GC Advisors - RPO

How can RPO & REC impact you?

GC Advisors: Leaders in Energy & Environmental Commodities

Sustainability. Value. Delivered. www.general-carbon.com 1

Agenda
• What is Renewable Purchase Obligation (RPO)?
• What is Renewable Energy Certificate (REC)?
• Case study
• How GC Advisors can help you with RPO?


RPO and REC


Renewable Purchase Obligation (RPO)
• The Electricity Act & National Action The Electricity Act, 2003
Plan on Climate Change (NAPCC)
provide roadmap for increasing
renewable energy in generation
• Renewable Purchase Obligation
(RPO) is an obligation mandated by
CERC for promotion of renewable National Action Plan on Climate
energy generation Change (NAPCC) – RPO Goal
• RPO fulfilled is under two
categories:
– Non-Solar
– Solar (0.25% in most states) 2020
2015
2010

Status of notification by States
State RPO % Notification Pref. Tariff APPC
(FY 12-13) (Wind)

Maharashtra 8.00 Final 3.38 -5.07 2.57*
Madhya Pradesh 4.00 Final 4.35 2.47*
Tamil Nadu 9.00* Gazetted 3.51 2.54
Rajasthan 7.10 Amendment to gazette awaited 5.18- 5.44 2.75*
Haryana 2.00 Final 4.08 2.77

Gujarat 7.00 Gazetted except OA and CPP 4.23 2.64
Chhattisgarh 5.75* Gazetted ~3.13 2.11- 4.66
Karnataka 7.0-10.0* Final 3.70 2.60

Andhra Pradesh 5.00 Final 4.70 2.00*
Orissa 5.50 Gazetted 5.31


Who Needs To Comply With RPOs
• Distribution companies or DISCOMs
• Open access consumers
– Procuring power from power exchanges (IEX/PXIL), traders, bilateral
agreements etc.
• Captive consumers
– Generating and consuming power from captive coal/ natural gas
power plants
– Primarily industrial users - cement, steel, chemical etc.


Renewable Energy Certificates (REC)
• REC is a tradable certificate of proof that one MWh of
electricity has been injected (or deemed to be injected) to
grid by an RE generator.

• REC types & Price band:

REC Up to April 2012 April 2012 - April 2017
Non Solar Rs 1,500 - 3,900 Rs 1,500 - 3,300
Solar Rs 12,000 – 17,000 Rs 9,300 – 13,400


Non Solar REC Prices – Exchange traded prices
4,500
4,000
3,500
3,000
INR/REC

2,500
2,000 PXIL
1,500 IEX
1,000
500
0


Solar REC Prices – Exchange traded prices
13200
13000
12800
12600
12400
PXIL
12200
IEX
12000
11800
11600


Case Study


Case study - Manufacturing Firm With 3 Units
• Maharashtra Unit (298 MU consumption)
– 131 MU from captive coal
– 36 MU waste heat recovery
– 131 MU from DISCOM/Grid
• Tamil Nadu Unit (209 MU consumption)
– 120 MU from captive wind site (pref. wheeling and banking)
– 50 MU from power exchange
– 39 MU from grid
• Karnataka unit (140 MU consumption)
– 140 MU from captive coal
• Compliance thorough Non-Solar RECs will have an annual cost
– ~ INR 2.62 Cr (at floor price of 1,500)
– ~ INR 5.78 Cr (at cap price of 3,300)
• Compliance thorough Solar RECs will have an annual cost
– ~INR 75.7 Lakhs (at floor price of 9,300)
– ~INR 1.1 Cr (at cap price of 13,400)


Case Study - Cost Of RPO
Non-solar RPO
Consumption Obligated RPO (%) RECs Cost of RPO (INR Cost of RPO (INR
(MU) consumption (MU) needed 1500 /REC) 3300 /REC)
Maharashtra 298 131 7.75% 10153 1,52,28,750 3,35,03,250

Tamil Nadu 209 170 8.95% 15,215 2,28,22,500 5,02,09,500

Karnataka 140 140 5.00% 7000 1,05,00,000 2,31,00,000

4.85 Cr 10.7 Cr

Solar RPO
Consumption Obligated RPO (%) RECs Cost of RPO (INR Cost of RPO (INR
(MU) consumption needed 9300 /REC) 13400 /REC)
(MU)
Maharashtra 298 131 0.25% 328 30,45,750 43,88,500

Tamil Nadu 219 39 0.05% 425 39,52,500 56,95,000

69.9 Lacs 1.01 Cr


Is WHR a renewable technology?
• Electricity Act 2003 mandates the State Commission "to promote co-generation and
generation of electricity from renewable sources of energy”
• Cogeneration has been defined in the Act under Sec. 2(12) as “a process which
simultaneously produces two or more forms of useful energy (including electricity)”.
• Waste heat recovery projects are classified as cogeneration (under bottoming cycle
category)
– Under bottoming cycle, co-generation is ‘any facility that uses waste industrial heat for power
generation by supplementing heat by any fossil fuel’. *Ref: Ministry of Power resolution (No.A-
40/95-IPC-I dated 6-11-1996) on promotion of co-generation power plants]
– Typical areas of application include cement, steel, ceramic, gas and petro chemical industries.
• Few states like Rajasthan’s Commission have clearly stated waste heat recovery/
cogeneration projects to be classified as renewable energy projects
• MNRE has not approved WHR as a renewable based technology


