Summer Internship Report

On
"Unleashing the potential of renewable energy to meet the RPO of captive power plant, VAL,
Jharsuguda and study the RE potential of Odisha of with comparative financial analysis".

UNDER THE GUIDANCE OF

Mrs. Karishma, Senior fellow,(CAMPS,NPTI)
&
Mr. MANAS TYAGI, AGM
Captive Power Plant
Vedanta Aluminium Limited, Jharsuguda

Submitted by: Mahesh Kumar Gupta

Regn.No: 12-NPTIF-0107
MBA (POWER MANAGEMENT)
AT

(Under the Ministry of Power, Govt. of India)

Maharishi Dayanand University, Rohtak

Haryana, India
August,2013

DECLARATION

I, Mahesh Kr. Gupta, Regn.No: 12-NPTIF-0107 student of MBA-POWER MANAGEMENT

(2012-14) batch of the National Power Training Institute, Faridabad hereby declare that the
Summer Training Report entitled

"UNLEASHING THE POTENTIAL OF RENEWABLE ENERGY TO MEET THE RPO

OF CAPTIVE POWER PLANT, VAL, JHARSUGUDA & STUDY THE RE POTENTIAL
OF ODISHA OF WITH COMPARATIVE FINANCIAL ANALYSIS".

is an original work and the same has not been submitted to any other Institute for the award of
any other degree.
A Seminar presentation of the Training Report was made on 3rd September, 2013 and the
suggestions as approved by the guide were duly incorporated.

Presentation In-Charge

Signature of the Candidate

(Faculty)

Countersigned
Director/Principal of the Institute

Page | 2

ACKNOWLGEDEMENT
I am having a great pleasure to present this report entitled "Unleashing the potential of renewable
energy to meet the renewable purchase obligation of captive power plant, Vedanta Aluminium
Ltd., Jharsuguda and study the RE potential of Odisha of with comparative financial analysis". I
take this opportunity to express my sincere thanks to make this a success.I am grateful to
Vedanta Aluminium Ltd. for giving me the opportunity to do my summer internship with
company.

I would like to thank Mr. G. Sambha Shiva Rao ,HEAD CPP(O&M), Vedanta Aluminium
Ltd.,for giving me the opportunity to do the summer internship project in the company.I express
my sincere gratitude towards my industry guide Mr. MANAS TYAGI,Associate General
Manager(CPP), for his able guidance, continuous support and cooperation throughout my
project.

I also extend my special thanks to Mr. VAMSIDHAR MANGU,(SENIOR CONSULTANT)

PWC of the company, for their keen interest as well as constant support & help in the successful
completion of this report.

I feel deep sense of gratitude towards Mr. J.S.S. Rao, Principal Director, Corporate Affairs
(NPTI), Mr. S. K. Chaudhary, Principal Director, CAMPS, my internal Project Guide Mrs.
Karishma, Senior Fellow, NPTI, Mrs. Manju Mam, Deputy Director, NPTI for arranging my
internship at Vedanta Sterlite and Mr. Rohit Verma, Deputy Director, NPTI for being a constant
source of motivation and guidance throughout the course of my Internship.

Words could never be enough to express my true regards to all those who in some or the other
way helped me in completing this project. I cant in full measure, reciprocate the kindness shown
and contribution made by various persons on this endeavour of mine. I shall always remember
them with gratitude and sincerity. I take this opportunity to thank all those who have been
instrumental in completion of my training.

Thank you all for being there for me always

(Mahesh Kr. Gupta)

Page | 3

TABLE OF CONTENTS
Sr. No.

CONTENTS

Chapter

Page No.

CERTIFICATE FROM INDUSTRY

DECLARATION

ii

ACKNOWLEDGEMENT

iii

TABLE OF CONTENTS

iv

LIST OF FIGURES

vi

LIST OF TABLES

vii

ABBREVIATIONS

ix

EXECUTIVE SUMMARY

INTRODUCTION

1.1

Problem Statement

1.2

Research Objective

1.3

Organization Profile

LITERATURE REVIEW AND RESEARCH

METHODOLOGY

Central Electricity Regulatory Commission

2.1.1

Introduction to such changes

2.1.2

Issues regarding PPA

2.1.3

Issues Regarding seasonal PPA in case of Co-gen

2.1.4

Procurement of electricity by a distribution

licensee

National Action plan For Climatic Change

10

National Solar Mission

11

2
2.1

2.2
2.2.1

Page | 4

2.2.2

Solar RPO target

12

2.3

OERC on RPO

13

2.4

National Tariff Policy

13

2.5

RPO Key features

13

Assessment of Solar Power Potential in odisha

16

Background

17

2.6.1

Electricity in Constitution of India

17

2.6.2

Present power Scenario of Indian Power sector

17

2.6.3

Total Installed Capacity

17

RE Technology

19

2.7.1

Types of Solar Power Plants

19

2.7.2

Working of Photovoltaic cell

19

2.7.3

Solar Thermal Power System

19

2.7.4

Layout of Solar Thermal Power plant

20

2.7.5

Solar Thermal Power Plants using parabolic

trough

20

2.7.6

Solar Power Towers

21

2.7.7

Solar Thermal Power plants using solar parabolic

dish

21

Wind Technology

21

REC MECHANISM

24

REC Mechanism

24

Introduction

24

3.2

Why REC Mechanism has been created?

27

3.3

Key Objectives for Introduction of REC

27

2.5.1
2.6

2.7

2.8
3
3.1
3.1.1

Page | 5

Mechanism
3.4

Key Design Features

27

3.5

Features

28

3.6

Development of RECs

28

3.7

Operational Framework

29

3.8

Role Of Various entities in REC mechanism

31

3.9

Institutional Framework

33

3.10

Pricing Of REC components

34

3.11

Bid and sell of RECs

37

3.12

REC data at IEX

37

3.13

Aspects considered for REC design in Indian

Context

38

3.14

Salient features of REC

38

CALCULATION OF RPO AND RECs FOR

VAL, JHARSUGUDA

41

Calculation of RPO

41

4.1.1

Capacity in Mw to Generation in MU conversion

41

4.1.1

Important facts to calculate RPO

41

4.2

Solar RPO

43

4.3

Non-Solar RPO

45

4.4

REC calculation

46

Generation into Number of RECs Conversion

46

RE POTENTIAL IN VAL, JHARSUGUDA

AND ODISHA

47

RE potential in VAL, Jharsuguda

47

4
4.1

4.4.1
5
5.1

Page | 6

5.2

Study of RE potential in Odisha

47

5.3

Indicative potential of different Sources in odisha

49

5.4

Availability of waste Land in Odisha

50

5.5

Drivers of Growth

55

5.6

Solar Potential and Possible sites

57

5.7

Wind Power potential and Possible sites

58

5.8

Proposed Biomass parks in Odisha

60

COMPARATIVE FINANCIAL ANALYSIS

OF RE SOURCES

61

6.1

Financial Analysis

61

6.2

Financial Analysis of Solar RPO

62

6.2.1

Net Profit per year from Solar Power plant

62

6.2.2

Break-up Cost for Solar Power plant

63

6.3

Financial Analysis of Non-Solar RPO

64

6.4

Financial Analysis of RECs

65

7.1

SUGGESTIONS AND
RECOMMENDATIONS

68

7.2

BIBLIOGRAPHY AND REFERENCES

70

7.3

ANNEXURE - I

73

7.4

ANNEXURE II

76

Page | 7

LIST OF FIGURES:
NAME OF FIGURE

Page No.

Figure 2.1: All India Generated Capacity(MW)

18

Figure 1.2: Layout of Solar Thermal Power Plant

20

Figure 2.2: Layout of Solar Trough System

20

Figure 2.3: Concentrating Solar Power and parabolic trough

21

Figure 2.4: Wind Technology

22

Figure 3.1:REC mechanism

30

Figure 3.2: Institutional Framework of REC

33

Figure 3.3: REC market for june 2013

38

Figure 4.1: Graph for capacity requirement of Solar power plant

44

Figure 4.2: Graph for capacity requirement of Non-Solar Power Plant

46

Figure 5.1: Graph for solar irradiance figure of jharsuguda

48

Figure 5.2 Growth drivers

49

Figure 5.3Solar power density map of India

51

Figure 5.4 Solar sites in Odisha

53

Figure 5.5 Wind power sites

55

Figure 5.6 Wind power map

58

Figure 5.7 Biomass sites map in Odisha

64

Figure 6.1 Graph of Co-generation RPO

66

Page | 8

LIST OF TABLE:
NAME OF TABLE

Page No.

Table 2.1: Solar RPO target

12

Table 1.2: Generic Tariff for Solar Thermal

14

Table 2.2: Assessment of Renewable energy Potential

16

Table 2.3: Total Installed Capacity

17

Table 2.4:Total Electricity Generation of india by 31st may 2013

18

Table 3.1:REC data at IEX

37

Table 3.2:REC key features

38

Table 3.3:REC market for June 2013

39

Table 4.1:Annual Consumption

42

Table 4.2:RPO as per OERC

43

Table 4.3:Solar energy Resources

43

Table 5:Solar sources Requirement on re technology basis

44

Table 4.5: Non-Solar RPO

45

Table 6.6: Non-Solar Requirement

45

Table 7.1:Geographical Location of Jharsuguda

47

Table 5.2:Solar irradiance figure of Jharsuguda

47

Table 5.3:Solar sites in VAL

49

Table 5.4:Gross potential in odhisa

49

Table 5.5:Solar power potential at selected sites

51

Table 5.6:Availability of potential waste land

53

Table 5.7:Min quantum of RPO

54

Table 5.8:RPO regulation by OREDA

56

Page | 9

Table 5.9:Solar power required in Odhisa

58

Table 6.1:Cost analysis of Solar & Non-Solar

59

Table 6.2:Cost analysis of Solar based on technology

63

Table 6.3:Net profit at Solar plant

65

Table 6.4:Break up-cost for Solar PV

66

Table 6.5:Cost analysis for Non-Solar RPO

66

Table 6.6:Net profit on Non-Solar plant

68

Table 6.7:Solar RECs to meet RPO

69

Table 6.8:Non-Solar RECs to meet RPO of VAL

71

Table 6.9:Non-Solar RECs to meet Co-generation

72

Page | 10

EXECUTIVE SUMMARY

As a student of MBA in Power Management from National Power Training Institute, I got an
opportunity to do my summer internship at Vedanta Aluminium Limited, Jharsuguda. I was
given a project regarding meeting the RPO compliance of VAL, Jharsuguda with its financial
analysis.
The project explains Renewable Purchase Obligation and the way to meet it either buying
Renewable Energy Certificates or installing a Power Plant from Renewable energy sources or
purchasing power from any Renewable Energy Generator. The compliance is only applicable to
entities like Open Access Consumers, Distribution licensees, Captive Generators. The Orissa
electricity Regulatory Commission made some changes on the target given by Central Electricity
Regulatory Commission. The present RPO is 6% of the power consumed by the company
leaving the traded and auxiliary power generated from the Captive Generating Plant. As per the
Regulation by the honorable commission the compliance will increase by 0.5% in the
consecutive years which comprises 0.05% in Solar Power, 0.2% in Non-Solar Power and 0.25%
in Co-Generation respectively. Till now the regulations has only mentioned the compliance till
2015-16.
In the report the mechanism of REC has been explained and the calculation method. I have
calculated the RPO compliance of VAL, Jharsuguda for three consecutive years till FY15-16
from this year onwards. The validity of RECs is for 730days. For non-compliance of RPO the
amount of penalty that will be charged at Forbearance price. Forbearance price is the
maximum cost of REC.
The financial analysis that has been shown that it is better to install a RE power plant rather
than to purchase RECs. The reason for this is that VAL has to purchase RECs every year where
as the plant will run for 25 years.

Page | 11

I find in this report that VAL, Site has the potential of Solar, Biomass and RE-Cogen. So it is
better to meet Solar RPO. VAL should install its own Solar Power Plant while to meet the NonSolar RPO; it has two options either to purchase Non-Solar REC or to buy electricity from IndBharat Utkal Private Limited, Jharsuguda.
Any obligated entities has to purchase RE electricity only from local RE Generators or
Distributors. In this Report I have also attached the financial modeling of RE power plants
(FY13-14) which follows CERC norms.

Page | 12

ABBREVIATIONS:
OERC

Orissa Electricity Regulatory

Commission

IPTC

Independent Power Transmission

Company

CERC

Central Electricity Regulatory

Commission

IS

Indian Standard

NAPCC

National Action Plan for

Climatic Change

RE

Renewable Energy

ACS

Average Cost of Supply

DMRPS

Dynamic Minimum Renewable

Purchase Standard

REC

Renewable Energy Certificate

NREL

National Renewable energy

laboratory

RPO

Renewable Purchase Obligation

kV

Kilo Volt

ARR

Average revenue Realized

kWh

Kilowatt Hour

EPS

Earnings per Share

IGCC

Integrated Gasification Combustion

Cycle

ATO

Annual Turn Over

SPO

Solar purchase Obligation

CAGR

Compound Annual Growth Rate

NTP

National tariff policy

CEA

Central Electricity Authority

FOR

Forum Of Regulators

WDV

Written Down value

IEGC

Indian Electricity Grid Code

Co-Gen

Cogeneration

MNRE

Ministry of Non-Renewable
Energy

CPP

Captive Power Plant

WISE

World Institute for Sustainable

Energy

CTU

Central Transmission Utility

OREDA

Orissa renewable Energy

Development Authority

VAL

Vedanta Aluminium Limited

IREDA

India Renewable Energy

Development Authority

DISCOM

Distribution Company

SPV

Solar Photo Voltaic

Page | 13

CGP

Captive Generating Plant

EA

Electricity Act-2003

APCC

Average Pooled Purchase Cost

SLDC

State Load Dispatch Centre

EE

Electrical Equipment

JNNSM

Jawaharlal Neheru National Solar

Mission

SAM

Solar advisory Model

IISC

Indian Institute of Science

EPC

Engineering, Procurement,
Construction

TERI

The Energy and Resources Institute

EU

European Union

STE

Solar Thermal Energy

FY

Financial Year

SEB

State Electricity Board

FYP

Five Year Plan

STU

State Transmission Utility

GENCO

Generation Company

OA

Open Access

PPA

Power Purchase Agreement

RPS

Renewable Portfolio standard

PT

Preferential Tariff

NLDC

National Load Dispatch Centre

IEX

Indian Energy Exchange

CUF

Capacity Utilization factor

PXIL

Power Exchange India Limited

GRIDCO

Grid Corporation Of Orissa

Limited

AD

Accelerated Depriciation

NRSA

National Remote Sensing Agency

GBI

Generation Based Incentive

MSW

Municipal solid Waste

GOI

Government Of India

SHP

Small Hydro Power

INR

Indian Rupees

YoY

Year on Year

Page | 14

Chapter-1
INTRODUCTION
1.1Problem Statement:
Since the cost of electricity generated from conventional power plants (Fuel: Coal, Oil, Gas) is
less; most of the manufacturing industries for their own use setup their Captive Plants. Although
the cost of power generation is less but the adverse impacton environment is very high.
Alternatively they are responsible for emission of carbon to the atmosphere. In due course of
time The National Action Plan for Climatic Change (NAPCC) has come into existence by the
Union Government and hence by that policy India has to reduce carbon emission. With this
action the Central Electricity Regulatory Commission has brought certain regulations and with
that the companies having Captive Power Plants, Open Access consumers and Distribution
Licensee have to generate a certain percentage of their usage either from renewable energy or by
buying Renewable Energy Certificates (RECs) or by paying penalties. Hence the problem
statement is
How to meet Renewable Purchase Obligation of (CPP) VAL, Jharsuguda as per Orissa
Electricity regulatory Commission".
1.2 Research Objective:
CPP is one of the obligated entities to meet RPO; as per CERC regulation Renewable Purchase
Obligation can be fulfill by three ways:

Generate it yourself.

