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Centre’s must-run path at odds with Madhya Pradesh’s price out strategy

According to reports, the Centre and states are working at cross-purposes in the renewable energy sector. Close on the heels of a move by states such as Rajasthan and Tamil Nadu to stonewall solar and wind power generation by randomly-issued backing down instructions, Madhya Pradesh’s electricity regulatory commission has now floated a proposal that would, in essence, take away the “must run” status of renewable energy and subject it to “merit order dispatch” by the state grid operator.

The move flies in the face of provisions of the Electricity Act, National Electricity Policy and National Tariff Policy to promote use of energy from renewable sources by according it a “must run” status, which emanates from the Indian Electricity Grid Code notified by the Central Electricity Regulatory Commission (CERC) and adopted by the state regulators. The “merit order dispatch”, on the other hand, is a principle followed for conventional generation sources that essentially ranks available sources of electrical generation based on the ascending order of prices and sequences them accordingly. A shift to the merit order dispatch would push costly solar and wind power down the pecking order.

Existing investors in the sector are already wary on account of state-owned power distribution utilities (discoms) in states such as Rajasthan and Tamil Nadu moving to curtail solar and wind power generation and randomly issuing backing down instructions — asking generators to unplug from the grid. Discoms in Tamil Nadu, Madhya Pradesh, Maharashtra and Rajasthan are also reported to be delaying payments to generators of wind and solar power by 6-12 months, putting the cash flows of most of the smaller renewable firms under severe stress.

Ironically, this comes at a time when the National Democratic Alliance (NDA) government at the Centre is pushing an aggressive renewable energy strategy that aims to ramp up the share of green power in the country’s electricity supply mix from the current seven per cent to nearly 20 per cent by 2022. In a bid to somewhat mitigate the move by states to blockade renewable generation, the Ministry of New & Renewable Energy (MNRE), on August 23, issued fresh guidelines for competitive bidding for procuring solar power under which it proposed generation compensation for constraints and has stressed on the “must-run” status for solar projects, alongside a stipulation that unilateral termination or amendment of PPAs for solar projects be disallowed.

According to analysts, the MNRE notification, while being a step forward in sending a message to states on reinforcing solar as “must run”, falls short on a number of counts. Firstly, there is provision for just fifty per cent compensation against backing down of solar. Further, the compensation for backing down due to transmission constraints is to be made good in the next three years. In effect, this could mean that the notification only brings about partial relief. Also, the principle of deemed generation seems to have been done away with. Also, guidelines for wind are yet to be issued.

Clearly, the Madhya Pradesh proposal of “merit order dispatch” negates the MNRE bidding guidelines for solar power. The amendment by the state regulator on the principal regulation governing the ‘Scheduling of Co-generation and Renewable Sources of Energy’ proposes that “…the generation from Co-generation and Renewable Sources of Energy shall be subject to “Scheduling” and “Merit Order Dispatch Principles” as decided by the Commission from time to time”. Currently, the scheduling of Wind Electric Generators with collective capacity of 10 MW and above and solar generating plants with collective capacity of 5 MW and above are as per the decision of the CERC. Under the current Grid code of Madhya Pradesh, (Reg. 8.3(c)), the state load dispatch centre (the state-level grid manager) is mandated to “regulate the overall state generation in such a manner that generation from power stations where energy potential, if unutilised, goes as a waste shall not be curtailed. These include wind and solar power stations, run of river or canal based hydro stations, hydro-station where water level is at peak reservoir level or expected to touch peak reservoir level (as per inflows) and nuclear power stations.

The slugfest between the states and the Centre on green power comes at a time when capacity addition in the renewable energy sector has shown its strongest performance in 2016-17, with a record capacity addition of 11,320 MW that eclipsed the thermal power segment’s 11,551 MW during

the fiscal. As of March 31, the total grid-connected renewable power capacity in the country stood at 57,260 MW (close to 20 per cent of India’s overall installed capacity of 3,29,000 MW). Based on the current capacity addition targets, India is forecast to meet 19 per cent of its power demand from renewable energy sources in five years, by fiscal year 2022. Commissioned projects being asked to back down is bad news for new projects.

In light of the strong of backing down instructions by utilities in states such as Tamil Nadu and Rajasthan, an increasing number of petitions have been filed by developers before the central and state power regulators. In the last 24 months, there were at least 19 petitions by more than half-a-dozen players — including ReNew Wind Energy, CLP Wind Farms, Orange DND Wind Power, Ostro Renewables, Clean Wind Power (Devgarh), Mytrah Vayu, Tanot Wind Power — alleging that states such as Rajasthan are frequently backing down renewable energy generation on a frequent basis during the peak season citing grid security as the reasons, resulting in generation losses of upwards of Rs 100 crore for these firms on a cumulative basis. “The situation of state utilities forcing solar and wind units to back down continues to date,” an executive of one of the affected companies told The Indian Express.

The CERC, while acknowledging the loss of generation for solar and wind players due to grid unavailability or back-down instructions, has now stepped in to mandate that utilities should issue written explanations in the case of back-down instructions that have been issued to renewable players due to issues other than grid security and reliability. The central regulator has directed the National Load Despatch Centre (NLDC), the apex body entrusted with ensuring integrated operation of the national power system, to work with the State Load Despatch Centres (SLDC) to evolve such a framework.

* Discoms in Tamil Nadu, MP, Maharashtra and Rajasthan are also reported to be delaying payments to generators of wind and solar power by 6-12 months
* In light of the string of backing down instructions, an increasing number of petitions have been filed by developers
* The slugfest between the states and the Centre on green power comes at a time when capacity addition in the renewable energy sector has shown its strongest performance in 2016-17

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