Karnataka solar rooftop PV regulation

Electricity markets have always witnessed a tussle between the utilities and the regulators, Karnataka state is no different. The electricity regulator has always been among the first in the country in implementing progressive policies in the Renewable Energy (RE) sector. However, the progress of all the plans has been disheartening and in most cases it is due to lack of co-operation from the utility in the state. A case in point is the solar rooftop projects, in spite of having the highest Feed-in Tariff (FiT) of ₹ 9.56/kWh in the country in 2013, there was a lack of adoption for well over a year. The reason, Distribution Companies (DISCOMs) came up with an implementation plan nearly a year after the order.

Karnataka Electricity Regulatory Commission (KERC) has recently drafted a regulation to address the concerns of domestic residents living in apartment complexes with shared roofs and electrical connections. The proposed regulation intends to offer existing solar rooftop owners in shared roofs an option to increase their capacity and also new residents who wish to install a bigger system by aggregating the contract demand of multiple households in the building.

The proposed regulation aims to fill all the gaps existing in the current system which hinders adoption of solar rooftop system in residential complexes. The proposed tariff at Average Pooled Power Purchase cost (APPC) which is currently at ₹ 3.97/kWh for BESCOM will raise eyebrows considering the FiT is at ₹ 7.08/kWh for domestic consumers.

Will the regulations have a positive impact?

• The regulation is likely to have a positive impact because it removes the regulatory hurdle currently preventing residential complexes in implementing the system.
• Residential complexes tend to install solar as a way to reduce their energy bills and hence the type of metering or tariffs wouldn’t matter much.
• The regulation would however impact early adopters who will have to surrender their individual Power Purchase Agreements (PPA) if the complex as a whole is going for a bigger system in the common roof.

Overall, the regulation is definitely a good step but I believe there are technical challenges like metering involved in the implementation phase which only the DISCOMs can solve. I had a conversation with a regulator in KERC prior to the drafting of this regulation discussing issues related to solar rooftop in the state. He clearly admitted that at their level they can only bring in the best-fit regulation considering all stakeholders in mind but the final implementation is out of their purview. The comments to this draft regulation are open till 5^th July post that there could be a revised regulation coming up.

Check the proposed regulation:Here

Forecasting and scheduling of renewable energy in India

Karnataka Electricity Regulatory Commission (KERC) has mandated Forecasting and Scheduling (F&S) for wind and solar assets in the state with penalties for deviation from the 1st of this month. The current regulations are applicable to all wind generators with a cumulative capacity of 10MW and above and all solar generators with an installed capacity of 5MW and above.

Why need F&S?

The concern raised by the lobby of wind developers might seem justified against penalties for deviations which add to the cost of energy, but a stringent F&S mechanism will only enable the grid to accept more Renewable Energy (RE).

F&S could reduce RE curtailment

Increasing RE will lead to local and system level congestion in the existing Indian grid and it will be essential to curtail wind and solar during those periods. Curtailment generally is attributed to the grid’s inability to absorb RE generation but what goes unnoticed is the surplus generation from RE that is beyond what is forecast and scheduled leading to a shortage of grid transfer capability. A significant part of RE curtailment is in fact considered economic in that case.

Adding flexibility to the system in the long run

• Accurate F&S will lead to creating an economic system where utilities could offer tariff incentives to increase consumption during peak wind/solar generation periods.
• It could also lead to efficient use of traditional power assets.
• A better inter-state coordination in managing power demand and delivering other grid ancillary services will become a possibility. Regional co-ordination has been a key to the success of RE integration in US.

Regulatory dimension

The regulator’s objective of delivering energy at the lowest possible cost shall always remain. At times, the intermittent nature of RE has caused the thermal power plants to provide flexibility by operating at a lower PLF thereby adding to the cost of energy and not to mention associated emissions (which is against the climate commitments). The F&S regulation will enable to enforce a better grid discipline by managing congestion which will provide value to the generators in the long run.  The next step for the regulators at state level would be to narrow the deviations by reducing the band and increasing the penalties. There is also a need for synchronisation of intrastate and interstate F&S regulations for better accounting and settlement.

The F&S regulations are not new for RE in India, Indian Electricity Grid Code made provisions in 2010. The current regulations based on the proposal from CERC in 2015 have been under draft across a few states. Rajasthan, Gujarat and Tamil Nadu have even implemented F&S on a voluntary basis. Karnataka has once again led the way in official implementing a timely regulation (with penalties) although it is likely to lose again on the market to other states that come up with a better regulation like Tamil Nadu’s proposal of a narrow band of ±10% for wind and ±5% for solar. One thing for sure can be guaranteed, a better grid discipline.

Is solar power development sustainable?

I got an opportunity to speak at the Times Renewable Energy Expo, a Renewable Energy (RE) conference in Pune this past week. I was privileged to be part of the panel featuring Dr Chetan Singh Solanki, Prof. IIT Bombay who has pioneered the adoption of solar power in rural communities. The theme of the panel was ‘Pace of RE scale-up in India’.

I represented India Energy Storage Alliance (IESA) and spoke about integration of energy storage with RE. The intent was to emphasise the need for energy storage in providing flexibility to the grid under increasing penetration of renewable energy. Being intermittent and seasonal, wind and solar energy do have its drawbacks. In spite of being a clean source of energy, the intermittent nature stresses the traditional fossil fuel plants and forces them to operate below optimal efficiency thereby increasing the operating cost and associated emissions. The message was well received by the audience comprising of project developers, researchers, policy makers and RE enthusiasts. But, the burning topic throughout the conference was ‘Are the record low solar tariffs realistic?’

The drop in solar prices

The recent bids in Bhadla that resulted in record low tariffs of ₹ 2.62/kWh and ₹ 2.44/kWh in a span of 2 days was a major discussion point. The drop from ₹ 3.15/kWh to ₹ 2.44/kWh (23%) in a month was never expected. (Read more about why there are no more outliers in solar)

 

Module costs

The drop in solar prices is attributed to the decline in module prices which is true but it hides the bigger picture. In a recent publication by Bloomberg, an Altman Z score analysis(see below) of the module manufacturers reveals a gloomy picture. Only one company lies above the mark with three others in ‘just safe’ zone while the rest have all indications to go burst. Incidentally Solar World just announced the beginning of its end. (Also, interestingly Bloomberg lists most of these companies under Tier 1 suppliers).

Is the development sustainable?

Wind recently witnessed an intense debut reverse bidding and if the indications are right, it could well follow the solar route albeit at a lower rate. So the big question then turns out to be, ‘Is RE development sustainable?’ ‘Can companies and the stakeholders sustain this in the long run?’ I have due respect to all the experts in the big corporations who are winning projects at this price, I wouldn’t challenge their acumen. At a personal level, I just have a few points to say why I believe this development is not sustainable in the overall gambit of things.

• There is intense corporate competition, with no long term visibility and the urge to develop large portfolios in a short time is driving the bids.
• How can module manufacturers who are financially weak be trusted to produce quality product that performs for 25 years?
• Supply is just one side, on the other side low tariffs is also driving down installation costs. There is an even bigger pool of ‘installation experts’ who offer manpower services at any price asked for (What about the logic that says your pay increases as you build expertise?).
• And, the last one, preserve natural resources. I personally feel this is a huge problem, we don’t want to destroy land (and water) resources on projects whose performance is going to decline rapidly every year.

Renewable Energy development that is sustainable is the need of the hour!