Purchase it from RE generators or licensees.

Purchase RECs from IEX or PXIL.

In India, RPO varies from one state to others depending on their respective Regulatory
commissions. Orissa electricity regulatory commission classified RE sources into Solar, NonSolar and Co-Generation to meet RPO. The Report will explore the possibilities for
RE sources in VAL site and Orissa

Page | 15

 Provide a comparative financial analysis of whether to purchase RECs or to set up its RE

Power Plant itself or to purchase power from RE Generators so as to meet current as well as
future RPO.
Optimization of project cost.

1.3 About the Organization:

Vedanta Group/Vedanta Resources:Vedanta Resources plc is a global diversified metals and mining company headquartered in
London, United Kingdom. It is the largest mining and non-ferrous metals company in India and
also has mining operations in Australia and Zambia. Its main products are copper, zinc,
aluminium, lead and iron ore.

History:-The Company was founded by Anil Agarwal in Mumbai in 1976. It was first listed on
the London Stock Exchange in 2003 when it raised $876 million through an Initial Public
Offering it acquired Sterlite Gold, a gold mining business in 2006. It raised an additional $2bn
through an ADR issue in 2007.

Vedanta have experienced significant growth in recent years through various expansion projects
for our copper, zinc, lead, silver, aluminium ,iron ore & power business, vedanta resources
overall revenue for the fiscal year ending 31March 2013 was US $ 15 Billion. It is the world
largest integrated Zinc lead producer & among the top producers of copper, Iron ore & silver.
They embedded sustainable development into all aspects of what they do & support communities
where they operate to improve the quality of life.
About 2.7 million people in about 550 villages have benefitted from their programs that include
sustainable livelihood development, education, women empowerment & health case. vedanta's
aanganwadis cater to 1.25 lakh children, while as many as 2.5 lakh children receive nutritious
meals every day. Investments in computer education has benefitted 10 lakh students, while they
have provided healthcare for over 22 lakh people, they also support more than 35,000 women
through 2,00 women self-help groups.
In last five years, these groups have reduced their energy consumption by over 40%, last year
they planted 759,000 trees bringing the total no. of trees on their operations to 12 million.
Page | 16

Vedanta Resources is a globally diversified natural resources group with revenues in excess of
US$ 11 billion. They are the first Indian manufacturing company to be listed on the London
Stock Exchange. Their experienced workforce of over 31,000 people is distributed among their
operating locations in India, Zambia, Namibia, South Africa, Liberia, Ireland and Australia.
The principal members of their consolidated group of companies are as follows:
Operations:-

Area

Subsidiaries
Sterlite Industries (India) Ltd.: Sterlite is registered office headquartered
in Tuticorin, India. Sterlite has been a public listed company in India since
1988, and its equity shares are listed and traded on the NSE and the BSE,
and are also listed and traded on the NYSE in the form of ADSs. Vedanta
owns 53.9% of Sterlite and has management control of the company.

Copper

Konkola Copper Mines: Vedanta own 79.4% of KCMs share capital and
have management control of the company. KCMs other shareholder is
ZCCM Investment Holdings Plc. The Government of Zambia has a
controlling stake in ZCCM Investment Holdings Plc.
Copper Mines of Tasmania Pty Ltd.: CMT is headquartered in
Queenstown, Tasmania. Sterlite owns 100.0% of CMT and has management
control of the company.
Hindustan Zinc Limited: HZL is headquartered in Udaipur in the State of
Rajasthan. HZLs equity shares are listed and traded on the NSE and BSE.

Zinc

Sterlite owns 64.9% of the share capital in HZL and has management
control. Sterlite has a call option to acquire the Government of Indias
remaining ownership interest.

Aluminium

Bharat Aluminium Company Ltd.: BALCO is headquartered at Korba in

the State of Chhattisgarh. Sterlite owns 51.0% of the share capital of
BALCO and has management control of the company. The Government of
India owns the remaining 49.0%. Sterlite exercised an option to acquire the

Page | 17

Government of Indias remaining ownership interest in BALCO in March

2004.

Vedanta Aluminium Ltd.: Vedanta Aluminium is headquartered in

Jharsuguda, State of Orissa. Vedanta owns 70.5% of the share capital of
Vedanta Aluminium and Sterlite owns the remaining 29.5% share capital of
Vedanta Aluminium. Vedanta Aluminium produces ingots, billets & wire
rods that are sold in the markets around the World. Vedanta Aluminium
Limited (VAL) has acquired 24.5% stake in L & T subsidiary
RaykalAluminium. Based on achieving certain milestones, VAL will fully
acquire RaykalAluminium in phases.
Madras Aluminium Company Ltd.: MALCO is headquartered in Mettur,
India. MALCOs equity shares are listed and traded on the NSE and BSE.
They own 93.9% of MALCOs share capital and have management control
of the company.
Sesa Goa Limited: Sesa Goa is headquartered in Panaji, India, and its
Iron ore

equity shares are listed and traded on the NSE and BSE. Vedanta owns
57.1% of Sesa and has management control of the company.

Commercial
power
generation
business

Sterlite Energy Limited: Sterlite Energy is headquartered in Mumbai.

Sterlite owns 100.0% of Sterlite Energy and has management control of the
company.

Vedanta Aluminium Ltd:

Vedanta Aluminium Ltd. is an associate company of the London stock exchange listed, FTSE
100 diversified Vedanta resources plc. Originally incorporated in 2001, VAL is leading producer
of metallurgical grade alumina & other aluminium products, which cater to a wide spectrum of
industries. Vedanta resources have over 31,000 employees worldwide.

Page | 18

Corporate Overview:
VAL has carved out a niche for itself in the aluminium industry with its superior product quality
based on state of art technology.The firm operates a 1mtpa green-field alumina refinery and an
associated 90MW captive plant at langigarh in the state of orissa. Plans are afoot to increase the
capacity of the langigarh refinery significantly to 5 mtpa.This is in line with VAL's strategy to
promote langigarh as a self-sustained manufacturing unit in terms of cost advantage & resource
availability.
VAL has invested in a 0.5 mtpaaluminium smelter & 9*135 (1215MW) captive power plant
supported by highly modern infrastructure at jharsuguda by highly modern infrastructure at
Jharsuguda, Orissa, In addition to this, construction of 1.1 mtpaaluminium smelter expansion
project at Jharsuguda is under process, the company intends to expand the fully integrated
Aluminum smelting capacity to 2.6 mtpa in near future.

Jharsuguda is also the site of the 4*600 (2400MW) Independent power plant (IPP) being set up
by group company Sterlite energy ltd. to meet the growing demand for power from both urban &
rural consumers.

Vedanta
Resources

79.4%
Konkola
Copper
Mines

70.5%

54.6%

VedantaAlu
minium

29.5%

94.8%

Sterlite
Industries

3.6%

55.1%

Madras
Aluminium

40.1%

Sesa
Goa

18.7%

Cairn
India
Limited

51%
51.0%
Bharat
Aluminium

64.9%
Zinc
India
(HZL)

100%
Skorpion
&Lisheen

74%

100%

Black
Mountain

Sterlite
Energy

100%
Australian
Copper
Mines

Liberia
Iron Ore
Assets

Page | 19

CHAPTER 2
LITERATURE REVIEW REGULATORY FRAMEWORK
&
RESEARCH METHEDOLOGY

2.1 CENTRAL ELECTRICITY REGULATORY COMMISSION,NEW DELHI

Explanatory Memorandum for the Draft Central Electricity Regulatory Commission (Terms and
Conditions for recognition and issuance of Renewable Energy Certificate forRenewable Energy
Generation) (Second Amendment) Regulations, 2012

The Commission had notified the CERC (Terms and Conditions for recognition and issuance of
Renewable Energy Certificate for Renewable Energy Generation) Regulations,2010 (hereinafter
Principal REC Regulations) vide notification dated 14th January, 2010.

The Commission had further clarified that the REC mechanism aimed at promoting additional
investment in the renewable energy projects and to provide an alternative mode to the RE
generators for recovery of their costs.Subsequently, the Commission made amendment in the
Regulation 5 of Principal REC Regulations vide notification dated 20th September, 2010
(hereinafter Amendment Regulations). The principal objective of the Amendment Regulations
was to provide clarity on applicability of the regulations to eligible entities and bring in certain
essential checks and balances in the REC related process.

Transactions in RECs over the past two years have provided valuable insights into the operation
of the REC mechanism as envisaged in REC Regulations. Several important milestones have
been reached in the trading sessions for non-solar and solar RECs. Renewable Energy generators
with a total capacity of 3,552 MW have been accredited for RECs out of which 3,237 MW of
capacity have got registered as on 15th October 2012.One principal concern is the need for
creation of demand for RECs and consequent price discovery. Demand for REC today is largely

Page | 20

driven by CPPs and Open Access consumers. Distribution companies are not participating in
large number in the REC market.

Section 86 (1) (e) of the Electricity Act, 2003, which requires the State Commission to promote
cogeneration and generation of electricity from renewable sources of energy by Providing
suitable measures for connectivity with the grid and sale of electricity to any person, and also
specify, for purchase of electricity from such sources, a percentage of the total consumption of
electricity in the area of a distribution license.

The Central Commission, as a consequence of its roles for market development under section 66
of the Electricity Act, 2003 has created a market framework through the REC mechanism that
would help compliance of the obligations set out by the State Commissions across the country.

The Commission also appreciates that some of the issues identified are of great significance and
would need to proceed along a logical path of progression. Addressing such issues would require
very extensive consultation with State Commissions and the state levelstakeholders.

2.1.1Addressing issues regarding REC market:

Introduction of such changes prematurely may affect the REC markets adversely, and may also
create distortions that would be difficult to undo subsequently. Accordingly, following issues are
proposed to be addressed through the present amendment as per the details given below:
(a) Eligibility criteria for issuance of Certificate for:
Renewable energy contracted through competitive bidding;
Self-consumption by a seasonal RE generator;
Self-consumption by a renewable energy based captive generating plant (CGP) and by a
renewable energy generator other than a CGP.
(b) Clarity on minimum capacity requirement for eligibility for Certificate;
(c) Procurement of electricity at Average Pooled Purchase Cost (APPC) rate as
determined by appropriate Commission;

Page | 21

(d) Extension of time period for applying for issuance of Certificate; The detailed amendments
proposed through modifications in the present regulations are elaborated upon in the following
section.

2.1.2 Issues regarding treatment of PPA entered through competitive bidding and not
through cost plus tariff determined by the regulators:

REC Regulations at present do not allow issuance of Certificates to a renewable energy generator
selling power at preferential tariffs. The term preferential Tariff has been defined in the REC
Regulations as the tariff fixed by the Appropriate Commission for sale of energy, from a
generating station using renewable energy sources, to a distribution licensee. This definition is
stated to leave out the tariff adopted by the Appropriate Commission under section 63 of the Act.

Renewable energy generators (selected through competitive bidding under section 63 of theAct)
cannot be given REC credit, as this would amount to double counting of the greenattributes.
Accordingly, it is proposed to clarify through suitable amendment in Regulation 5(1) (b) of the
REC Regulations and substitute the definition of preferential tariff by the definition of tariff as
tariff determined under section 62 or adopted under section 63 of the Act by the Appropriate
Commission

Amendment of Regulation 2 of Principal Regulations:

Sub-clause (k) of clause (1) of Regulation 2 of the Principal Regulations shall be deleted.
Sub-clause (b) of clause (1) of Regulation 5 of Principal Regulations shall be substituted as
under:"(b) it does not have any power purchase agreement for the capacity related to such
generation to sell electricity at a tariff determined under section 62 or adopted under section 63
of the Act by the Appropriate Commission:

2.1.3 Issue of Seasonal PPA in cases of bagasse based cogeneration:

It has been represented that there is a need to address the issues related to quantum of selfconsumption of a bagasse based cogeneration plant with co-located load of sugar mill, where the
capacity available for PPA based sales to the utility as per tariffs determined by the State
Page | 22

Commission varies from season to season and year to year, depending on the nature of the
Internal consumption requirements of such co-gen units.
Bagasse based cogeneration power plants are generally established for meeting primarily the
self-load requirement of Sugar Mills and sale of surplus quantum if any. In order to promote
setting up of such power plants, the state and respective commissions have passed relevant
regulations/orders for export of surplus power available after meeting their captive requirement.
The Commission is of the view that any investor while participating under competitive bidding
quotes tariff after considering all costs as well as risks involved during the life time of the
operation of renewable energy generation project, and offers the green energy in its totality and
not the electricity component and green attribute separately.
It is abundantly clear that under PPA that the bagasse based Co-generation plants havebeen
established primarily to meet their own power requirement (self-consumption). The PPA was
signed with the sole intention only to sell Surplus power.

2.1.4 Procurement of electricity by a local distribution licensee at the rate of pooled cost of
purchase as determined by appropriate Commission:

The term Pooled Cost of Purchase has been defined in the Principal REC Regulations as
under: Introduction of such changes prematurely may affect the REC markets adversely, and
may also create distortions that would be difficult to undo subsequently. Accordingly, following
issues are proposed to be addressed through the present amendment as per the details given
below:

(a) Eligibility criteria for issuance of Certificate for:

Renewable energy contracted through competitive bidding;
Self-consumption by a seasonal RE generator;
Self-consumption by a renewable energy based captive generating plant (CGP) and by a
renewable energy generator other than a CGP;
(b) Clarity on minimum capacity requirement for eligibility for Certificate;
(c) Procurement of electricity at Average Pooled Purchase Cost (APPC) rate asdetermined by
appropriate Commission;
Page | 23

(d) Extension of time period for applying for issuance of Certificate;

(e) Extension of shelf life of the Certificate;
(f) Clarity on whether Certificates should be issued to an eligible entity from date of Commercial operation or from the date of registration; the detailed amendments Proposed through
modifications in the present regulations are elaborated upon in the following section.

