Wind Force Newsletter May, Edition, 2012

Enabling High Efficiency and Reliable Wind Power Projects
2

Policy and Regulatory

1. Andhra Pradesh Electricity Regulatory Commission (APERC): Final retail supply
tariff schedule for FY 2012-13

Category KV level Existing Tariff (Rs./Kwh) Proposed Tariff
(Rs./Kwh)

Green Power (HT VII) 132 KV and above 6.70 7.00

33 KV 6.70 7.00

11 KV 6.70 7.00

Impact: Once the Open Access policy of use of power from wind gets clear in
Andhra Pradesh, sale of wind power under 3rd Party/ Group Captive structure with
Renewable Energy Certificate (REC) shall be very attractive owing to the high HT
Tariff.

2. Ministry of Power (MOP): Committee for Accelerate Development of
Renewable Energy
Ministry of Power (MOP) has constitute a committee for accelerate development of
Renewable Energy through legislative changes and to evolve competitive bidding
guidelines for procurement of RE power from Distribution licenses under sec 63 of
EA 2003 and to address issues relating to connectivity and evacuation
infrastructure.

Issues to be considered for Legislative Changes:
 Legislative Changes for long term RPO trajectory and deterrent against non
compliance of RPOs (empowering Regulators to specify RPO targets including
measures by way of penalty for non compliance, in addition to that provided in
sec 142) in accordance with NEP and Tariff Policy.
 To make specific provision in the Act to empower Regulators to create innovative
market based instruments like REC for the development of RE Sector.
 Need to make provision for levying of RPO on the consumption of the OA
consumers and captive power producers in the Act with more clarity.
 Renewable Energy Technologies to be covered under the competitive bidding
guidelines.
 To identify the issues at stake in the context and suggest measures including
provision of funds towards facilitating up gradation/development of
transmission infrastructure.
 Role of various organizations like MNRE, CEA, CTU etc for planning, generation,
transmission and distribution of electricity through RE sources.
 Examination of the provisions pertaining to treatment of financial support/soft
loans extended for development of projects based on RE sources of energy
while determining the tariff from these sources.

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3. KERC: APPC for Fy13
KERC notified APPC of Rs. 2.73/unit for the Financial Year 2012, which ended on
31.03.2012. Commission as an interim measure continues the pooled cost at Rs.
2.73/unit for FY13 also. Any variation in pooled cost based on actual power
purchase cost of FY12 as may be notified by the Commission in the near future shall
be adjusted in the future bills. Hence, in exercise of the powers conferred under
Clause 7(c) of the KERC (Procurement of Energy From Renewable Sources)(First
Amendment) Regulations, 2011, for the purpose of REC, KERC hereby continues the
pooled cost at Rs.2.73/unit till 30th June 2012 or further notification, whichever is
earlier.

4. Government again pushes for swift implementation of open access in power
sector
According to the initial directive issued in November 2011, every consumer with
over 1 MW of power consumption can opt to become an open access user and that
the State Electricity Regulatory Commission would have no right to regulate the
power procurement price for such users, except for wheeling charges and
surcharge. It also stated that a consumer may opt to procure power through
competing sources (say through open access as well as through distribution
companies). In such a case, the distribution companies "do not have an obligation
to compulsorily provide power to such consumers." The distribution company,
however, would be duty bound to provide the open access users access to its
network when the users intend to use it. The open access users need not seek
permission from the distribution company to use its network.

5. APERC: Redetermination of control period of wind tariff order 2009 and
determination of tariff for future wind energy projects
INWEA has filed a petition with APERC regarding redetermination of control period
of wind tariff order 2009 and determination of tariff for future wind energy
projects. Some of the key points discussed are as follows:
 Limit the control period of existing wind tariff order to December 2011 instead
of March 2014.
 Tariff as proposed by INWEA for future wind power project is Rs 4.92 per unit.


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6. KERC: Retail tariff for 2012-13
Karnataka Electricity Regulatory Commission (KERC) has announced retail tariff for
2012-13. Key points discussed are as follows:
The below mentioned tariff is applicable to all DISCOMS (BESCOM, MESCOM,
HESCOM, GESCOM,CESC) in Karnataka.

