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Solar Energy : Policy and Regulatory Challenges and Initiatives : India

Ashok Basu
Secretary, Ministry of Power, India Chairman, Central Electricity Regulatory Commission, India Chairman, South Asia Forum for Infrastructure Regulation
ADB, Dhaka September 20, 2011

Energy and Development

Richest 1bn people use 5 t.o.e. energy per capita Poorest 2 bn use 0.2 t.o.e. per capita 20% World population consume 60% energy Asia has 66% world poor population South Asia has 20% world population,4.2% installed energy capacity

South Asia : Installed Capacity 2008

Country India Bangladesh Pakistan Sri lanka Nepal Bhutan Maldives (in GW) 159.00 5.25 19.44 2.66 0.62 0.49 0.06 Thermal 64% 96% 64% 50% 9% 3% 100%

Total ( S. Asia ) : World


: 4428.00

Technically Accessible Clean Energy

Power accessible using current technologies Is 5.9 times the global demand Sun Geo thermal Wind Bio Mass Hydrodynamic Ocean 3.80 times 1.00 time 0.50 times 0.40 times 0.15 times 0.05 times 5.90 times
Source : Dr. Joachim Nitsch.

India : Power for All By 2012

1712 MW in 1950 1,76,990 MW now 2,00,000 MW by 2012 90,000 MW in next 10 years

India : Problems and Opportunities

By 2031, India will import 90% oil, upto 50% gas and upto 45% coal. Renewables potential 1,83,000 MW ; only 8% realized, 3.5% in energy terms Hydropotential 1,50,000 MW; 29% achieved, 9.2% peaking shortage

Basic Framework : Major Challenges

Legal Governmental Regulatory

Clarity of policies and programmes essential


Legal Framework : Electricity Act, 2003

Development of Power system based on optimum utilization of coal, gas, nuclear, hydro and renewable sources Restructuring of State Electricity Boards Two-tier Regulatory mechanism Generation free from license Open access Trading as independent activity Private entry in all segments Consumer protection

Legal Framework : Electricity Act, 2003

Involvement of local bodies, co-operatives, NGOs, franchisees etc. in RE distribution Stand alone systems in rural areas Central Regulatory Commission to prescribe principles and methodologies re: tariff, grid connectivity, etc. State Commissions to promote co-generation & renewable, fix tariffs, prescribe Renewable Purchase Obligation, etc.

India : Solar Energy Perspective

Potential : 50 MW/Sq. Km. Accessed : 6 MW/Sq Km

Most secure source of energy Environment friendly, Zero emission Enables distributed generation Quick Commissioning, Short lead time Space intensive Effective storage necessary

Solar Energy : Key Questions and Challenges

Is there a credible roadmap for development? Can the high capital cost be sustainable? How to reduce the dependence on imported equipment and systems? How to improve inadequate domestic manufacturing capability? What should be the methodology for tariff fixation? Is grid connectivity feasible for such small projects? How will such high cost power be sold?

Governmental Framework : Jawaharlal Nehru National Solar Mission (JNNSM)

Segment Solar Collectors Off-Grid application Grid Power 2010-13 7m Sq mts 2013-17 15m sq mts 2017-22 20m sq mts

200 MW 1000-2000 MW

1000 MW 4000-10000 MW

2000 MW 20000 MW

By 2022, Solar can contribute 7% of power generation, reduce 30% of imported coal bill, save 95 MT CO2 loss, generate 1 million jobs, create USD 100 bn investment potential

Governmental Framework : JNNSM

NTPC Ltd.s trade utility designated as Nodal Agency Nodal Agency to purchase PPA-based power from Solar Developers at 33 KV and above Ministry of Power to allocate equivalent MW of power from its quota, to Nodal Agency Nodal Agency to sell bundled power to Distribution Utilities at pooled tariff

Governmental Framework : JNNSM

Mission Strategy : Promote off-grid, standalone systems Improve manufacturing capability Establish R&D centres, Pilot projects Human Resource Development, Capacity building Enable ease of business Achieve grid parity by 2022


Governmental Framework : Incentives

Low import tariffs for capital equipment Soft loans to manufacturers and users Third party sale of renewable power Allotment of land at token lease rent No excise duty/sales tax on manufacture of finished products Five year tax holiday 80% accelerated depreciation

Governmental Framework : Foreign Investment

Foreign Investment Policy :
FIs can have JVs with Indian Cos. 100% FDI : automatic approval FIs can have Liaison Office in India BOO projects allowed with PPAs Indian Cos. can accept Foreign Investment on automatic route


Regulatory Frame Work : Central Commission

Stage - I Development of electricity market facilitated through : Tariff Regulations Grid Code Regulations for private entry Competitive bidding guidelines Electricity trading Power Exchange Merchant Power Plants

Regulatory Framework : Central Commission

Stage - II Tariff Regulations Specified for solar technologies with option for (i) generic or (ii) project specific tariff Upfront levelised tariff for entire useful life (25 yrs) Inter-State transmission charges and losses waived Threshold capacity for inter-State grid connectivity reduced to 50MW, individually or collectively.

Regulatory Framework : Central Commission

Generic Tariff Norms :
Capital Cost Debt : Equity Depreciation ROE (pre tax) Interest on Loan Loan repayment : Rs. 14.42 Cr/MW (PV), Rs. 15 Cr/MW (Th.) : 70 : 30 : 7% (first 10 yrs) : 19% (10 yrs), 24% (beyond) : Basic Rate + 150 points : 10 years

Capacity utilization Factor : 19% (PV), 23% (Th.) Govt. subsidy to be factored in

Regulatory Framework : State Commissions

Tariffs determined for various RE technologies CERCs tariff regulations being adopted Renewables Purchase Obligation with annual increase announced for State sources


Regulatory Framework : Forum of Regulators

Recommends fixing of RPO taking total resources in country as a whole Renewable Energy Certification evolved for adoption by State Commissions Task Force set up for addressing grid connectivity issues


Solar Development Status

Clarity of policy and regulatory issues ensured Indigenous manufacturing capability increasing Lesser dependence on imports 694 MW grid connected projects under development, 306 MW grid connected projects being finalized under JNNSM 100 MW small and roof top projects cleared 1000 MW under construction/finalization in States outside JNNSM

Energy Cooperation in Asia

Adoption of best practices Capacity Building Technology Transfer Supply of equipment Investment in plant and machinery Joint Ventures


Platforms for cooperation in South Asia

Potential for cooperation has to be harnessed :
Bilateral negotiations SAARC SAFIR BIMSTEC APPP Other recognized channels

Ashok Basu 91-33-98319-64646