2.2 National Action Plan For Climatic Change:

On June 30, 2008, Prime Minister Manmohan Singh released Indias first National Action Plan
on Climate Change (NAPCC) outlining existing and future policies and programs addressing
climate mitigation and adaptation. The plan identifies eight core national missions running
through 2017 and directs ministries to submit detailed implementation plans to the Prime
Ministers Council on Climate Change by December 2008.
Dynamic Minimum Renewable Purchase Standard (DMRPS) may be set, with escalation each
year till a pre-defined level is reached, at which time the requirements may be revisited.
Emphasizing the overriding priority of maintaining high economic growth rates to raise living
standards, the plan identifies measures that promote our development objectives while also
yielding co-benefits for addressing climate change effectively. It says these national measures
would be more successful with assistance from developed countries, and pledges that Indias per
capita greenhouse gas emissions will at no point exceed that of developed countries even as we
pursue our development objectives.
Procurement of renewable based power by the State Electricity Boards/other power utilities
should, in so far as the applicable renewable standard (DMRPS or SERC specified) is concerned,
be based on competitive bidding, without regard to scheduling, or the tariffs of conventional
power (however determined).
Renewable based power may, over and above the applicable renewable standards, be enabled to
compete with conventional generation on equal basis (whether bid tariffs or cost-plus tariffs),
without regard to scheduling (i.e.) renewable based power supply above the renewable standard
should be considered as displacing the marginal conventional peaking capacity). All else being
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equal, in such cases, the renewable based power should be preferred to the competing
conventional power.
2.2.1 National Solar Mission: The NAPCC aims to promote the development and use of solar
energy for power generation and other uses with the ultimate objective of making solar
competitive with fossil-based energy options. The plan includes:
Specific goals for increasing use of solar thermal technologies in urban areas,
industry, and commercial establishment.
A goal of increasing production of photovoltaic to 1000 MW/year; and
A goal of deploying at least 1000 MW of solar thermal power generation.
Other objectives include the establishment of a solar research center, increased international
collaboration on technology development,strengthening of domestic manufacturing capacity, and
increased government funding and international support.
The NAPCC also describes other ongoing initiatives, including:

Power Generation: The government is mandating the retirement of inefficient coal-fired

power plants and supporting the research and development of IGCC and supercritical
technologies.

Renewable Energy: Under the Electricity Act 2003 and the National Tariff Policy 2006, the

central and the state electricity regulatory commissions must purchase a certain percentage of
grid-based power from renewable sources.

Energy Efficiency: Under the Energy Conservation Act 2001, large energy-consuming

industries are required to undertake energy audits and an energy labeling program for appliances
has been introduced.
As per Tariff Policy, the solar power purchase obligation for states may start with 0.25% in
Phase I (by 2013) and go up to 3% by 2022.RE resources are unequally distributed in the country
with some states having abundant supply. This makes it difficult for the RE deficit states to meet
their RPO targets. To counter this issue, REC mechanism was introduced. Discomscould buy
RECs from power exchanges and fulfill their RPO.NAPCC envisages a national level 10% RPO
level to be achieved by 2015 increases 1% every year up to 15% till 2020.
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2.2.2 Solar RPO Target:

As per Tariff policy, Solar RPO has to begin with 0.25% by 2013 and reach 3% by 2022.

Table no-2.1
To achieve 3% RPO compliance by 2022, we would need ~34,000MW of solar capacity.

2.3 ORISSA ELECTRICITY REGULATORY COMMISSION ON RPO:

OERC also determined the tariff from the Renewable Sources of Energy through a Suo Motu
proceeding initiated for finalization of policy on harnessing of power from RE sources of energy
including co-generation. Commission in its Petition No.37/2008 (Suo Motu) dtd.14.09.2010
determined the generic tariff for various renewable sources of energy for the control period
2010-11 to 2012-13.
In the said order the Commission mentioned that in case of Solar PV and Solar Thermal
Projects the bench mark cost may be reviewed by the Commission annually. The Commission
has determined the generic tariff for Solar PV and Solar Thermal Projects to be set up in Odisha
with technical and financial parameters.

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2.4 NATIONAL TARIFF POLICY: HARNESSING RE

Clause 6.4 of NTP States:

Pursuant to provisions of section 86(1) (e) of the Act, the Appropriate Commission
shall fix a minimum percentage for purchase of energy from such sources taking in
to account availability of such resources in the region and its impact on retail tariffs.
Such percentage for purchase of energy should be made applicable for the tariffs to
be determined by the SERCs latest by April 1, 2006.

2.5 RPO: Key Features

RPO refers to regulations that require large consumers/ distributors of electricity to consume a
certain minimum percentage of electricity from renewable sources.
RECs are similar to Carbon credits in International market. They are tradable and will be
available to RE power producer and are traded domestically.
Specify some percentage of renewable energy every utility need to purchase:

Single target for overall renewable energy purchase,

Usually close to existing purchase levels,

In some cases Y-o-Y targets,

no technology specific targets

Period is up to five years,

Not applicable to OA/Captive in only three States and they are Arunachal Pradesh,
Sikkim, West Bengal
Purchase of RE from outside the State has not been permitted,
Silent on mode of procurement, competitive or cost based
Implementation mechanisms need further refinement
Weak on enforcement methodology

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2.6 Solar Market status in India:

1. The continuous lowering of price in the International Market has compelled CERC to take a
view on tariff for Solar PV and Solar Thermal sources annually.

The capital cost constitutes

80% of the total project cost. The revision in capital cost approved by CERC and corresponding
change in the generic tariff for Solar PV and Solar Thermal sources from 2010-11 to 2012-13 is
shown in the table below:

Financial

Capital cost

Year

CERC Tariff

OERC Tariff

(withoutaccel. Deprn.)

(withoutaccel. Deprn.)

Rs./Kw/hour

Rs./Kw/hour

Solar

Solar

Solar PV

Solar Thermal

Solar PV

Solar

PV

Thermal

2009-10

17.00

15.30

2010-11

16.90

15.30

17.91

15.31

17.80

14.73

2011-12

14.42

15.00

15.39

15.04

17.80

14.73

2012-13

10.00

13.00

Thermal

Table no -2.2

2. CERC has also approved the price of Renewable Energy Certificates (RECs) to meet Solar
Power Obligation (SPO) for the Control period of 5 years from 1st April, 2012 to 31st March,
2017 reducing almost 22% from the current price as indicated in table below:
3. In the 27th Meeting of Forum of Regulators (FOR) held on December 16, 2011 at Raipur,
Mr.Tarun Kapoor, Jt. Secretary, MNRE presented the Solar Power Scenario in India today and
Page | 28

declared that looking at the present response from Solar Manufacturing Industry, MNRE is now
sure that Solar Power will attend grid parity by 2017. Mr.Kapoor said that the highlights of the
latest round competitive bidding for 350 MW Solar Power under Phase-I JNNSM Programme
are as under: The lowest bid was offered by M/s Solar Direct India for 5 MW Solar Power Plant in
Rajasthan @ Rs.7.49/Kwh.
The highest bid was offered by M/s Green Infra Solar Project Ltd. For 20 MW Solar Power
Plant in Rajasthan @ Rs.9.44/Kwh.
The average price of winning bids was Rs.8.78/Kwh which is 49% of Rs.17.91/Kwh and
57% of Rs.15.39 per Kwh approved by CERC for FY 2010-11.
4. Rajasthan bagged offer for 295 MW Solar Power Plant out of 350 MW offered.

5. In India, there are 51 Module Manufacturers (9 of whom also make cells) having a combined
capacity of 1500 MW but these industries are now working at a Capacity Utilization Factor
(CUF) of 20% even though 1000 MW worth of Solar Power Plants are under construction in the
country today under $20 billion worth under JNNSM. 80% of Demand has been met by imports
leading to the so-called Death of Manufacturing in India.

6. Due to drop in the demand in the biggest market World over, European, Chinese and
American Manufacturers are left with huge inventory of solar modules and cells and these are
being liquidated / dumped in India at a throw away prices. The US Company Solyndra has sold
some solar modules at a dirt cheap price of 55 Cents/Watt to some Solar Power Developers of
India. Indian Solar Module Manufacturers have therefore represented MNRE to recommend to
Ministry of Finance to impose a 15% Customs Duty on imported modules and cells.

7. For harnessing Renewable Energy in Odisha, OREDA the State Nodal Agency for
Renewable Energy has assessed Renewable Energy potential of about 16230 MW, Science and
Technology Dept., Govt. of Odisha has assessed the feasible potential as 11820 MW whereas

Page | 29

WISE- engaged as Consultant by OERC has assessed RE potential of the State of about 7874
MW as shown in Table 2.3:

Assessment of Renewable Energy Potential (in MW)

Source

Science & Technology

Dept. Govt. of Odisha

OREDA

WISE

Wind

800

1700

2430

Solar

10000

14000

5000

Biomass

900

350

240

Small Hydro

120

160

184

Municipal waste

NIL

20

20

11820

16230

7874

Total

Table 2.3
8. Odisha is having good potential for setting up of solar projects as can be seen from the table
at para-8 above but is lagging behind the other States in attracting any major solar projects. The
relevant extract of the Study of WISE engaged by the Commission is as under:

India, due to its geo-physical location, receives solar energy equivalent to nearly 5,000 trillion
kWh/year which is equivalent to 600 GW. This is far more than the total energy consumption of
the country today. But India produces a very negligible amount of solar power - mere 0.2 percent
compared to other energy resources.

Further, entire electricity generation is using Solar Photovoltaic (SPV) technology as power
generation using solar thermal technology is still in the experimental stages. Currently, India has
less than 7 MW of grid connected solar PV capacity.

Following map depicts solar energy potential in the country. While India receives solar
radiation of 5 to 7 kWh/m2 for 300 to 330 days in a year, power generation potential using solar
PV technology is estimated to be around 20MW/sq. km and using solar thermal generation is
estimated to be around 35MW/sq. km.

Page | 30

2.7 BACKGROUND:

2.7.1 ELECTRICITY IN CONSTITUTION OF INDIA:

Item 38 in List III of the Seventh Schedule of the Constitution of India places electricity in the
concurrent list, that is, on which both the central and state governments have jurisdiction
.However by virtue of part XI of the constitution, in case of overlapping of the law enacted by
state and union legislature, the union legislation shall prevail. The state law shall be inoperative
only to the extent of inconsistency with the union law.

2.7.2 PRESENT POWER SCENARIO OF INDIAN POWER SECTOR:

India ranks 5th in terms of Installed electricity Capacity after USA, China, Japan, Russia.

2.7.3 Total Installed capacity:

SECTOR

MW

%AGE

STATE SECTOR

90317.2

40.96

CENTRAL SECTOR

67309.1

29.81

PRIVATE SECTOR

65999.56

29.23

TOTAL

225793.72

100.00

Table no-2.4

Private sector participation in capacity addition has been increased significantly compared to
previous years percentage which is a good sign but still more participation needed in growth
perspective.

Page | 31

TOTAL ELECTRICITY GENERATION OF INDIA AS PER 31ST MAY-2013

FUEL

MW

%AGE

THERMAL

153,847.99

68.14

COAL

132,288.39

58.58

GAS

20,359.85

9.01

OIL

1,199.75

0.53

HYDROELECTRIC

39339.40

17.42

NUCLEAR

4780.00

2.11

RES** (MNRE)

25856.14

11.45

TOTAL

225793.72

100.00

Fig-2

Page | 32

2.8 RE-TECHNOLOGY
2.8.1 TYPES OF SOLARPOWERPLANTS:
1) Photovoltaic power plants
2) Solar thermal power plants

2.8.2 WORKING OF PHOTOVOLTAIC CELLS:

A typical silicon PV cell is composed of a thin wafer consisting of an ultra-thin layer of

phosphorus-doped (N-type) silicon on top of a thicker layer of boron-doped( P-type) silicon.

An electrical field is created near the top surface of the cell where these two materials are

in contact, called the P-N junction.

When sunlight strikes the surface of a PV cell , this electrical field provides momentum

and directiontolight-stimulatedelectrons,resultinginaflowofcurrentwhen the solar cell is

connected to an electrical load.

2.8.3 SOLAR THERMAL POWER SYSTEM:

Solar thermal energy (STE) is a technology for harnessing solar energy for thermal energy
(heat). Solar thermal collectors are classified by the United States Energy Information
Administration as low, medium, or high are generally used-temperature collectors. Hightemperature collectors concentrate sunlight using mirrors or lenses and for electric power
production. STE is different from and much more efficient than photo voltaic, which converts
solar energy directly into electricity.
Types of technologies used in solar thermal power plants:

Solar thermal plants using parabolic trough.

Solar Power Towers.

Solar thermal power plants using solar parabolic dish.

Page | 33

2.8.4 Layout of Solar Thermal Power Plant:

Fig-2.2
2.8.5 Solar thermal plants using parabolic trough:

In these solar thermal plants parabolic trough is installed. It consists of the long array of
curved mirrors that form the sort of trough and they focus suns rays on pipe through which
the fluid usually the water flows. Due to focused sun rays the fluid gets heated and its steam is
formed. The steam flows through the conventional generators to produce electricity. The
solar thermal plants using parabolic troughs are the most commercialized of the lot.

Fig-2.3

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2.8.6 Solar Power Towers:

In the solar power tower the field of mirrors is used to reflect the solar energy towards the
central tower in which there is a fluid usually water .The fluid gets heated and converted into
steam, which turns the turbine as is done in conventional power plants.

2.8.7 Solar thermal power plants using solar parabolic dish:

The parabolic solar dish comprises of the parabolic shaped concentrator that have shape
similar to the satellite dish. The reflectors are installed on their inner surfaces that reflect the
solar energy at the focal point at the Centre where the receiver is mounted. In the receiver the
heat engine is installed that generates the electricity.

Fig-2.4
2.9 Wind Technology:

Before the advent of wind turbine people uses windmill captures wind energy and then uses a
generator to convert it to electrical energy. But now to harness the energy of the wind turbine is
used which is built to capture the winds energy with 2 or 3 propeller-like which are mounted
Page | 35

on a rotor, to generate electricity. The wind blows and a pocket pressure air forms on the
downward side of the blade, then low-pressure pulls the blade toward it, causes the rotor to run.
Hence a lift and drag occur making the generator to work to make electricity.
The important parts of wind turbine are:-

1)

Anemometer: Measures the wind speed and transmits wind speed data to the controller.

2)

Blades: Most turbines have either two or three blades. Wind blowing over the blades

causes the blades to lift and rotate.