Energy Charges Existing Tariff New tariff

HT Industrial

For 1 - 1 lac Units (Rs./unit) 4.90 5.10

For above 1 lac units (Rs./unit) 5.20 5.40

HT Commercial

For 1 - 2 lac Units (Rs./unit) 6.30 6.50

For above 2 lac units (Rs./unit) 6.60 6.80

Cross Subsidy surcharge (CSS): Open access consumers who opt to buy power from
generating companies or trading companies other than ESCOMs directly (even if
they are using ESCOM's network) are required to pay CSS in addition to wheeling
charges. The rates of cross subsidy surcharge vary from 11 paise per unit to Rs 2.05
per unit depending upon the voltage level and the tariff applicable to the relevant
category of consumers. The CSS payable for 2012-13 by HT industrial consumers
at 66 kV & above voltage level will be 43 paise/unit and at 33/11 kV voltage levels
it will be 11 paise/unit respectively. Similarly, the cross subsidy for HT commercial
consumers at 66 kV & above voltage level will be 205 paise/unit and at 33/11 kV
voltage level will be 173 paise/unit.

Wheeling charges and wheeling losses:
ESCOM's Wheeling charges and Wheeling losses at HT Level

Existing New

Wheeling charges Wheeling losses Wheeling charges Wheeling losses
(Paise per unit) (%) (Paise per unit) (%)

BESCOM 10.0 2.94% 10.0 4.02%

MESCOM 19.0 4.35% 21.0 4.32%

HESCOM 20.0 9.38% 19.0 8.57%

GESCOM 20.0 5.98% 22.0 5.88%

CES Corp. 18.0 5.13% 19.0 5.20%


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The wheeling charges as determined above are applicable to all the open
access/wheeling transactions for using the ESCOM network, except for energy
wheeled from Non Conventional Energy (NCE) sources to the consumers in the
State.

For the wheeling of NCE energy within the State, the Commission decides to
continue the existing wheeling charges at 5% of the injected energy and for wind
and mini-hydel sources of energy, additional banking charges at 2%, irrespective
of the network used.

Transmission Charges & Losses: Transmission charges for long term open access
consumer is Rs. 1, 12,224/MW/Month & for short term open access consumer is as
follows:

Transmission Charges (Rs/MW) Fy13

More than 12 hrs & upto 24 hrs in a day in one block 922.39

More than 6 hrs & upto 12 hrs in a day in one block 461.19

Upto 6 hrs in a day in one block 230.60

Transmission losses for FY 2013 is 3.96%

7. CSERC: Notification regarding the date of applicability of RPO on captive and
open access consumer
Chhattisgarh State Electricity Regulatory Commission (CSERC) has issued
notification regarding the date of applicability of RPO which specifies the date of
applicability of RPO as April 1, 2012 for the captive and open access (OA)
consumers. Renewable Energy or REC if procured by captive and open access (OA)
consumers during the period March 4,2011 to March 31, 2012 for meeting
renewable purchase obligation shall be considered as deemed to have been
procured for FY 2012-13 and shall be adjusted against their RPO for year 2012-13.

8. Important order regarding clarification APPC Price by TNERC
Commission clarifies that the pooled cost of power purchase will be determined by
the Commission on a yearly basis based on the records to be furnished by
TANGEDCO and the rates so fixed shall be payable year after year. The fixed rate of
Rs 2.37 per Unit is applicable for 2010-11 only and can be extended beyond that
date if no new rate is fixed. Commission therefore directed that the pooled cost of
power purchase shall be the rate as specified by the Commission on a yearly basis
and shall be payable to such of those generators who have entered into an Energy
Purchase Agreement based on average power purchase cost for the purpose of
availing REC benefit.


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9. CERC’s final RE tariff order for FY 2012-13
CERC has issued final RE tariff order for FY 2012-13. Some of the key points
discussed are as follows:
a) Suggestions by stake holders (investors etc):
 Must run status should be given to wind energy projects.
 Forecasting of wind energy generation within range of +/- 30% as per
IEGC-2010 is not possible.
 Some method should be adopted where errors are minimal

Decision by CERC: The review of the above-mentioned points as suggested are not
the subject matter of present regulatory process which has been initiated for
determination of generic tariff

b) Useful Life and Tariff Period for Wind Power Projects: 25 years and 13 years
respectively
c) Capital Cost for FY 2012-13 for Wind Power Projects: INR 575 Lakh/MW
d) Return on Equity:
(a) 20% per annum for the first 10 years, and
(b) 24% per annum from the 11th year onwards
e) O&M expenses for Wind Power Projects: INR 9 lakh per MW with an escalation
of 5.72% p.a.
f) Generic Tariff for Wind Power Projects for FY 2012-13

