative trailblazers

Business

Lines Power Trading

Bilateral

Trades

Power

Exchanges

Coal Supply

Facilitation

Clean

Development

Mechanism

Advisory

Services

LTST/MT