3)

Brake: A disc brake, which can be applied mechanically, electrically, or hydraulically to

stop the rotor in emergencies.

4)

Controller: Thecontrollerstartsupthemachineatwindspeedsofabout8to16 miles per hour

(mph) and shuts off the machine at about 55mph. Turbines do not operate at wind speeds above
about 55 mph because they might be damaged by the high winds.

5)

Gearbox: Gears connect the low-speed shaft to the high-speed shaft and increase the

rotational speeds from about 30to60 rotations per minute (rpm) to about 1000to1800 rpm, the
rotational speed required by most generators to produce electricity. The gear box is a costly
(and heavy) part of the wind turbine and engineers are exploring" direct-drive" generators that
operate at lower rotational speeds and don't need gear boxes.

6)

Generator: Usually an off-the-shelf induction generator that produces 60-cycle AC

electricity. High-speed shaft: Drives the generator. Low-speed shaft: The rotor turns the lowspeed shaft atabout30 to60 rotations per minute.

7)

Nacelle: The nacelles its a top the tower and contains the gear box, low-and high-speed

shafts, generator, controller, and brake. Some nacelles are large enough for a helicopter to land
on.

Page | 36

Fig-2.5

8)

Pitch: Blades are turned, or pitched, out of the wind to control the rotor speed and keep

the rotor from turning in winds that are too high or too low to produce electricity.

9)

Rotor: The blades and the hub together are called the rotor.

10)

Tower: Towers are made from tubular steel (shown here),concrete, or steel lattice.

Because wind speed increases with height, taller towers enable turbines to capture more energy
and generate more electricity.

11)

Wind direction: This is an "upwind" turbine, so-called because it operates facing in to

the wind. Other turbines are designed to run" down wind," facing away from the wind.

12)

Wind vane: Measures wind direction and communicates with the yaw drive to orient the

turbine properly with respect to the wind.

Page | 37

13)

Yaw drive: Upwind turbines face in to the wind; the yaw drive is used to keep the rotor

facing in to the wind as the wind direction changes. Down wind turbines don't require a yaw
drive , the wind blows the rotor down wind.

14)

Yaw motor: Powers the yaw drive.

2.10 Small Hydro Power:

The definition for Small Hydro Power given by CEA is that those hydro power plants whose
capacity dont exceed 25MW. In SHP plants basically the water is stored and used. These are of
two kinds. One is of running water type and the other is of stored kind.

2.11 Biomass Power plants:

In these kinds of Power plants either the Biomass is converted into biogas or directly used to
generate steam which in turn rotates the prime mover. The main difficulty in these kinds of
power plants is thearrangement of fuel and its transportation cost.

2.12 Research methodology:

The research includes the survey report that has been conducted by me inside VAL, Jharsuguda.
In Order to find out the costs associated with various RE power plants are drawn from the
present tariff order set for the financial year 2013-14 set by CERC. The various rates like Return
on Equity, Interest on debt, depreciation amount, Interest on working Capital, Operation and
Maintenance Expenses are scrutinized from OERC tariff Order. Those rates which are not being
mentioned in the tariff order of OERC are from the CERC order. These orders are mentioned in
the annexure in the end of the report.
In order to carry out the financial calculations excel has been used. In order to get an optimized
cost I have used a tool from Operation research i.e. Simplex Method. To solve this problem
Excel Solver has been used. In the end a comparative analysis has been done on the basis of cost
as well as feasibility.

Page | 38

CHAPTER- 3
3.1 REC MECHANISM:

3.1.1 INTRODUCTION:
India has sustained one of the most detailed and comprehensive renewable energy sectors since
a very long time. As far back as the 1980s, solar thermal and solar photo voltaic technology and
biogas was available in the market, for consumption of the masses and the focus was primarily
the rural sector because of, perhaps two major reasons: firstly the requirement for power was
substantially lower in the rural sector and secondly, rural sectors demand for a consistent
supply was also not too strict. In many ways, the effect of this policy was salutary to the nascent
Indian renewable energy market. A primary focus on the rural sector, which lacked grid
connectivity allowed the technologies to grow and also focused the research efforts of many
leading institutions like IISC and TERI towards developing new renewable energy technologies
and improving upon the existing ones.

By nature renewable energy is geography dependent, thus early on, its development and use
were both confined to the areas producing it. Rajasthan was end owed with abundant
INSOLATION, Tamil Nadu with wind and Maharashtra, owing to extensive sugarcane farmingwith bagasse. The generation and consumption were both localized in nature and no plans were
in place for its transmission and distribution. Being costlier in nature, without any incentives,
there would have been no reason for a distributor to buy any renewable energy to supply to his
customers.

But with the progression of time and subsequent development in the country, starting from the
final decade of the previous century, several factors have started contributing to a Sudden
emphasis on the development and consumption of renewable energy. The most important factor
is the spectra of global warming and consequent environmental fallouts that the traditional
sources of energy have. Thermal power plants based on coal, belch out pollutants in the
atmosphere which have cause irreparable damage to the fragile ecosystems that sustain all life
on earth. The requirement of energy can not be practically reduced, so the only way out seems to
reduce the dependence on the traditional sources of energy. This is where renewable energy
Page | 39

scores as a viable option. Second major factor is the highly fluctuating nature of oil prices in the
international markets. Most nations especially developing countries found their development
plans completely thrown off-gear during the last price spurt of oil. Another major contributing
factor is the quest for energy security which the policy makers of the country have been
pursuing right from the time of independence and as has been formally stated in the Integrated
Energy Policy 2006.
These three, together have laid the ground work for renewable energy to become available
option in terms of both sound policy and economic viability. Most renewable energy
technologies are still in a developing phase and in order for them to compete with established
sources of energy there needs to be, a policy support mechanism in its favour to allow it to
mature technologically and achieve economies of scale that are so essential for are duction in its
price versus fossil fuels.
In India, the ElectricityAct2003 is one such legislation which envisions a developed market for
renewable energy in future and took the first steps towards the development of a comprehensive
demand supply mechanism for it. The EA allows the generation to be delicensed and gives a
frame work for its procurement by the distributors. So its a carrot and stick policy as
incorporated into the legal framework of EA2003.There are several incentives that are allowed
to the generators of renewable energy and there are statutory requirements for its procurement
and supply to the end consumers. As the generation of renewable energy is fairly decentralized
in both nature and form, the act rests the responsibility of its promotion on the SERCs.
According to EA, it is the mandate of SERCs to ensure that the electricity mix in the irrespective
states has a fixed percentage of renewable energy. This mechanism is known as the Renewable
Purchase Obligation or the RPO. But there is an inherent flaw in this mechanism. As each state
has its own potential, different states have different RE potentials and thus supply mixes. Also as
the RPO mechanism concentrates mainly on the intra-state use, a state devoid of any potential
didnt have either incentive for using renewable energy nor was there any mechanism for interstate sale of RE. Without such a mechanism, the entire effort can turn into sham as RE would
still be generated and used in isolated pockets only. Also, as RE is a costlier form of power,
states would not want to generate any more than the irrespective RPOs and those states with a
meager RE potential also do not use any RE in absence of any mechanism promoting its interstate purchase.
Page | 40

The National Action Plan for Climate Change announced by the Prime Minister of India in the
year 2008 advocates a greater use of RE in the country. It targets a minimum of 5% RE in the
supply mix of the entire country by 2010, 15% by 2015 and 20% by 2020. To carry its
objectives out, a mechanism has been formed which, the states generating the RE would be
able to use to ensure, that the cost they incur to produce and use RE is spread though out the
system and also to those who can not or will not produce RE. This mechanism was essential
because the existing RPO mechanism is not enough to ensure that the vision of NAPCC comes
to life.

To remove this anomaly, there was a need for an incentive mechanism, which would result in
commercial benefits for the RE generators on the one hand and which would ensure that even
those states which are deficient in RE generation are able to meet their individual RPOs,
thereby facilitating inter state RE transactions. This mechanism would allow even the SERCs of
RE deficient states to increase the RE component in their electricity mix without having to
actually generate it.

To address all these challenges and to turn the environmental celebrity of renewable energy in to
a marketable entity, the concept of Renewable Energy Certificates was developed. Apart from
facilitating inter-state RE transactions, RECs also have some other objectives as well, which can
be identified as:
a. Effective implementation of RPO obligations across all states
b.

Creating competition among competing RE technologies

c.

Protecting the local distribution licensee selling RE

d.

Overcoming geographical impediments to use RE

e.

Reduce the costs for RE transactions

3.2

WHY REC MECHANISM WAS CREATED?

Renewable sources are not spread evenly across country

Many states with no or little RE were not able to promote RE
States with good RE felt they have exhausted their capacity to absorb
Page | 41

It is difficult to carry out inter-State sales using CERC OA Regulations for large scale
deployment of RE due to following reasons:

Most RE generators are difficult to schedule

Transaction would be expensive due to low capacity factors of RE

RE generators are not connected to STU but to discoms

Intra-state balancing systems have not yet stabilized

Therefore, a mechanism that will enable inter-state sale and purchase of renewable energy
was required.
3.3 KEY OBJECTIVES FOR INTRODUCTION OF REC MECHANISM

Effective implementation of RPS.

Increased flexibility for participants.

Overcome geographical constraints.

Reduce transaction costs for RE transactions.

Enforcement of penalty mechanism.

Create competition among different RE technologies.

Development of all-encompassing incentive mechanism.

Reduce risks for local distributor by limiting its liability to energy purchase.

3.3 REC MECHANISM KEY DESIGN FEATURES:

Eligible Source

All sources recognized by MNRE under Renewable Energy Category.

Two Categories of Certificates one for Solar and other for Non-Solar.

Eligible Entities

Grid Connected RE Power Projects having NO PPA at preferential tariff and received
accreditation certificate from State Agency.

Shall sell electricity at Pooled cost of Power Purchase to distribution utility or at

mutually agreed price to any other licensee.

Page | 42

Obligated Entities

As defined by SERC, distribution utility, open Access User, Captive Consumer.

REC Issuing Authority

National Load Dispatch Centre shall issue REC to Generator based on the Energy Injection
Report prepared by SLDC.

Sale/Purchase of REC
Transaction of REC shall take place at Power Exchanges operating under the guidance of
CERC.

3.5 REC MECHANISM DESIGN FEATURES:

Denomination

One (1) REC shall be issued corresponding to 1 MWh of renewable energy is

generated and injected into the Grid.

Form of REC

REC shall be issued electronically to the Generator.

Pricing of REC

To be discovered only on Power Exchanges through auction route.

Floor and Forbearance Price shall be determined by the CERC.

Redemption of REC

Obligated entities shall purchase REC from Exchange Platform and redeem it in lieu to
their fulfillment of RPO with State Agency.Only single trade (once through) permissible
Multiple trades not allowed.

Page | 43

Shelf Life
RE Generator shall apply for issuance of certificate from 3 months of energy injection in the
grid.
REC shall be valid for 1 year from the date of issuance.

3.6 THE DEVELOPMENT OF RECS-APPROACH ADOPTED IN INDIA:

As a mechanism, the concept of REC has been around in developed economies since a bit of a
while. Countries like Denmark, Germany, Norway, Japan which meet a substantial portion of
their electricity requirements through RE, have faced and overcome similar challenges as India
in the past and they were the ones which initially had propounded such a mechanism. But the
context between them and us is different. The mechanism had to be adapted to the local
legislations and other unspoken concerns, most important of which, is the presence of electricity
in the concurrent list in India. The federal structure of the country, the presence of separate
entities which make a fragmented market and regulatory bodies, were to be taken into
consideration while formulating policy concerning RECs .
What India did borrow from international experience regarding RECs was the generally
accepted view that generation of RE represented two disparate products. One was the electricity
itself and the other one was the environmental benefits of the power.

This outlook divides the RE power generated into two separate marketable entities. The
electricity sold to the distributor and the environmental benefit or which the economic system
has to pay the price, in the form of REC. Thus, REC is a tradable certificate.

An other important observation to be noted is that the RE generators will have two options either
to sell the renewable energy at preferential tariff fixed by the concerned Electricity Regulatory
Commission or to sell the electricity generation and environmental attributes associated with RE
generation separately.

Page | 44

3.7 OPERATIONAL FRAME WORK OF THE REC MECHANISM :

In the Indian context, generation of 1MWof RE allocates a REC to the generator, which can be
sold in an energy exchange to an obligated entity which can not find a RE generator to fulfill
its RPO obligations, there by overcoming the geographical constraints the transaction of RE
poses. There are some important points of note here.

REC mechanism is not an incentive scheme. It is simply a market mechanism to enable

various obligated entities to meet their RPO norms asset by their respective SERCs. The
mechanism co-exists with all the current incentive schemes as, these schemes offer incentives
for generation only. Also it is not related to carbon credits. The two mechanisms operate
parallel to each other for the benefit of RE generators.

As can be seen from the figure above, the easiest route of selling RE to the obligated entities is
through the grid, as established by the connection(1).The accounting of the RE produced by the
generators is carried out by the SLDCs(1) the information of which is forwarded to the national
registry(3).

If the generator chooses to sell their RE electricity through the REC route, he makes an
application to the national registry(2),after which a RECs is issued to the generators(4) as per the
amount of power generated, which they can trade in the power exchanges.
If these obligated entities can not achieve their RPOs, they buy RECs in the exchange to make
up for whatever is the deficit in their supply mix (5), which are redeemable at the national
registry itself (6). The compliance reporting is done to the monitoring committee of each state
(7), which submits a quarterly report to each states SERC.

Page | 45

Fig-3.1 Courtesy MNRE

CERC has issued detailed outline of various activities related to issuance and trading of RECs,
along with the fees for the same. According to the commission, the central agency has to issue a
registration to the generating company within a period of three months unless

it finds a

discrepancy in the application. The generating company has to meet one of the eligibility
criteria, as defined by the CERC, and given below, to be designated as an Eligible Entity
before the central agency can grant it registration.

a)

RE Generator does not have any power purchase agreement for the capacity with any entity

which is still in force at the time of his making an application for selling of RECs against the RE
power that produces.
b) The applicant RE generator does not have a PPA with another entity, which has been
terminated within a period of three years prior to his submission of application. Even if the PPA
Page | 46

has been terminated due to non-compliance with the contractual obligations by the RE
generator, RE generator is not eligible to sell his power through the REC route for a period of
three years.
c)

Only if the PPA has been terminated with mutual consent of both the RE generator and the

obligated entity or if the contract has been terminated due to a breach of contract by the
obligated entity to which the RE generator is selling, the RE generator may submit his
application inside a period of three years from the date of termination of the PPA.
d) RE generator has not availed or does not propose to avail any benefit in the form of
concessional/promotional

transmission or wheeling charges, banking facility benefit

and

waiver of electricity duty(this is not related to the generation based incentives that he gets).
e) A period of three years has elapsed from the date off or going the benefits of concessional
transmission or wheeling charges, banking facility benefit and waiver of electricity duty.
f) The benefits of concessional transmission or wheeling charges, banking facility benefit and
waiver of electricity duty has been withdrawn by the State Electricity Regulatory Commission
and/or the State Government.