WHR/ Cogeneration: RPO & REC
• Various states view WHR & RPO is different manners:
– Obligation of RPO even on co-generation facility
• Eg. Gujarat
– Exemption from RPO compliance for co-generation plants
• Eg. Maharashtra
– Separation of obligation for RE as well as cogeneration.
• Eg. Orissa
– Permission in fulfillment of RPO through cogeneration based power as well.
• Eg. Rajasthan, MP

• Madhya Pradesh amended its RPO regulation in April 2012 to allow RPO to be
fulfilled though fossil-fuel based cogeneration projects as well
• Since MNRE has not approved WHR as a renewable technology, a WHR project
cannot be registered under REC Mechanism even in those states where RPO
fulfillment is allowed through WHR/ co-generation projects


Are you prepared to comply your RPO
1. Are you aware of the RPO compliance regulations
2. Have you assessed RPO applicability for your various plants with
reference to the state specific regulations
– Captive & Open Access
• Source (RE, Fossil-fuel, WHR / co-generation, mix-fuel, etc)
• Capacity
• Grid connectivity

3. Have you quantified the RPO in terms of MWh of the renewable power
required
– Each plant specific
• Solar
• Non- Solar


4. Have you assessed the financial implication in fulfilment of RPO
– Compliance
• in terms of REC purchase (REC floor & forbearance price clarity available till 2017)
• in terms of developing captive RE project (wherever possible after doing the assessment)
– Biomass, wind, etc
– Solar

• in terms of third party tie-up of RE power
• in terms of setting up REC based RE projects
• in terms of mix of the above possibilities

– Non-compliance
• in terms of Penalty (in terms of REC forbearance price)


5. Have you developed an RPO compliance Strategy at the organization & plant level
– Short term
• Previous back log
• Current financial year
– Long term
• Next five years
• upto 2020 & beyond

6. What actions have you taken to implement the RPO compliance strategy & resolve
the implementation hurdles
– Time lag & effort required in setting up RE project
– Open access status/ issues / challenges in various state
– View regarding WHR projects
– No clarity on REC prices post 2017
– Other state / technology / sector /organisation policy specific issues


GC Advisors


GC Advisors
• Leading player in energy & environmental commodities

• Developing bilateral power contracts and providing advisory services for
power market participants
• Developing renewable energy, energy efficiency, carbon offsets and
sustainable development projects
• Operating across India, South East Asia and Africa


Energy Vertical
• Power sourcing/sales
– Short, Medium & Long term contracts
– Power Exchange based advisory services
• Regulatory and strategic support to provide a
single-window approach
• Energy strategy
– Assessing renewable purchase obligation and cost
effective sourcing plan
– Energy consumption and developing a management
plan


Environmental Commodities
• Carbon offsets
– 100 million CERs & 20 million VERs
– Carbon offset projects across - India, Indonesia, Thailand, Sri Lanka, Nigeria,
Ethiopia & Kenya
– Fixed, floating, spot & exotic structures including upfront payment
– Equity, Debt and mezzanine financing based on carbon credits
• Renewable Energy Certificates (RECs)
– 350 MW of REC projects across India
– Develop RECs through advisory and turnkey projects
• Energy efficiency certificates (EsCerts)
– Engaging large clients to prepare for PAT
– Integrate PAT and REC obligations to develop holistic compliance toolkit


GC Advisors: Knowledge base
• Wind energy portfolio of > 2000 MW
– TN, Karnataka, AP, Maharashtra, Gujarat, MP and
Rajasthan
• Natural gas portfolio of > 2000 MW
• Hydro portfolio of > 600 MW
• Biomass portfolio of > 400 MW
• Supercritical based portfolio of > 10,000 MWs


GC Advisors–
Develop your RPO compliance plan


GC Advisors: Assesses how RPO impacts you
• Renewable Purchase Obligation (RPO) is the minimum
percentage of renewable energy share in the area of a
– Distribution licensee
– Open Access Consumer
– Captive consumer
• RPO will impact you
– If you are buying power from the bilateral market or exchanges
– If you have captive generation capacity at your plants
• Existing wind capacity where you are availing preferential
wheeling and banking benefits will not be eligible to help
you fulfill your RPO.

GC Advisors: Quantify the impact of RPO
• RPO regulations vary by state and distribution company;
understand what applies to your units.
• Assess total power consumption and identify power
sourced from:
– Open access (bilateral or exchange)
– Captive generation
• Compute any renewable power in your mix.
• Compute your RPO obligation and therefore your
shortfall.


GC Advisors: Develop RPO compliance plan
• Assess the options available to you
– Buy Vs Build
• Technology (Wind, Solar, Biomass, Small Hydro etc.)
• Suitability of technology
• Cost of power from shortlisted technology
• Regulatory support
– Petitioning / facilitate in regulatory clarification (eg. inclusion of WHR /
cogeneration projects as renewable)
• RPO compliance cost
– Likelihood of enforcement
– Cost of procurement of REC
• Finalize RPO plan


Contact Us
To develop your RPO compliance plan, contact us:

Mumbai Chennai
Rameez Shaikh Priya Ranganayaki
+91 9920 033 866 +91 9962 526 876
rameez.shaikh@general-carbon.com priya.v@general-carbon.com

New Delhi Vadodara
Arijit Banerjee Sunny Gangar
+91 9999 621 373 +91 9322 456 789
arijit.b@general-carbon.com sunny.gangar@general-carbon.com


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