Particulars Levellised Benefit of Net Levellised
Total Tariff AD Tariff (upon
(if availed) adjusting of AD)
(if availed)

Wind Energy (INR/Kwhr)

Wind Zone -1 (WPD upto 200 W/m2 - CUF 20%) 5.96 0.60 5.36

Wind Zone -2 (WPD 201-250 W/m2 - CUF 22%) 5.42 0.55 4.87



Wind Zone -5 (WPD above 400 W/m2 - CUF 32%) 3.73 0.38 3.35

10. MERC (Maharashtra State Electricity Regulatory Commission) has issued Final
RE Tariff order for FY 2012-13
MERC (Maharashtra State Electricity Regulatory Commission) has issued Final RE
Tariff order for FY 2012-13
a) Capacity Utilization Factor (CUF) specified for wind energy projects as per
WPD have been considered same as earlier


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b) Tariff for New RE Projects for FY 2012-13 - Wind
Wind Energy Tariff Period Levellised Benefits of Net Levellised Tariff upon
Tariff for FY Accelerated adjusting for Accelerated
2012-13 Depreciation (if Depreciation Benefit (if availed)
availed)

Years Rs/kWh Rs/kWh Rs/kWh

WindZone-1 13 5.67 0.81 4.86

WindZone-2 13 4.93 0.70 4.23

WindZone-3 13 4.20 0.60 3.60

WindZone-4 13 3.78 0.54 3.24

11. TNERC (Tamil Nadu Electricity Regulatory Commission) has issued final order
on Determination of Tariff for HT
TNERC (Tamil Nadu Electricity Regulatory Commission) has issued final order on
Determination of Tariff for HT Consumers and Determination of Intra-State
Transmission Tariff:

Tariff category Energy charge (Paise/Kwhr)

Previous Tariff New Tariff

HT IA 400 550

High Tension Tariff III 550 700

With this increase in tariff in the state, OA of wind power will turn out to be more
viable option.

12.APERC: announced Renewable Purchase Obligation (RPO), Renewable
Energy Certificate (REC) regulations 2012
APERC (Andhra Pradesh Electricity Regulatory Commission) has announced
Renewable Purchase Obligation (RPO), Renewable Energy Certificate (REC)
regulations 2012. The key points discussed are as follows.
Till the issue of order regarding the Pooled Cost of Power Purchase, the Pooled Cost
of Power Purchase of the previous year shall continue to be valid as Provisional
Pooled Cost of Power Purchase. After the issue of order for the Pooled Cost of Power
Purchase by the Commission, the difference with the Provisional Pooled Cost of
Power Purchase shall be adjusted equally in the bills of the next two months or as
decided by the Commission in the order determining the Pooled Cost of Power
Purchase for that year.
Provided further, that the Pooled Cost of Power Purchase applicable for the period
from the date of publication of these Regulations in the Andhra Pradesh Gazette
till 31-05-2012 shall be R 2.00 per unit which shall be treated as ad-hoc notional
pooled cost of power purchase of the previous year.
APERC has announced the RPPO for various entities like the DISCOMS, OA
Consumers, Captive Consumers on the quantum of electricity to be purchased from
renewable sources to meet the RPPO.


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Renewable Power Purchase Renewable Power Purchase Renewable Power Purchase
Obligation (RPPO) for DISCOM Obligation (RPPO) for Open Obligation (RPPO) for Captive
access consumer consumer

Every DISCOM shall purchase Every open access consumer in the Every consumer owning a captive
electricity from different types of state of AP shall purchase from generating plant of installed
renewable energy sources, a renewable energy sources, a capacity of One (1) MW shall
quantum of not less than 5% its quantum of not less than 5% of its purchase Renewable Energy
energy, during each of the years energy, during each of the years Certificates corresponding to a
from 2012-13 to 2016-17. from 2012-13 to 2016-17 Provided quantum of not less than 5% of its
Provided that a minimum of 0.25 % that a minimum of 0.25 % point out energy, during each of the years
point out of the 5% Renewable of the 5% Renewable Power from 2012-13 to 2016-17 Provided
Power Purchase Obligation (RPPO) Purchase Obligation (RPPO) above that a minimum of 0.25 % point out
above specified, shall be procured specified, shall be procured from of the 5% Renewable Power
from generation based on solar as generation based on solar as Purchase Obligation (RPPO) above
renewable energy source renewable energy source specified, shall be procured from
generation* based on solar as
renewable energy source