The NLDC has been nominated by it to act as the central agency

3.8 Role of various entities in the REC mechanism
The functions of the various parties involved in the mechanism are:

CERC: Rule making and transaction charge fixation. The fee and charges payable by the

Eligible Entities(approved RE generators)to participate in the REC Mechanism include:

a) Onetime Registration fee and charges-Rs. 1000 as the application fee, along with Rs.5000
on acceptance of the registration application, payable to the central agency.
b) Annual fee and charges, of Rs.1000 payable by April10 of each year, payable to the central
agency.
c) Transaction fee and charges for issue of certificate-charges for issuance of each certificate is
Rs.10, payable to the central agency.
d) Charges for accreditation-accreditation application charges of Rs.5000 payable to the state
agency. On acceptance of the application a further one-time charge of Rs. 30000 payable to the
Page | 47

state agency. The eligible entity is to also pay a annual charge of Rs. 10000 per application and
in case, are validation is required-a fee of Rs. 15000 for a validation period of 5 years or such a
period as determined by the commission.

Also, as per the CERC-REC Regulation clearly specifies that certain percentage of the
proceeds from the sale of certificates and not from the transaction fees, shall be utilized for the
purpose of training and capacity building of the State Agencies and other facilitative
mechanisms for the implementation and monitoring of the detailed procedures issued by the
Central Agency.

NLDC: The NLDC has been nominated by it to act as the central agency. The CERC

REC Regulations envisage functions of the Central Agency as follows:

Registration of Eligible Entities, Issuance of Certificates, Maintaining and Settling Accounts in
respect of certificates, Repository of Transactions of Certificates and such other functions
incidental to the implementation of Renewable Energy Certificate Mechanism as maybe
assigned by the Commission.

SLDCs: Certificationthey will account for the amount of accredited RE injected into

the grid by each of the eligible entities with in a state to the central agency and also to the state
agency.

Power Exchanges: Actual Trading of REC

Compliance Auditors: comply with the duties as specified by the CERC. In case of a

revocation of the license of any eligible entity, submit a detailed investigation report to the
central agency/CERC.

State Nodal Agencies: Accreditation of the RE generators for the grant of their

registration applications as eligible entities.

3.9 INSTITUTIONAL FRAMEWORK:

The diagram above shows the interaction of the SERCs, RE generators and obligated entities of
various states and the roles they play in the mechanism. In the mechanism, the forum of
Page | 48

regulators comprising of the SERCs of the various states and CERC decide upon the RE tariffs,
the power purchase cost for the DISCOMs, and the renewable power supply regulations for the
obligated entities. This forum of regulators also decides upon critical issues related to RECs like
denomination, face value, compliance rules, registry requirements, validity, eligibility of RE,
trading platforms to be used and the governance structure required by the mechanism.

Fig3.2: COURTESY MNRE

3.10 PRICING OF ELECTRICITYANDRE COMPONENTS:

As mentioned before, the RE generated has two components which are marketable-the
electricity generated, and the environmental benefits that such a power bestows on the society.
Generating RE has a cost associated with it, which is larger than the generation of conventional
power from fossil fuels. Thus there is always a risk that the RE generator would feel unfairly
constrained in the conventional market unless there is a separate policy support advocating the
use of RE. Also the mechanism has to ensure that the RE produced is optimally priced to
adequately compensate the RE generator.
Page | 49

The pricing of the electricity and the REC has to follow separate mechanisms. The electricity
tariff may be fixed according to the following mechanisms:

a)

Market prices for electricity-This is done based upon the supply-demand dynamics

present in the market for electricity. The

price

discovery may

be

done

through

competitivebiddingforlongtermcontractsorthroughthepowerexchangesfor short term contracts.

The competitive bidding route reflects a wide variation in tariffs due to a large number of
factors specific to the contract and has a capacity and an energy charge component. The
capacity charge remains constant while the energy charge allows for an escalation factor
dependent on the fuel price escalation. But in the case of RE projects the tariff is based on a
single component, the price discovery through the power exchanges is considered a better
option. The use of this avenue is already proven in the case of conventional energy and it also
allows different RE technologies to compete amongst each other and also with other
conventional technologies. But there are some demerits to this method as well. The amount of
power sold through the exchanges is very small in comparison to the total Power sold in the
country and the prices discovered through this method thus, may not reflect the true price of
power. Also as has been recently noticed, the price of power sold through the exchanges has
escalated rapidly, due to the demand supply gap in the country, and there are concerns in policy
circles that the prices imply does nt reflect the cost that may be involved in the generation of
the power.

b)

UI Price-in the present system, the buyers and dispatchers of power are supposed to

follow a schedule for generation and consumption as drawn up by the respective load dispatch
Centre. Any deviation from the same leads to a fluctuation in the grid frequency from 50Hz and
based on the same the tariff changes. This is defined as the unscheduled interchange charge for
electricity. As the RE itself is a form of power that is not guaranteed, its tariff may be fixed
based on such schedules. The tariff based in these schedules is fixed by the CERC and is much
higher than that arrived at using any other method and thus there is a possibility that the RE
project will gain higher revenues although they may be uncertain(dependent on the
frequency).To reduce the uncertainty the price may be fixed at the UI frequency of50Hz.
Page | 50

c)

Average power purchase price of the distribution licensee- This is the method that is

presently being used across all the states to fix the tariff for electricity. The respective SERCs
regulate all sources of power purchase and the procurements of all distribution licensees. The
power purchase expenses are thus calculated on the basis of the aggregate revenue requirements
of the generators. This is the basis of the cost plus approach. The most important benefit of
this method is that it doesnt unnecessarily over burden the consumer. Also the average power
purchase (APP) cost is calculated by pooling the price of all the sources of power and
information pertaining to this is available well in advance. Thus there is increased certainty both
for the project developers and the end consumers regarding the price of power. But there are
serious flaws in this mechanism. Firstly several SERCs do not include the cost of short term
power purchased from traders and UI pool while calculating the APP cost. Thus in many cases
when a DISCOM is buying mainly from short term sources, its cost may go higher than the
approved APP cost. Apart from this, there is a wide variation between the APP costs of different
utilities spread across the states.

Due to this, the RE project implementer would sense better opportunities where the APP cost is
higher rather than where there are better opportunities for generating the power. Due to these
shortcomings this particular methodology is nt considered very suitable for price determination
of electricity from the RE sources.

d)

Normative or feed- in tariff or particular renewable technology-As per the New Tariff

Policy, the SERCs can specify the preferential tariff or power procurement from the RE
generators. In most cases the tariff is based on a cost plus approach. Representative sample
studies are conducted by the SERCs to calculate a normative price for different types of RE
electricity. This is considered to be one of the best methods for setting tariff from both legal and
operational point of view. This approach has already been in use in the case of RE in several
states and with a harmonization of the guiding principles for tariff fixation across states. There
are some risks for the generators upon the adoption of this mechanism though. Most of the RE
generators are using government subsidies in one way or the other. Once these subsidies start to
go down, the cost of RE project will go up in comparison to the tariff decided using this method.
Apart from pricing of the electricity generated through RE sources, another issue is the pricing
Page | 51

of the RECs that the generator is given by the NLDC. The pricing of REC can be done using
two approaches:

1.

Price discovery thorough the market-This is the price discovery using the basic

principles of matching of the supply and demand curves and arriving a tan equilibrium price for
the REC. This mechanism is essential for the long term sustain ability of the market itself and is
being

alreadyusedforpricingofelectricity.ButduethefactthattheRECconceptisstillin

developmentstageinthecountry,thismethodhastodependonseveralpolicymeasures

that

a
make

pricing through this route viable-for example the RPOs. Also certain issues like the base price,
and minimum denomination etc. can only be clarified with adequate degree of precision only
after closely monitoring the existing REC mechanism over an elaborate period of time. Thus this
method, although is a recommended method in the long term, for the initial phases this may not
be the best suited method.

2.

Price linked to the notional price of electricity generated through RE sources- This

is the method that is currently being used to fix the price of the REC and according to the
current system1MWofelectricitygeneratedthroughREisconsideredequivalentto1unitofREC and
the generator is allocated 1REC for every MW of RE electricity produced. This methodology
has many associated benefits. Th e end consumer is not over burdened; also the methodology
may be changed as the maturity of the REC market increases. As such this method doesnt have
any demerits.

3.11 TRADING OF RECs

Bids and Sell of RECs can be done only in IEX and PXIL
IEX transaction fee: Rs 20/REC
Member Service Fee: As mutually agreed
Registration Fee: Annual Client registration Fee is waived off for voluntary Clients till
furth
Page | 52

3.12 REC Data at Indian Energy Exchange (IEX):

Summary

Buy Bids
(REC)

Sell Bids
(REC)

Cleared Volume
(REC)

Cleared
Price(Rs/REC)

Solar

797

2,836

797

9,300

NonSolar

36,147

1,401,048

36,147

1,500

Maximum Solar

797

2,836

797

9,300

36,147

1,401,048

36,147

1,500

Minimum

NonSolar
Solar

797

2,836

797

9,300

36,147

1,401,048

36,147

1,500

Total

NonSolar
Solar

797

2,836

797

NonSolar

36,147

1,401,048

36,147

Average *

Table-3.1
1 REC = 1MWH
* Simple average for traded months only.

3.13 Aspects considered for REC Design in Indian Context

Electricity Market is regulated to large extent.
More than 90 % of electricity volumes continue to be transacted at regulated price.
Preferential RE Tariff Regime to continue (FIT % REC shall co-exist).

Page | 53

Fig-3.3

3.14 Salient Features of REC:

Participation

Voluntary

Denomination

1 REC = 1Mwh RE generated

Validity

730 days after issuance

Categories

1. Solar
2. Non-Solar

Trading platform

Power Exchange only

Banking

NA

Borrowing

NA

Transfer Type

Single Transfer only

Penalty for Non-compliance

Forbearance price (maximum price)

Price Guarantee

Floor price(minimum price)

Page | 54

Price Discovery mechanism

Through double side auction

Trading Calendar

Last Wednesday of the month( T Day)

Trading Period

1300 1500 hrs (T Day)

Market clearing

1700 hrs (T Day)

Financial Settlement

Buyer upfront (T Day) & Seller receive on

(T + 1 day)

Table-3.2
The following forbearance price and floor price are prescribed for dealing in Certificates under
the REC Regulations:

PRICE

Non-solar REC

Solar REC

(Rs/MWh)

(Rs/MWh)

Forbearance Price

1500

9300

Floor Price

3300

13400

Table-3.3

The REC mechanism has some constraints. These can be given by:

RECs are not bankable.

Most renewable projects other than Wind are unviable with REC floor prices, because of

this most of the renewable energy generators are selling their power to the discoms at
preferential tariff without going for REC.
Average Pooled Purchase Cost of Power for discom is low due to the surfeit of dirty power
Page | 55

(Coal).
The mechanism is there in only few countries and has suffered many issues/
changes Prone to market uncertainty.

Investors arent yet comfortable with the risks.

Cash flows are neither guaranteed nor predictable.

No clarity on what happens if RECs remain unsold especially as they are valid

only for 1 year.

To overcome these problems a new kind of market can be developed where the renewable
energy producers can trade their energy through the power exchanges to the renewable energy
obligated entities.

Page | 56

Chapter 4
4.1 CALCULATION OF RPO & RECS FOR VAL, JHARSUGUDA
4.1.1 CAPACITY INMW TOGENERATIONINMU CONVERSION:
Capacity in MW X 24 Hours X 365 Days X C.U.F
Generation = ------------------------------------------------------------------------Million Units
1000
Example: Installed capacity=100 MW
Capacity utilization Factor=25%

100 MWX 24 X365 X 0.25

Generation = ------------------------------------- = 219 Million Units
1000
Note: Using the same formula, the Capacity Utilization factor can be determined, provided,
Generation and Capacity data is available.

4.1.2 Important facts to calculate RPO:

1) Renewable purchase obligation is calculated for its own consumption as in case of

captive power plant, RPO exempted for Auxiliary consumption of CPP.

2) Vedanta Aluminum Ltd. has capacity of (9*135MW) =1215MW, out of which

currently 8 unit are running while Auxiliary consumption is 9.84%.

3) Annual

consumption

of

smelter

for

FY

2010-11,FY2011-12,FY2012-13

was6144MUs,6707MUs,7768.03MUs.

4) Here we calculated RPO & no. of RECs by taking average consumption(Smelter)

of last three financial years.
Page | 57

FINANCIAL YEAR

ANNUAL CONSUMPTIONS
(IN MUs)

FY 2010-11

6144.00

FY 2011-12

6707.00

FY 2012-13

7768.03
Table-4.1

5) For calculating RPO, Capacity Utilization Factor play very important role for RE
Sources. The net capacity utilization factor of a power plant is the ratio of its
actual output over a period of time, to its potential output if it were possible for it to
operate at full nameplate capacity indefinitely. To calculate the capacity factor, take
the total amount of energy the plant produced during a period of time and divide by
the amount of energy the plant would have produced at full capacity.

6) The Renewable Purchase Obligation (RPO) is calculated on the basis of the average
consumption of smelter for the last three financial years shown above and is 6873
MUs. By using conversion formula as per OERC predetermined percentage
individually for Solar, Non-solar, Co-generation RECs can be calculated.

7) Vedanta Aluminium Ltd. already has its Cogeneration captive plant of 90 MW in

Langigarh so we have to meet RPO only for Solar & Non-solar.

8) As we know that as per OERC any obligated entities have to fulfill their RPO
(Minimum quantum of Renewable Energy purchase in % of total Energy
consumption in the State) individually by Renewable (Solar & Non-solar) &Cogeneration.

9) Here we can see from table given below Solar RPO increases every financial year
by 0.05%, Non-Solar RPO by 0.20% & Co-generation by 0.25%.

Page | 58

Renewable Purchase Obligations from FY 2011-12 to FY 2015-16

Year-wise

Minimum quantum of Renewable Energy purchase in % of total Energy

target

consumption in the State

Renewable

Co-generation

Total

Solar

Non-solar

2011-12

0.10

1.20

3.70

5.00

2012-13

0.15

1.40

3.95

5.50

2013-14

0.20

1.60

4.20

6.00

2014-15

0.25

1.80

4.45

6.50

2015-16

0.30

2.00

4.70

7.00

Table-4.2

4.2 SOLAR RPO :

CUF for solar sources varies based on technology, as we can see from table that it is

lowest for solar PV while highest for solar thermal.

