Andhra DISCOM Says Expensive Renewable Power Procurement Threat to Their Survival

The Eastern Power Distribution Company of India Limited (APEPDCL) has refused to rescind its open access amendments in the face of objections raised by renewable developers.

The developers opposed to the withdrawal of several incentives given to renewable generation in the state. The developers who raised objections to the amendment included Amplus Andhra Power Private Limited, Andhra Pradesh Solar Power Developers Association, AP Textile Mills Association, Atria Wind Power Limited, Cyber Village Solutions Private Limited, and Visakhapatnam Port Trust.

Background

In March 2019, the Andhra Pradesh Electricity Regulatory Commission had issued the fourth amendment to its regulations on the interim balancing and settlement code for open access transactions. The new regulations were formed, keeping in mind the new wind and solar policies framed by the Andhra Pradesh state government. Andhra Pradesh passed a slew of new policies and regulations last year to promote the expansion of renewable energy projects in the state.


In the first week of 2019, Andhra Pradesh came up with a solar policy to promote the widespread use of solar power, targeting a minimum total solar power capacity addition of 5,000 MW in the next five years in the state.

Following this, the state government announced Wind Power Policy-2018 intending to expand the base of wind projects in Andhra Pradesh.

Later, it also issued Wind-Solar Hybrid Power Policy-2018 to achieve 18,000 MW of renewable energy capacity by the financial year 2021-22, which was 10% of the national target.

Then in November 2019, the state government issued a notification amending its policy for wind, solar, and wind-solar hybrid projects, taking away some vital incentives from the renewable generators. The amendments changed or canceled many provisions dealing with transmission charges, energy banking, and tariff determination.

DISCOM’s Clarification

In a letter to the developers, the state DISCOM argued that benefits like the exemption of transmission and wheeling charges, exemption of transmission and distribution losses, and the exemption of cross-subsidy charges, should be removed.

It was argued that if factors like backing down cost, grid support charges, transmission and wheeling charges, are taken into account, the cost of non-conventional power procurement is “abnormally high,” which would make it difficult for DISCOMs to survive while their financials are already in a rut.

Advocating the removal of incentives, it added that during the last six years, approximately 7.7 GW of renewable energy projects had been set up in the state.  The maximum power demand of the state varies from 6 GW to 11 GW during the year, and Andhra Pradesh has approximately 20 GW of installed power capacity, including all types of generators. The state DISCOM also said that the total installed capacity of non-conventional energy against the available total installed power capacity is around 38.5%.

The letter further said that the procurement cost of renewable energy is high, and with this kind of high cost of power procurement, DISCOMs could not survive in the state.

The DISCOM noted that the government of Andhra Pradesh had given many incentives to the developers for promoting the generation of power from renewable sources. But now it was not possible to continue with the benefits like exemption of transmission and wheeling charges, exemption of transmission and distribution losses, and the exemption of cross-subsidy charges, among others.

APEPDCL requested the developers to “understand the difficulties being faced by the AP DISCOMs and cooperate” with them.

Earlier in a letter to the Andhra Pradesh Electricity Regulatory Commission, the state DISCOM had noted that the capital cost of infrastructure for solar and wind projects is around ₹40-₹60 million (~$533,378-$800,066)/MW. It argued that the smooth integration of 8.5 GW of solar and wind power with the grid, having a system demand of nearly 10 GW, is a difficult task. In the present situation, the promotion of renewable power is not required, said the DISCOM.

According to APEPDCL, with falling prices of solar and wind power coupled with the incentives granted to the renewable generators, there is no healthy competition, and it adversely affects the DISCOMs.

Asserting these arguments, it had requested the Commission to initiate the process of amendment of open access, withdrawing exemptions of transmission and wheeling charges, distribution losses given to solar projects, energy banking, and drawal, cross subsidy charge, and additional charge.

According to Mercom’s India Solar Project Tracker, Andhra Pradesh has installed solar PV capacity of ~3.6 GW and a project pipeline of 1.3 GW.

Notably, as of March 2020, power dues payable by Andhra Pradesh DISCOMs amounted to ₹66.73 billion (~$883.13 million). The Andhra Pradesh Southern Power Distribution Company Limited had power dues of ₹45.38 billion (~$600.57 million), while the Andhra Pradesh Eastern Power Distribution Company Limited had dues of ₹21.35 billion (~$282.55 million). The state was one among several that were ratedWorst” in terms of ease of payments.

Image credit: Vattenfall