* Note: Interestingly for the DISCOM and open access consumer the commission is saying to purchase of energy
not less than 5% from RE sources and can buy equivalent REC's to fulfil RPPO. But in case of Captive consumer
commission is saying first to purchase REC for quantum not less than 5% and then it says provided purchase of
energy from RE sources shall also be treated as fulfilment of RPO.

Conditions for Accreditation
A generating company [including a Captive Power Producer (CPP)] in AP engaged in
generation of electricity from RE sources shall be eligible for obtaining
accreditation from the State Agency if it fulfils the following conditions:
a) It does not have any Power Purchase Agreement for the capacity related to such
generation to sell electricity at a tariff determined by the Commission from time to
time for sale of energy to a distribution licensee;

b) It sells the electricity generated either (i) to the distribution licensee in the State
of Andhra Pradesh at the pooled cost of power purchase, or
(ii) to any other licensee or (iii) to an open access consumer at a mutually agreed
price, or (iv) through power exchange at market determined price.

c) In respect of CPP, it has not at all availed or does not at all propose to avail any
benefit in the form of concessional / promotional transmission or wheeling
charges, banking facility and waiver of electricity duty. The entire energy generated
from CPP including self consumption shall be eligible for RECs.


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What’s New
1. Installed Capacity of Indian Wind Power in FY 12
FY'12 Installation*

State MW % Share

Tamil Nadu 1086.73 34.34%

Gujarat 790 24.98%

Rajasthan 545.65 17.25%

Maharashtra 408 12.90%

Karnataka 178.65 5.65%

Madhya Pradesh 100.4 3.17%

Andhra Pradesh 54 1.71%

Total 3163.43

*As per market report

2. FDI for wind power generation is now allowed
FDI in wind power generation, involving the installation and sale of electricity
produced by wind power generators has now been allowed to be brought in.

3. C-WET RLMM - 19.03.12
Key Inclusions (WTGs) in RLMM List dated 19.03.12
1. Kenersys K100 (RD100, HH85/100) – 2.5 MW
2. Suzlon S95 DFIG (RD95, HH80/90/100) – 2.1 MW
3. Suzlon S97 DFIG (RD97, HH80/90/100) – 2.1 MW
4. Suzlon S88 DFIG (RD88, HH80) – 2.25 MW


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4. India's Onshore Wind Energy potential is 3000 GW
A study is pegging Indian potential for wind power at 3,000 GW. C-WET estimated
Indian wind farm potential at 49,000 MW at 50 m Hub Height and increased to 100
GW subsequently at 80 m Hub Height.
"Scientific and research work carried out by Indian wind industry expert Jami
Hossain (Chief Mentor & Co-founder WinDForce) has inspired scientists at
Lawrence Berkley National Laboratory (LBNL) to challenge assessments of the
Chennai based government agency CWET, on the potential for wind farms in India.
Hossain in his paper, published in the international renewable energy journal
Renewable Energy, presented his findings on the assessment for potential for
windfarms using Geographical Information System Platform," read a media
s t a t e m e n t i s s u e d b y Wo r l d W i n d E n e r g y A s s o c i a t i o n ( W W E A ) .

After re-assessing the land that can be used for wind power development, so as to
take into account previously excluded lands, Lawrence Berkeley has come to the
conclusion that the true potential of wind energy in India is between “20 and 30
times higher than the current official estimate of 102 GW.”

It was previously thought that only 2 per cent of lands in windy areas could be used
for putting up wind power projects.

Lawrence Berkeley found after the study that a lot more land was available even
after excluding lands with low wind speeds, lands with slopes greater than 20
degrees and elevation higher than 1,500 metres.

The study looked at wind speeds at heights of 80 metres, 100 metres and 120
metres.

