According to reports, the Andhra Pradesh solar policy announced a few days ago has generally been hailed as a very investor-friendly policy and one that has the scope to make the State “another Gujarat.”
But nevertheless, some experts see red in the details.
The policy does not provide a higher feed-in tariff, instead gives project developers a host of concessions, such as exemptions from several charge and tax credits on inputs, and encourages them to avail themselves of the tradeable renewable energy certificates.
The RECs can be traded in one of the two energy exchanges in India (IEX or PXIL) and the prescribed minimum price is Rs 9.3 a unit of electricity.
Fantastic, said the industry. For Ardeshir Contractor, Managing Director and CEO of Kiran Energy, the AP policy was a “dream come true.” The IFC and Bessemer Venture Parters-funded company had already been working on putting up a 50 MW project in the State and the policy made their deal sweeter.
But now it is dawning on many that things may not be all that simple. The policy, which relies heavily on the REC mechanism to induce developers to put up projects in the State, goes against the very principle of renewable energy certificates — that the entity will get the certificates only if it does not avail itself of other benefits.
The certificates are issued by the National Load Despatch Centre, a body of the Ministry of Power.
NLDC follows the guidelines of the Central Electricity Regulatory Commission (CERC).
The CERC guidelines clearly say that RECs will be available only to those developers who do not avail themselves of other concessions, such as lesser or exempt wheeling and banking. NLDC is allowed to follow the guidelines of the respective State Electricity Regulatory Commission, too. However, in the case of Andhra Pradesh, again the APERC’s guidelines also say (in Clause 6 (c) that those who get concessions are not eligible for RECs.
The big worry in the minds of investors is whether NLDC will refuse to issue RECs to the solar projects set up in Andhra Pradesh.
“The State solar policy is expected to create a serious conflict with APERC as well as CERC regulation on REC. The State Nodal Agency being appointed by APERC, would naturally follow the guidelines issued by the APERC. This means, solar project developers participating into REC mechanism might not be able to claim all the benefits that are proposed under the State solar policy,” says Vishal Pandya, Director, REConnect, a consultancy that helps companies secure and trade in RECs.