The Government of Andhra Pradesh (GoAP) has issued an order with guidelines to implement its 10 GW solar power project program for farmers in the state.
The program aims to provide nine hours of free power during the day to farmers without increasing the financial burden on the state’s distribution companies (DISCOMs).
The program was first announced in February 2020.
Andhra Pradesh said that the average agricultural power consumption in the state was 12,221 million units (MU) per year. It added that the subsidies for the sector have grown almost three-fold to ₹83.54 billion (~$1.10 billion) during FY 2020-21. It stated that these subsidies are expected to grow as more pump-sets are installed, and supply costs rise.
The state also explained that the Andhra Pradesh Electricity Regulatory Commission (APERC) has been determining agricultural subsidy on the average cost of supply model, which has three components – average power purchase cost, average transmission cost, and average distribution cost. The state has proposed to replace the average power purchase cost with solar power and provide nine hours of free power during the day to agricultural consumers.
The state used filings by DISCOMs to identify that the total solar capacity required to meet agricultural demand was around 10 GW.
Based on these requirements, the state-issued guidelines for the program. Some of the important highlights:
The state government said that the newly formed Andhra Pradesh Green Energy Corporation Limited (APGECL), a 100% subsidiary of Andhra Pradesh Power Generation Company Limited (APGENCO), will be the executing agency for setting up the 10 GW solar project in a phased manner and for connecting it to the grid. It said the APGECL would procure the power through competitive bidding and monitor the projects.
It said that the APGECL could procure decentralized solar power from 132 kV and 220 kV substations wherever feasible, adding that it can participate in venture gap funding based bidding up to 2.5 GW under the Central Public Sector Undertaking Program Phase-II.
The APEGCL will also be the nodal agency for developing solar parks under the Ultra Mega Solar Power Projects Program and the Ultra Mega Renewable Energy Power Park Program, according to the state’s guidelines.
The state also ordered for a tender approval committee comprising the secretary to the government, energy department, principal finance secretary, finance department, Chairman and Managing Director of the APGECL, Chairman and Managing Director of Transmission Corporation of Andhra Pradesh (APTRANSCO), Managing Director of APGENCO, and Vice Chairman and Managing Director of New & Renewable Energy Development Corporation of Andhra Pradesh.
The APGECL is also expected to procure solar power under the build-operate-transfer (BOT) mode from developers for 30 years. A flat tariff discovered through competitive bidding will be applicable for the first 15 years. Prefixed operation and maintenance (O&M) charges will be paid from the 16th year onwards and will escalate 4% every year till the 30th year.
At the end of the useful life of the solar project, it will be transferred to the APGECL to reduce overall tax implications.
Payment for Power and Land:
The guidelines stated that the finance department would pay for charges incurred during the land acquisition process.
The state government will also pay monthly energy charges to solar power developers through the APGECL. Energy charges are to be paid to projects from the date of commissioning for 30 years. A fixed tariff will be applicable for the first 15 years, and O&M charges will start from the 16th year.
The state said that the land would be made available on lease to developers for setting up the solar projects in a mix of government and assigned lands. District collectors and magistrates are directed to identify these land parcels and ensure their availability.
The APGECL, district magistrates, and collectors are expected to survey these lands, prepare all the required records, and conduct grama sabhas (village council meetings). The state also directed the revenue department to amend assigned land regulations and other parts of relevant acts to facilitate leasing for these projects.
Assigned and private lands are to be leased to the APGECL at a rate of ₹25,000 (~$329)/acre annually. The APEGCL can then lease these lands for ₹31,000 (~$408)/acre annually to solar power developers. In the case of government-owned lands, the APGECL will transfer the entire lease rental amount to the state government or based on the state’s decision.
The guidelines, however, exempted projects from making payments for non-agricultural land charges. The revenue department is directed to amend the relevant Act as required.
Power Evacuation and System Strengthening:
The state delegated the responsibility of setting up external power evacuation infrastructure, including transmission lines and substations to the APTRANSCO. It directed the state transmission company to use its own funds for setting up and strengthening the power evacuation infrastructure and allowed to recover costs through the aggregate revenue requirement of its transmission business.
The state also directed APTRANSCO to set up a grid substation and a switching substation along with the required bays within 1 kilometer of the solar park.
Meanwhile, the solar power developer is expected to set up internal evacuation infrastructure and to connect the solar projects to the pooling station as per requirements.
State DISCOMs are given rights to renewable energy certificates generated from these projects and to sell them on power exchanges or other similar mechanisms. The state government said it would pay any applicable network and balancing charges to state DISCOMs after netting off REC revenue.
They were also directed to enter into agreements with the APGECL to supply power to agricultural consumers and to get all the required approvals from the APERC for the same.
Banking charges will not apply for power generated from these projects and will be treated as banked power with the DISCOMs for the entire lifespan of the projects. Energy settlements will be done annually instead of daily or monthly. Any surplus banked energy at the end of the year will be treated as free power to the DISCOMs.
DISCOMs are also directed to cooperate with the Andhra Pradesh State Load Despatch Center (APSLDC) to conduct studies and develop a protocol to address real-time variations in renewable generation in agricultural consumption. They are also assigned the responsibility of ensuring an uninterrupted power supply over the nine-hours during the day.
The APSLDC, state DISCOMs, and the APGECL are also tasked with developing a digital application for this real-time management.
The state government said that these projects are exempted from obtaining approvals from the village or panchayat. It also permitted the APGECL to appoint consultants for assisting the corporation in conducting the bidding process, in monitoring project progress, and to conduct studies when needed.
According to Mercom India Solar Project Tracker, Andhra Pradesh has 3.7 GW of large-scale solar projects in operation, and approximately 1.3 GW capacity is under the development pipeline as of Q1 2020.
Image credit: JREDA
Nithin is a staff reporter at Mercom India. Previously with Reuters News, he has covered oil, metals and agricultural commodity markets across global markets. He has also covered refinery and pipeline explosions, oil and gas leaks, Atlantic region hurricane developments, and other natural disasters. Nithin holds a Masters Degree in Applied Economics from Christ University, Bangalore and a Bachelor’s Degree in Commerce from Loyola College, Chennai.