SOLAR RENEWABLE ENERGY RESOURCES

SOLAR SOURCES(On Technology
basis)
SOLAR PV
SOLAR PV WITH TRACKING
SINGLE AXIS
SOLAR PV WITH TRACKING
DUAL AXIS
SOLAR THERMAL

Weighted
Average PRICE
PER UNIT (Rs)
8.98
10.21

TOTAL PROJECT
COST(in
crores)/MW
8.05
8.85

CUF
(IN %)
16.10%
18.75%

11.28

9.45

20.88%

12.31

12

25.99%

Table-4.3

Page | 59

As the capacity utilization factor increases requirement of plant in term of MW decreases,

on that basis we can say that capacity of solar plant will be minimum. Here a table is given
below which shows the requirement in term of MW for respective year based various
technologies.

SOLAR SOURCES
(On Technology basis)

Requirement in terms
of MW for 2013-14

Requirement in terms of
MW for 2014-15

SOLAR PV
SOLAR PV WITH
TRACKING SINGLE
AXIS
SOLAR PV WITH
TRACKING DUAL
AXIS
SOLAR THERMAL

9.75
8.37

12.18
10.46

Requirement in
terms of MW for
2015-16
14.61
12.55

7.52

9.39

11.27

6.04

7.55

9.06

Table-4.4

Below, there is a graph between required capacity (MW) VS solar technologies for FY

2013-14,2014-15 & 2015-16 which will give clearer picture.

40
35
30
25

Requirement in terms of MW for

2015-16

20

Requirement in terms of MW for

2014-15

15
10

Requirement in terms of MW for

2013-14

5
0
SOLAR PV

SOLAR PV
WITH
TRACKING
SINGLE AXIS

SOLAR PV
WITH
TRACKING
DUAL AXIS

SOLAR
THERMAL

Fig-4.1
Page | 60

4.3 Non-Solar RPO

Under Non-solar RPO Odhisa electricity regulatory commission says that non-solar RPO

can fulfill by any of RE sources like wind, biomass, small hydro, municipal solid waste & RE
based Co-generation.

NON SOLAR RENEWABLE ENERGY RESOURCES

RE
SOURCES
WIND
BIOMASS
SHP(<5
MW)
**MSW
RE CO-GEN

Weighted Average PRICE PER

UNIT(Rs)
4.91
4.09
3.91

TOTAL PROJECT COST(in

Crores)/MW
4.7
3.95
5.5

CUF

3.49
4.73

4
4

50%
53%

19%
75%
35%

Table-4.5

CUF for wind power generation is lowest while requirement capacity (In Mw) is highest

& for biomass power plant it is vise-versa, so we can make a conclusion that biomass
power(which has highest CUF) is more economic than any other type RE plant.

Co-generation RPO can be fulfill by fuel based Co-gen or Non-solar(Wind, Biomass,

SHP, Muncipal Solid Waste, RE Co-generation).

Non-solar RPO requirement in term of MW
RE SOURCES

Requirement in terms of
MW for 2013-14

Requirement in terms of
MW for 2014-15

Requirement in terms of
MW for 2015-16

WIND

65.49

74.33

82.56

BIOMASS

16.59

18.83

20.92

SHP(<5 MW)
**MSW
RE CO-GEN

35.55
24.89
23.48

40.35
28.24
26.65

44.83
31.38
29.60

Table-4.6
Page | 61


To meet non-solar RPO we can install either any one type RE Sources or combination of
more than two but a large variation will take place in term of money.
250
200
150

Requirement in terms of MW for

2015-16

100

Requirement in terms of MW for

2014-15

50

Requirement in terms of MW for

2013-14

0
WIND

BIOMASS

SHP(<5
MW)

**MSW

RE CO-GEN

Fig-4.2
4.4 REC CALCULATION:

4.4.1 GENERATIONINTO NUMBEROFRECS CONVERSION:

1) We can find the number of RECs by finding the 0.20%,0.25%,0.30% of annual

consumption of captive plant in case of Solar RECs,for Non-Solar RECs
1.60%,1.80%,2.00%,for FY 2013-14,FY 2014-15 & FY 2015-16.
2) Number ofRECs = Generation in Million Units X1000
3) 1 REC = 1 MWh of electricitygenerated.
4) REC market has two price first one is FLOOR PRICE (Minimum price) & other is
FORBEARANCE PRICE(Which is maximum price of REC),which applied for both
in case of Solar & Non-Solar RECs.
5) Suppose generation in Million Units 13.746, then total no. of RECs become 13746.
6) Currently floor price of Solar RECs is 9300 & forbearance price is 13400, to find total
floor price will be Rs. 127837800 & total forbearance price Rs. 184196400.

Page | 62

Chapter 5
RE POTENTIAL IN VAL, JHARSUGUDA AND ODISHA
5.1 ANALYSIS OF RE POTENTIAL IN VAL, JHARSUGUDA
Geographical location of Jharsuguda: The area of Jharsuguda district is 2081 square
kilometers. It is an upcoming industrial hub, basically in the metal and cement sectors.
Jharsuguda is well connected to all major cities of India through rail network. It is popularly
known as the power house of Odisha due to large number of thermal power plants located
nearby.
Latitude(Deg.) Longitude(Deg.) Altitude(meter)

Annual G (W/m2)

Jharsuguda
21.85

84.03

217

217

Table-5.1
Solar irradiance figure of Jharsuguda (Month wise) is given below in the table
Solar Irradiance Figure of Jharsuguda (Annual Average 4.93KWh/Sq. m./day)
SL NO.

MONTH

Solar Irradiation(in KWh/ sq. m/ day)

Jan

4.43

Feb

5.12

Mar

5.75

Apr

6.28

May

6.42

Jun

5.26

Jul

3.88

Aug

4.12

Sep

4.50

10

Oct

4.57

11

Nov

4.54

12

Dec

4.38

Table-5.2
Page | 63

As per the survey of OREDA; Jharsuguda has the 3rd highest Solar irradiation density in

odisha. We can easily get Sunrays around 300 days in a year.

irradiance level in Jharsuguda (kWh/Sq. m/day)

7
6
5
4
irradiance
level(kWh/Sq.
m/day)

3
2
1
jan
feb
mar
apr
may
jun
july
aug
sep
oct
nov
dec

Fig-5.1

We did a survey in VAL site which has overall area of 4500 acre (approximately 18.29 sq.
km). Out of which 50 acre area can be feasible to put Solar or Biomass or RE co-gen plant.
According to CERC data 1MW solar pv plant require 4.5-5 acre area of land. So inside VAL
we have 10MW potential of Solar PV/Solar thermal.
Here we can also use a Hybrid RE Power plant in which we can put a combination of Solar
and Biomass plant in same location.

Page | 64

5.1.1 Possible sites at VAL,Jharsuguda:

SITE NAME
SITE NEAR INTERIM
site-1 in front of Guest House
site-2 near site-1
site-3 near conveyor belt of IPP
site-4 buildings near conveyor belt of IPP
SITE NEAR PMO OFFICE
site-5 Pmo building
site-6 garden near pmo office
site-7 garden opposite pmo office
SITE NEAR PLANT 1 SITE OFFICE
site-8 water distribution pump house
house & treatment plant
SITE NEAR CPP
SITE-9RCBF BUILDING
site-10 cpp plant building
Car parking in cpp&pmo
site-11 opposite cooling tower
SITE NEAR SMELTER 1
STORE-4 BUILDING
STORE HOUSE NEAR COMPRESSOR
HOUSE
CAR PARKING OPPOSITE POT ROOM
ALF3 WAREHOUSE
PROPELIA 1 TO 5 BUILDING
Raw Material store house
Central Engg. Lab
Building behind engg. Lab
SITE NEAR PLANT 2 EXTENSION
OFFICE
site-2 extension office building
site office building potline-2
smelter-1 buildings
SITE NEAR VEDANTA MEADOWS
Training Community Centre building
all building except Rusikulya

AREA(SQ.
METER)

SOLAR ENERGY (KWH/SQ.

METER)

15080
13500
4800
280

75400
67500
24000
1400

264
1350
7600

1320
6750
38000

200
100

1000
500

350
1950
600
1600

1750
9750
3000
8000

5280

26400

1725
600
1500
34500
1425
300
750

8625
3000
7500
172500
7125
1500
3750

7200
6000
2900

36000
30000
14500

1305
16800

6525
84000
Page | 65

BOY'S HOSTEL
rusikulya
BUILDING NEAR COMMUNITY CENTER

2250
2000
900

11250
10000
4500

Site Near GAP

34500

172500

SUM TOTAL

167609

838045

Table-5.3

Area equivalent of 167609 square meters is 41.42 acre.

In VAL site there is no scope of Wind and Small hydro Power. So we are left with

only Solar and Biomass or RE based co-generation.

1Mw Solar power plant require 4.5 to 5acre, if we include road network then
overall sites 50 acre which has 10Mw potential.

Land cost for installing Solar power is around 2% ,Vedanta Aluminium Ltd. can
save that cost & here we find various sites in plant.

We found around 10 Mw of solar potential is present inside VAL, jharsuguda including

road network area.

5.2 Study of RE Potential in Odisha :

Odisha Needs Power to support GSDP Growth Rate of 9.57 %, massive Rural Electrification,
Rapid IndustrializationOdisha needs additional capacity of 10,000 MW by end of 13th plan
(2021-22).

Page | 66

5.3 Indicative Potentials of diff. RE sources in Orissa:

Table-5.4

5.4 Availability of Waste land in Odisha:

a. Ministry of Rural Development, Government of India in collaboration with National Remote
Sensing Agency (NRSA), Department of space, Gov. of India has mapped the waste lands in the
country using satellite data of different periods (1986-2000). As per mapping conducted by
NRSA, Odisha constitutes total 12.17 % of waste land area in India totalling 18952 .74 sq Km.
In order to estimate the approximate solar power potential in the state, the most feasible area
receiving greater insolation and relatively flat terrain has been separated out from the total waste
land in the state. The table given below shows the potential waste land identified for Solar Power
Project installation in the state of Odisha.If 10 % of above land is made available for solar power
installation in the state then in terms of capacity approximately 16740 MW SPV Power Projects
or 30000 MW Solar Thermal Power Projects could be set up in the state.
.

Page | 67

Availability of potential waste land for Solar Power Projects in Odisha

Category of waste land

Area ( sq KM)

Land with scrub

7537.96

Land without scrub

618.05

Sandy land

77

Degraded land under plantation crop

135.68

Total

8368.69
Table-5.5

Calculation of the probable annual energy generation from the solar power generation
projects in Odisha.

b. Estimation and validation of correct annual energy generation from a solar configuration /
technology proposed by the developer would be a critical exercise for the Commission especially
in absence of the operational data of commissioned project. The consultant has estimated the
annual energy generation by using the advanced software namely, METEONORM for solar
radiation data (which maintains the ground as well as satellite solar radiation database and
generate solar insolation data for the given location) . The solar insolation file generated by
METEONORM will be provided as input data to software Solar Advisory Model (SAM)
developed by National Renewable Energy Laboratorys (USA) (NREL). By using the two
softwares probable annual energy generation from three different configurations (Fixed solar
PV, solar PV two axis tracking and solar thermal parabolic trough ) can be worked out at any
specified location which requires that the latitude , longitude and mean elevation from sea level
needs to be provided as input to the software.

c. By using the above software, the consultant has computed the annual energy generation at
five potential locations in Odisha namely Angul, Dhenkanal, Jharsuguda, Talcher, Titlagarh.

d. The results of the calculation are shown in the following table.The methodology for
Page | 68

calculation of annual energy generation and related solarinsolation data file generated by
METEONORM.
National Action Plan on Climate Change (NAPCC) aims at increasing the share of
Renewable Sources of Energy from 5% of the total energy mix in 2010 to 15% by 2020. The
Commission vide Notification dt.30.09.2010 issued OERC (Renewable & Cogeneration
Purchase Obligation and its Compliance) Regulation, 2010 and vide Regulation-3 fixed the yearwise as well as source-wise RPO for compliance by GRIDCO and the obligated entities during
the obligated period from FY 2011-12 to 2015-15 as shown in the Table.

Estimation of annual energy generation from 1 MW

solar power project at potential location

SITE DATA

SOLAR PV-

SOLAR

SOLAR

FIXED

PV2

THERMAL

AXIS

PARABOLIC
TROUGH

Sl.
No.

Site

Lat.

Long.

Alt.

Annual G

(Deg.)

(Deg.)

(m)

(W/m2)

CUF (%)

CUF (%)

CUF (%)

1.

Angul

20.85

85.10

194

214

15.92

20.44

23.37

2.

Dhenkanal

20.67

85.60

79

210

15.46

19.78

22.08

3.

Jharsuguda

21.85

84.03

217

217

16.10

20.88

25.99

4.

Talcher

20.95

85.22

77

214

15.87

20.34

23.39

5.