The study found that 1,629 sq.km of area is available for putting up wind turbines at
heights of 80 metres with PLF more than 25 per cent.
“The main importance of this study, why it's groundbreaking, is that wind is one of
the most cost-effective and mature renewable energy sources commercially
available in India, with an installed capacity of 15 GW and rising rapidly,” says
Berkeley Lab scientist Mr Amol Phadke, who authored the report.
“The cost of wind power is now comparable to that from imported coal and natural
gas-based plants, and wind can play a significant role by effectively addressing
energy security and environmental concerns.” The study has come to the attention
of the Ministry of New and Renewable Energy also.
Source:
"Reassessing Wind Potential Estimates for India: Economic and Policy Implications" can be downloaded at:
http://ies.lbl.gov/node/473


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5. Windmill developers to lose tax breaks
Windmill developers will no longer enjoy lower tax outgo in the first year, for
investing in windmills.
Effective 1st April 2012, accelerated depreciation – which allows the investing
company to fast track the write-off of certain assets for tax purposes - will not be
allowed to wind energy developers. The Income Tax department has amended the
rules regarding this, through a notification.
Until FY-12, a deduction of up to 80 per cent was allowed if the wind project was
commissioned before September of a fiscal. Projects commissioned in the next half
of the fiscal got a 40 per cent deduction. Now developers will only be allowed 15 per
cent depreciation.
But wind equipments will still enjoy the 20 per cent additional depreciation
prescribed for power equipments in the recent Budget. That would make for an
effective 35 per cent depreciation.
Accelerated depreciation allowed developers to reduce their tax outgo in the first
year as the 80 per cent deduction of investments lowered the taxable profits.
It was in 2009 that the Government decided to give incentives to developers for
their generation and brought in generation-based incentive scheme (GBI). The
move is therefore expected to weed out players who are not serious about
generating wind power. Other captive players in sectors such as textiles and cement
who had wind power plants in hand may also see some impact.
The GBI was active till registration of 4000 MW or 31st March 2012, which ever
earlier. As on date AD has gone and technically GBI is also not clear, this may result
in major impact on wind industry, at least in near future.

REC & GBI Update (till 31.03.12)
REC
Total Accredited = 1226.935 MW – Wind Specific
Total Registered = 1063.48 MW – Wind Specific
Total Issued = 10, 54,243 RECs
Total Redeemed = 10, 15,698 RECs

GBI
Total Capacity Requested for Registration and Registered (MW) for GBI = 1568.49 MW -
Wind Specific


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REC Trading

Primarily, summarizing FY'12, total 9,51,008 RECs were traded at an average rate of Rs
2829/ MWh (at IEX). As expected, the volume trade showed an increase in Q4 with 58%
of REC being traded in this quarter alone for the year. This may be because of
participation of most of the state power distribution companies in the trading, as RPO
deadlines for FY12 approached. The above graph indicates that in last FY the REC
volume traded at IEX was increasing every month. Moreover traded equilibrium price
had also shown some confidence among the stakeholders.
This year, April being 1st trading month of the FY, it was expected that Trading Volumes
will be among the lowest and the clearing price shall also fall drastically. But the market
again has shown some maturity and more than 70,000 RECs were traded in April 2012
@ Rs 2201/ MWh rate at both the exchanges. For the continuous growth of REC Market,
it is very necessary that the entities which have not matched their RPO in FY12 must be
penalized ASAP otherwise other entities which are following the RPO shall start
deviating. Following the same in May'12 trading session total around 1,70,000 RECs
were traded of which 1,53,125 RECs were traded @ Rs 2402/ MWh rate and other
15,550 REC @ Rs 2150/ MWh rate.
This trading session a total 10 Solar RECs of M&B Switch Gears were also traded @ Rs
13000/ MWh rate.

Electricity Price

From the above graph it is observed that during last one year short term market price of
electricity in bilateral arrangement is higher than that at power exchanges. This analysis
includes only inter-State transactions. In October 2011, there was steep hike in price at
the exchanges because of major power crises in various power surplus states in India.
The issues encountered were resolved and power prices at exchanges has now again
settle down as seen in the graph above.


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Rupesh Singh
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E-mail: rupesh@windforce-management.com

A WinDForce Publication
Disclaimer - This Newsletter has been compiled by WinDForce Management Services Private Limited
for circulation among the stakeholders in the energy market. Though the contents of this bulletin are
correct to the best of our knowledge, WinDForce does not vouch for their accuracy.


Wind Force Newsletter May, Edition, 2012

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