Titlagarh

20.30

83.15

214

219

15.93

20.71

26.17

15.86

20.43

24.20

Average

Table-5.6

Page | 69

Renewable Purchase Obligations from FY 2011-12 to FY 2015-16

Year-wise

Minimum quantum of Renewable Energy purchase in % of total

target

Energy consumption in the State

Renewable

Co-generation

Total

Solar

Non-solar

2011-12

0.10

1.20

3.70

5.00

2012-13

0.15

1.40

3.95

5.50

2013-14

0.20

1.60

4.20

6.00

2014-15

0.25

1.80

4.45

6.50

2015-16

0.30

2.00

4.70

7.00

Table-5.7
e. OREDA submitted before the Commission during hearing dated 08.09.2011 that based on
OERC RPO Regulations, 2010 OREDA has assessed the cumulative capacity addition required
during the 1st Obligated Period to meet the RPO of the State as shown in table:

Consumption (in MU)

FY

Capacity Addition from different Sources (in MW)

Solar

Wind

SHEPs

Bio-

Co-gen

Total

mass
2011-12

30358

58

267

333

2012-13

36862

27

24

79

130

2013-14

39912

15

25

10

52

102

2014-15

40578

15

25

10

41

91

2015-16

43062

16

50

41

107

81

100

102

480

763

Total

Table-5.8

Page | 70

f. The Commission in its order dtd.23.09.2011 in Case No.64 of 2011 has agreed to the
projection in State power demand stipulated in 17th EPS of CEA for 12th plan period (2012-17)
and has assessed the consumption of industries having CGPs for FY 2011-12 as 20,000 MU and
considering the increment of 10% / annum in industrial consumption from CGPs, the
requirement of solar power by the obligated entities including GRIDCO to meet SPO during 1 st
Obligated Period from FY 2011-12 to FY 2015-16 is indicated in table below:
Solar Power Required in Odisha to meet SPO during 1st Obligated Period (2011-16)
FY

Grid

Consumption of

Total

SPO

Cumulative

Cumulative

consumption as

Industries

consumption of

approved

solar energy

solar power

per 17 EPS

having CGPs

Odisha

(in % )

required

capacity

(in MU)

(in MU)

(in MU)

(in MU)

required

th

(in MW)

2011-12

27149

20000

47149

0.10

47.149

26.91

2012-13

29204

22000

51204

0.15

76.806

43.84

2013-14

31415

24200

55615

0.20

111.23

63.49

2014-15

33793

26620

60413

0.25

151.03

86.20

2015-16

36351

29282

65633

0.30

196.90

112.38

Table-5.9
Hence, OREDA has to gear up to encourage the solar power developers for capacity addition
required in each FY during the 1st Obligated Period so as to meet SPO failing which RECs at
exorbitant rates will have to be procured.

g. Science and Technology Dept., Govt. of Odisha vide letter No. 4940 dtd.07.09.2011
submitted before the Commission as under:
Odisha has great potential to accelerate the use of its renewable sources to meet its energy
requirement and enhance economic growth. It is to state that OREDA will be able to fulfill the
necessary requirement for harnessing the renewable energy potential in Odisha. OREDA has
already taken steps for setting up Renewable Energy Power Plants in the State.
Page | 71

 The renewable energy sources will pick up in a big way in Odisha from FY 2012-13 onwards
due to Wind Resource Assessment (with 80 mt. high mast), setting up of Renewable Energy
Industrial Parks and Solar Industrial Parks, reduction in capital cost of solar energy and lower
cost of generation of electricity resulting into good prospects in the technology for both solar and
wind.
Keeping in view the available potential, continuous improvement in the technology and
reduction in cost of electricity generation, S&T Dept. and OREDA are taking timely action not
only for meeting RPO but also harnessing renewable energy potential in a big way in Odisha.
In order to enhance the activities of OREDA, necessary steps will be taken for raising the
manpower with requisite expertise in future so that renewable energy is fully tapped for meeting
energy requirement for the State.

5.5DRIVERS OF GROWTH:

Fig-5.2
The following are major drivers of growth of renewable energy in India.

Page | 72

Accelerated Depreciation: The Government of India allowed renewable energy based

power producers to claim accelerated depreciation (AD) at the rate of up to 80% in the first year
on a written-down value (WDV) basis under Section 32, Rule 5 of the Income Tax Act. This was
the most significant driver of renewable energy capacity addition in the past. However, this has
resulted, to some extent, in mushrooming of players with the purpose of off-setting income from
other business to claim tax benefits rather than actual production of electricity. However, AD for
wind power projects has been withdrawn recently to attract attention from more serious players
for development of Renewable Energy.

Generation based incentives: The GoI along with Indian Renewable Energy

development Agency (IREDA) as the nodal agency, had introduced a scheme for grid interactive
wind power projects which provided an incentive of Rs 0.50 per kilowatt-hour (kWh), with a cap
of Rs. 15 lakh per MW per year, totaling Rs. 62.5 lakh per MW to be availed for a minimum of
four years and maximum of 10 years. The scheme was however limited to a capacity of first
4,000 MW commissioned through GBI on or before 31 March, 2013. Recently the central
government withdrew AD benefit for wind projects. This has slowed down wind energy capacity
addition by almost 50% on year-on-year basis. However, there is a possibility of reinstatement of
GBI to attract investments in wind sector.

Subsidy in equipment imports: Some technologies like small hydro, biomass and solar

PV (off grid) systems are provided support through capital subsidy based on installed capacity.
For example, Ministry of New and Renewable Energy (MNRE) provides a capital subsidy of
30% for off-grid and decentralized solar photovoltaic (SPV) applications.

National Solar Mission: The Mission has set an overall target of 20,000 MW in three

phases: first phase up to 2012/13, second phase from 2013 to 2017, and the third phase from
2017 to 2022. The mission targets capacity of grid-connected solar power generation to 1,000
MW by 2013 and 4,000 MW by 2017. It is further envisioned that the solar capacity addition
could reach 10,000 MW by 2017 and 20,000 MW by 2022. JNNSM targets, including grid
connected, off-grid application and for solar collectors, are provided in the table below.

Page | 73

Table-5.10

Income Tax Holiday: Section 80 IA of the Income Tax Act offers a 10-year consecutive

tax holiday period within a block of first 15 years during the life cycle of all infrastructure
projects which also includes renewable energy power generation projects.

Feed-in-tariff: Central and state electricity regulatory commissions (CERCs and SERCs)

have notified wind-specific feed-in-tariff for electricity generated from wind. Also, state-specific
tariff for solar energy in states such as Rajasthan, Gujarat, Madhya Pradesh, and Karnataka have
been announced. Such preferential tariffs have provided attractive returns to investors leading
them to set up projects in various states.

5.6 SOLAR POTENTIAL & POSSIBLE SITES

In odisha the intensity of solar radiation varies between 5.6-5.4 KWh/Sq. m. which has been
indicated in the figure shown below. From the survey obtained by OREDA the major potential
Proposed solar parks areas in the State sites found in odisha are as follows:
1. Nuapada
2. Kalahandi
3. Bolangir
4. Sambalpur
5. Jharsuguda
6. Sundargarh
7. Angul
8. Dhenkanal
9. Nayagarh
10. Baudh
11. Deogarh
12. sonpur
Page | 74

SOLAR POWER DENSITY MAPOF INDIA

Fig-5.3
SOLAR SITES IN ODISHA :

Fig-5.4
Page | 75

5.7 WIND POWER POTENTIAL AND POSSIBLE SITES:

The wind power potential ranges from 0-250 watt/sq. m. in odisha and which has been referred
by Centre for Wind Energy Technology. The major potential sites in odisha are as follows
1. Sundargarh
2. Balasore
3. Bhadrak
4. Koenjhar
5. Puri
6. Khordha
7. Ganjam
8. Rayagada
9. Kalahandi
10. Koraput
11. Malkangiri

WIND POWER DENSITY MAP OF INDIA :

Fig-5.5

Page | 76

WIND SITES IN ODISHA:

Fig-5.6
BIOMASS POWER POTENTIAL IN ODISHA

Fig-5.7
Page | 77

5.8 Proposed Biomass Parks in the State:

The potential sites in odisha are as follows
1. Bolangir
2. Sambalpur
3. Boudh
4. Kalahandi
5. Nowrangpur
6. Nayagarh
7. Dhenkanal
8. Jagatsinghpur
9. Bhadrak
10. Balasore
11. Cuttack

Page | 78

Chapter 6
6.1 COMPARATIVE FINANCIAL ANALYSIS OF RE SOURCES:
RE sources included solar, wind, biomass, small hydro, RE cogeneration & municipal solid
waste, but installation cost of each type sources varies now the main task to meet RPO with
optimized cost. In our project basically we are doing financial analysis on three parameter:

Installation of its own RE plant

Purchase of Renewable Energy Certificates from IEX/PXIL

Purchase of RE from generator or licensee

S. NO.

RE SOURCES

INSTALLATIONC
OST PER MW
(IN CRORE)

LEVELISEDTARIF
F PER UNIT

LEVELISED
BENEFIT/UNIT

Solar PV
Solar thermal

8.00
12.00

8.75
11.90

0.88
1.21

Wind

5.98

4.19

0.33

SHP (<5Mw)
(5Mw to 25 Mw)

6.24
5.72

5.16
5.15

0.35
0.41

5.83
5.88
5.20

0.14
0.20
0.24

1.

2.
3.

4.
5.
6.

Biomass
RE-Cogen
Muncipal solid waste

4.63
4.36
4.10
Table-6.1

This financial analysis provide a clear picture what we choose to meet RPO of VAL,
Jharsuguda either install its own plant or purchase RECs, another choice may be more
economical to choose combination of both.

From table we can see that cost of installing power plant based on municipal solid waste,

RE-cogeneration & biomass is less comparatively other RE Sources like wind & solar type.

Capacity utilization factor of biomass & RE-Cogeneration is also having larger value; it

means 1MW biomass produces more no. of units annualy.

As we know that VAL, Jharsuguda has to meet its RPO individually by Solar, Non-Solar,
Page | 79

Co-generation but one benefit to VAL that it already has captive cogeneration plant of 90Mw in
Langigarh so it does need to meet its co-generation renewable purchase obligations.

6.2FINANCIAL ANALYSIS OF SOLAR RPO:

VAL Jharsuguda has 10 Mw Solar PV potential in its site,in our survey we found that it has 35
Acre (feasible area) including roof-top & we also get some space to put small solar PV along the
road network length.
SOLAR SOURCES
(On Technology basis)

capital cost for 2013-14

(in crores)
78.48

capital cost for

2014-15
(in crores)
98.05

capital cost for

2015-16
(in crores)
117.61

SOLAR PV
SOLAR PV WITH
TRACKING SINGLE
AXIS
SOLAR PV WITH
TRACKING DUAL
AXIS
SOLAR THERMAL

74.07

92.57

111.07

71.064

88.74

106.5

72.48

90.6

108.72

Table-6.2
6.2.1 NET PROFIT PER YEAR FROM SOLAR PLANT:
Central electricity regulatory commission (CERC),New Delhi has notified generic tariff for FY
2013-14 under regulation 8 of the RENEWABLE ENERGY SOURCES REGULATIONS 2012
in petition no. 243/SM/2012 (Suo- Motu).

As per CERC, cost of putting solar PV plant is 800 lakhs while solar thermal is 1200 lakhs
(much higher than solar PV).we calculated solar quantum obligation upto FY 2015-16,it is found
that required installation capacity of solar thermal is less than solar PV because solar thermal
plant annually generated more no. of unit, annual net profit from solar PV & solar thermal is
2.14 crore and 2.41 crore rupees but the important point that life of solar power plant is around
25 years so these plant provide benefit a no. of years. we can also install solar PV with tracking
Page | 80

system (single or dual axis) but cost of plant, annually units generated, CUF will varies
comparatively normal type solar PV. Tracking based solar has more efficiency but it is economic
for putting solar plant of more than 1Mw.

Plant
type

Required capacity
of plant(In Mw)

Annual units
generated per MW

Total
units

Benefit
per unit

Solar
PV
Solar
thermal

14.61

1664400

24316884

0.88

Net
Profit
(In lakhs)
213.99

9.06

2190000

19841400

1.21

240.09

Table-6.3

6.2.2 BREAK-UP OF THE COST FOR SOLAR PV :

PV modules constitute around 43% of total project cost so we should focus our attention
to choose the PV model .
Vedanta Aluminium Ltd. has around spread across 4500 acre land out of which 50 acre
land can be used for solar power plant purpose including roof-top buildings so it will save
2% cost of project by using its site land.
Another major break-up cost is covered by civil & general work, mounting structure
which is approx. 25% totally depend on choosing the outsourcing agencies & vendors.

S.NO

Particulars

Capital Cost for Solar PV

Project

% of Total Cost

PV Modules

340.50

43%

Land Cost

16.80

2%

Civil & general work

94.50

12%

Mounting structure

104.50

13%

Page | 81

Evacuation cost up to interConnection point(cable &tx)

104.50

13%

Power conditioning unit

56.00

7%

Preliminary & preoperative

Expenses including IDC and
contingency

80.00

10%

Total capital cost

800.00

100%

Table-6.4
6.3 FINANCIAL ANALYSIS FOR NON-SOLAR RPO :
RE SOURCES

Capital cost for 2013-14

(in Crores)

Capital cost for 2014-15

(in Crores)

Capital cost for 2014-15

(in Crores)

WIND

307.82

349.34

388.16

BIOMASS

65.53

74.37

82.64

SHP(<5 MW)
**MSW
RE CO-GEN

195.54
99.55
93.91

220.92
112.98
106.58

246.58
125.53
118.42

Table-6.5

As we can see from table no. 6.5 that putting wind power plant is very costly
Comparatively other plant because wind power plant generates lowest no. of units.

For VAL, Jharsuguda it is more economical to put biomass, RE co-gen or municipal

solid waste power plant.

Here we calculate RPO for current & next two financial year it is suggest that ,if VAL
want to installing any type RE power plant it should meet the RPO for FY2015-16 or left
the plant for further expansion.

Page | 82

SHP

Plant
type

Required
capacity of plant
(In Mw)

Annual units
generated
per MW

Total
units

Benefit
per unit
(In Rs.)

Net Profit
(In lakhs)

Wind

82.58

1664400

137446152

0.33

453.57

3066000

137444400

0.35

481.07
563.53
192.43

<5Mw
5 to 25 Mw

44.83

Biomass

20.92

6570000

137448780

0.41
0.14

RE-Cogeneration

29.6

4642800

137444400

0.20

329.86

MSW

31.38

4380000

137426880

0.24

274.85

Table-6.6
Here we can see from table no. 6.6 that maximum profit will be generated by put small hydro
power plant(>5Mw) which is 5.64 crore while the lowest profit by biomass 1.92 crore rupee
as per CERC renewable energy tariff FY 2013-14.
6.2.4 Financial analysis of RECs:
SOLAR RECs TO MEET RPO OF VAL,JHARSUGUDA
NO. OF RECs
REQUIREMENT
13746

NO. OF RECs
REQUIREMENT
17183

NO. OF RECs
REQUIREMENT
20619

FY 2013-14
FLOOR PRICE

FORBEARANCE PRICE

12,78,37,800

18,41,96,400

FY 2014-15
FLOOR PRICE

FORBEARANCE PRICE

1,59,801,900

2,30,252,200

FY 2015-16
FLOOR PRICE

FORBEARANCE PRICE

1,91,756,700

2,76,294,600

Table-6.7
Page | 83

 If any captive consumer is not installing its own power plant or buying from distribution
licensee then it is mandatory to buy renewable energy certificate by exchange to meet RPO
as per OERC.
VAL, Jharsuguda has another option to meet its RPO by installing its own solar power plant
in surplus as per requirement and sell the Solar RECs in the trading exchange.
We can purchase Non-Solar RECs by exchanging from Solar RECs in IEX or PXIL.
Requirement of RECs increases by 0.05% in consecutive years till 2022 as per JNNSM.
Any RE generator putting either Solar PV or Solar Thermal will generate same amount of
Solar RECs (Floor Price per RECs Rs. 9300, Forbearance price Rs 13400).

NON-SOLAR RECs TO MEET RPO OF VAL,JHARSUGUDA

NO. OF RECs
REQUIREMENT
109008

NO. OF RECs
REQUIREMENT
122634

NO. OF RECs
REQUIREMENT
137460

FY 2013-14
FLOOR PRICE

FORBEARANCE PRICE

16,35,12,000

35,97,26,400

FY 2014-15
FLOOR PRICE

FORBEARANCE PRICE

18,39,51,000

40,46,92,200

FY 2015-16
FLOOR PRICE

FORBEARANCE PRICE

20,61,90,000

45,36,18,000

Table-6.8

As per current scenario to install wind, Biomass, SHP, MSW are more costly than Solar

Plants because Pay Back Period of Non-Solar Power Plants are longer.

The Price of Non-Solar RECs is less than that of Solar RECs (Floor Price per RECs Rs.

1500, Forbearance price Rs 3300).

In Power Exchange market the price of Solar and Non-Solar RECs are decided on the

basis of buying bids and selling bids.

Page | 84

NON-SOLAR RECs TO MEET COGENERATION RPO OF VAL,JHARSUGUDA

FY 2013-14
FLOOR PRICE
FORBEARANCE PRICE
NO. OF RECs
REQUIREMENT
39,55,45,500
87,02,00,100
263697

NO. OF RECs
REQUIREMENT
279393

NO. OF RECs
REQUIREMENT
295090

FY 2014-15
FLOOR PRICE

FORBEARANCE PRICE

41,90,89,500

92,19,96,900

FY 2015-16
FLOOR PRICE

FORBEARANCE PRICE

44,26,35,000

97,37,97,000

Table-6.9
As per OERC norms a Captive consumer has to meet RPO individually by Solar, NonSolar and Co-Gen but to meet Non-Solar and Co-Gen Obligations it has to buy Non-Solar
RECs from exchange market.
VAL has its own Captive Co-generation plant(90 Mw) in Lanjigarh.So it is not required
to meet Co-Gen RPO.

350000
300000
250000
NO. of Solar RECs

200000

NO. of Non-Solar RECs

150000

NO. of Co-Gen RECs

100000
50000
0
FY 2013-14

FY 2014-15

FY 2015-16

Fig-6.1

Page | 85

Chapter-7
7.1 SUGGESTIONS & RECOMMENDATIONS:
Since the Solar potential of Jharsuguda region is high, it can be suggested that VAL,
Jharsuguda can meet its RPO by installing a Solar Power Plant.
Ind-Bharat Energy Utkal Limited has its own Biomass Power Plant in Jharsuguda, So in
order to meet its Non-Solar RPO it can purchase power from that company.
The amount of electricity generated from the RE sources can be used for the power used
either inside VAL, township or electrical appliances inside the company.
The subsidy provided by central government for SHP is 50% of the capital cost and the life
of SHP is 35years as well as the net profit from this kind of plant is 5.6 crore per year as per
CERC RE Tariff Regulation FY2013-14.
It is suggested that VAL should install its own Solar Power Plant in Surplus than its RPO
requirement, So that the surplus quantity can fetch Solar RECs which can be exchanged with
Non-Solar RECs.
OERC has declared RPO requirements for entities inside odisha territory till the FY2015-16.
So VAL should plan for meeting its current as well as future RPO. Before installing any RE
based plant it should take care in mind for further capacity expansion of these power plants.
Penalty charged every year by OERC at forbearance price (Solar RECs-Rs.13400, Non-Solar
RECs- Rs 3300).Hence it is better to install its own power plant or purchase electricity from
RE generator. Otherwise it can also purchase some quantities of RECs and the remaining can
be fulfilled by the other ways.

Page | 86

7.2 BIBLIOGRAPHY

[1] J.M Erikson and W. H. Holmes, The Law of wind Power Purchase Agreements and
Environmental Attributes. www. AGMRC.org
[2] RPO Report. FERC Energy Policy
[3]T. Logan, C. Shah and G. Robbinson, REC Mechanism Checklist for State and Local
Governments, Fact Sheet Series on Financing Renewable Energy Projects, 2010.
[4] C. Shah, Consumer Sited Power Purchase Agreements, National Renewable Energy
Laboratory (NREL), June 2013.
[5] Solar Power Purchase Agreements Green Power Partnership US EPA
http:/www.epa.gov/greenpower/buygp/solarpower.htm, 2011
[6] Guide to Purchasing Green Power, Renewable Electricity, Renewable Energy Certificates
and Onsite Renewable Generation, DOE/EE-3307, 2011.
[7] CERC- Terms and Conditions of Tariff along with all its amendments
[8] CERC Renewable Energy Terms and Conditions of Tariff 2009-14
[9] CEA Concurrence to Private Hydro Power on 10th June, 2012
[10] New Hydro Policy
[11] CERC Order on Tato II Hydroelectric Power Project
[12] National Electricty Policy and National Tariff Policy with amendments
[13] CERC Order No 255/2010 on Determination of Benchmark capital cost norm for solar PV
projects during FY 2013-14
[14] New CERC Regulations To Encourage Investment, Efficiency in Power Sector by ICRA
Page
[15] Orissa Hydro Power Policy, 2008
[16] Assessment of REC Mechanism by C. Shah for Department of Energy
[17] www.cea.nic.in on 31st June, 2013 and 17th July 2012.
[18] www.cercind.gov.in on 11th June, 17th June, 05th July and 21st July, 2013.
[19] www.derc.gov.in on 06th June and 19th June, 2012.
[20] www.powermin.nic on 11th July, 2012.
[21] www.mnre.gov.in on 15th July 2012
Page | 87

[22] www.forumofregulators.com
[23] www.erldc.org
[24] www.envfor.nic.in
[25] www.sterliteenergy.co.in
[26]OERC Consultative Paper on MYT for 2013-2017.
[27] EA-2003
[28]IEGC-2010
[29]TERI policy brief, Dec 2012

Page | 88

Annexure -1

Assumpion for Solar PV Power Projects Parameters

S. No. Assumption
Sub-Head
Head
1 Power Generation
Capacity

Sub-Head (2)

Unit

Asumptions

Installed Power Generation Capacity

Capacity Utilization Factor
Useful Life

MW
%
Years

1
19.0%
25

Power Plant Cost

Rs Lacs/MW

Tariff Period

Years

Debt

70%

Equity

30%

Total Debt Amount

Rs Lacs

560.00

Total Equity Amout

Rs Lacs

240.00

Loan Amount
Moratorium Period
Repayment Period(incld Moratorium)
Interest Rate

Rs Lacs
years
years
%

560.00
0
12
13.00%

Equity amount
Return on Equity for first 10 years
RoE Period
Return on Equity 11th year onwards
Weighted average of ROE

Rs Lacs
% p.a
Year
% p.a

240.00
20.00%
10
24.00%
22.40%

2 Project Cost
Capital Cost/MW

800

3 Financial Assumptions
25

Debt: Equity

Debt Component

Equity Component

Discount Rate

10.95%

4 Financial Assumptions
Fiscal Assumptions
Income Tax
MAT Rate (for first 10 years)
80 IA benefits

%
%
Yes/No

Depreciation Rate for first 12 years

Depreciation Rate 13th year onwards

%
%

32.445%
20.000%
Yes

Depreciation

Years for 5.83% rate

5.83%
1.54%
12

5 Working Capital
For Fixed Charges
O&M Charges
Maintenance Spare
Receivables for Debtors

(% of O&M exepenses)

Months
%
Months

1
15%
2

For Variable Charges

6 Operation &

Interest On Working Capital

Maintenance

power plant
Total O & M Expenses

Rs. Lacs
%

Escalation

13.50%

11.63
5.72%

Page | 89

Annexure-2

Assumptions for Solar Thermal Power Projects Parameters

S. No. Assumption Head
1 Power Generation

Sub-Head

Sub-Head (2)

Unit

Assumptions

Capacity
1
23.0%
10.0%
25

Installed Power Generation Capacity

Capacity Utilization Factor
Auxiliary Consumption Factor
Useful Life

MW
%
%
Years

Power Plant Cost

Rs Lacs/MW

Tariff Period

Years

Debt
Equity
Total Debt Amount
Total Equity Amout

%
%
Rs Lacs
Rs Lacs

70%
30%
840
360

Loan Amount
Moratorium Period
Repayment Period(incld Moratorium)
Interest Rate

Rs Lacs
years
years
%

840.00
0
12
13.00%

Equity amount
Return on Equity for first 10 years
RoE Period
Return on Equity 11th year onwards
Weighted average of ROE

Rs Lacs
% p.a
Year
% p.a
%

360.00
20.00%
10
24.00%
22.40%

Discount Rate

10.95%

Income Tax
MAT Rate (for first 10 years)
80 IA benefits

%
%
Yes/No

Depreciation Rate for first 12 years

Depreciation Rate 13th year onwards
Years for 5.83% rate

%
%

2 Project Cost
Capital Cost/MW

1200.00

3 Sources of Fund
25

Debt: Equity

Debt Component

Equity Component

4 Financial Assumptions
Fiscal Assumptions
32.445%
20.000%
Yes

Depreciation
5.83%
1.54%
12

5 Working Capital
For Fixed Charges
O&M Charges
Maintenance Spare
(% of O&M exepenses)
Receivables for Debtors
For Variable Charges
Interest On Working Capital
6 Operation & Maintenance
power plant
Total O & M Expenses Escalation

Months
%
Months
%
Rs Lacs
%

1
15%
2
13.50%
15.86
5.72%

Page | 90

Annexure-3

Odisha

Select State

Assumption for Biomass Power Project Parameters

S. No. Assumption Head
1 Power Generation

Sub-Head

Sub-Head (2)

Unit

Assumptions

Capacity
Installed Power Generation Capacity
Auxillary Consumption during stablisati
Auxillary Consumption after stabilisatio
PLF(Stablization for 6 months)
PLF(during first year after Stablization)
PLF(second year onwards)
Useful Life

MW
%
%
%
%
%
Years

1
10%
10%
60%
70%
80%
20

Power Plant Cost

Rs Lacs/MW

463.336

Debt
Equity
Total Debt Amount
Total Equity Amout

%
%
Rs Lacs
Rs Lacs

70%
30%
324.335
139.001

Loan Amount
Moratorium Period
Repayment Period(incld Moratorium)
Interest Rate

Rs Lacs
years
years
%

324.335
0
12
13.00%

Equity amount
Return on Equity for first 10 years
RoE Period
Return on Equity after 10 years

Rs Lacs
% p.a
Year
%

139.001
20.00%
10.00
24.00%

Weighted average of ROE

Discount Rate (equiv. to WACC)

%
%

22.00%
10.95%

Income Tax
MAT Rate (for first 10 years)
80 IA benefits

%
%
Yes/No

32.445%
20.000%
Yes

Depreciation Rate(power plant)

Depreciation Rate 13th year onwards
Years for 5.83% depreciation rate

%
%

2Project Cost
Capital Cost/MW
3Financial Assumptions
Debt: Equity

Debt Component

Equity Component

4 Financial Assumptions
Fiscal Assumptions

Depreciation
5.83%
2.51%
12.00

5Working Capital
For Fixed Charges
O&M Charges
Maintenance Spare
(% of O&M exepenses)
Receivables for Debtors
For Variable Charges
Biomass Stock
Interest On Working Capital
6 Fuel Related Assumptions
Heat Rate
After Stabilisation period
During Stablization Period

Months
Months

1
15%
2

Months
%

4
13.50%

Kcal/kwh
Kcal/kwh

4000
4000

Biomass
Base Price
GCV - Biomass
Biomass Price Escalation Factor
7Operation & Maintenance
power plant
Total O & M Expenses

Escalation

Rs/T
Kcal/kg

Rs Lacs
%

2653.07
3300
5.00%
25.37
5.72%

Page | 91

Determination of Accelerated Depreciation for Biomass Power Project

Depreciation amount
Book Depreciation rate
Tax Depreciation rate
Additional depriciation
Income Tax (Normal
Rates)
Capital
Cost
-------------Years
--->
Book Depreciation
Book Depreciation
Accelerated
Depreciation
Opening
Allowed during the year
Closing
Accelrated Deprn.

90%
5.28%
80%
20.00%
32.45%
463.33
6

1
2
3
4
5
6
7
8
9
2.64% 5.28% 5.28% 5.28% 5.28% 5.28% 5.28% 5.28% 5.28%

Unit
%
Rs
Lakh

%
%
%
Rs
Lakh

12.23

24.46

24.46

100.00% 50.00% 5.00% 1.00% 0.20% 0.04% 0.01% 0.00% 0.00%

50% 45.00% 4.00% 0.80% 0.16% 0.03% 0.01% 0.00% 0.00%
50%
5% 1.00% 0.20% 0.04% 0.01% 0.00% 0.00% 0.00%

0.00%
0.00%
0.00%

Rs
Net Depreciation Benefit Lakh
Rs
Tax Benefit
Lakh
Net Energy generation
MU
Per unit
benefit
Rs/Unit
Discounting Factor

24.46

24.46

24.46

24.46

3.71

0.74

24.46

0.15

24.46

0.03

24.46

10
5.28%

231.67 208.50

18.53

0.01

0.00

0.00

219.44 184.04

-5.93 -20.76 -23.72 -24.32 -24.43 -24.46 -24.46

-24.46

71.20
2.56

59.71
6.31

-1.92
6.31

-6.73
6.31

-7.70
6.31

-7.89
6.31

-7.93
6.31

-7.94
6.31

-7.94
6.31

-7.94
6.31

2.78

0.95

-0.03

-0.11

-0.12

-0.13

-0.13

-0.13

-0.13

-0.13

1.00

0.95

0.86

0.77

0.70

0.63

0.56

0.51

0.46

0.41

11
5.28%
24.46

12
5.28%
24.46

13
5.28%
24.46

14
5.28%
24.46

15
5.28%
24.46

16
5.28%
24.46

17
5.28%
24.46

18
2.88%
13.34

19
0.00%
0.00

20
0.00%
0.00

0.00%
0.00%
0.00%
0.00

0.00%
0.00%
0.00%
0.00

0.00%
0.00%
0.00%
0.00

0.00%
0.00%
0.00%
0.00

0.00%
0.00%
0.00%
0.00

0.00%
0.00%
0.00%
0.00

0.00%
0.00%
0.00%
0.00

0.00%
0.00%
0.00%
0.00

0.00%
0.00%
0.00%
0.00

0.00%
0.00%
0.00%
0.00

-24.46
-7.94
6.31
-0.13

-24.46
-7.94
6.31
-0.13

-24.46
-7.94
6.31
-0.13

-24.46
-7.94
6.31
-0.13

-24.46
-7.94
6.31
-0.13

-24.46
-7.94
6.31
-0.13

-24.46
-7.94
6.31
-0.13

-13.34
-4.33
6.31
-0.07

0.00
0.00
6.31
0.00

0.00
0.00
6.31
0.00

0.30
0.27
0.14 (Rs/kWh)

0.25

0.22

0.20

0.18

0.16

0.15

0.37
0.34
Levellised benefit

Page | 92