Andhra Pradesh Amends its Solar, Wind and Hybrid Policy – Pulls Back Incentives

The government of Andhra Pradesh has issued a notification amending the state’s policy for wind, solar, and wind-solar hybrid projects, taking away some vital incentives from the renewable generators.

The amendments have changed or canceled many existing provisions in these policies that deal with transmission charges, energy banking, and tariff determination.

Transmission and distribution charges for wheeling of power

As per the latest amendment, transmission and distribution charges will be determined by the Andhra Pradesh Electricity Regulatory Commission (APERC) for connectivity to the nearest central transmission utility (CTU) through the state transmission utility (STU) network for the inter-state wheeling of power, and only through the STU for intra-state wheeling of power.



Also, the amendments go on to delete the relevant provisions in the solar and wind policies that state that these projects will be exempted from paying the supervision charges to distribution companies (DISCOMs) only in case of transmission of power from the STU to CTU.

The exemption of transmission and distribution charges for inter-state wheeling of power to the nearest  CTU through the STU network for solar and wind projects, as provided in its 2018 policies, will stand amended. Further, for wind-solar hybrid projects, the transmission and distribution charges were exempted up to 50% of the applicable charges for wheeling of power within the state according to the 2018 policy. This has now been amended also.

Energy Banking

The amendments also state that the facility of energy banking and drawal of power given to generators will be withdrawn for solar, wind, and hybrid projects. Further, any injection of energy between synchronization and declaration of the commercial operation date (COD) will be treated as inadvertent power, and no cost will be paid for it by the state DISCOMS.

With this amendment, banking of 100% of energy, which was allowed throughout the year based on the feasibility and prior approval for solar, wind, and hybrid projects earlier, is deleted.

Tariff

The policy now also states that the tariffs for these renewable energy projects or any other variable renewable energy project will not exceed “the difference between pooled variable cost and balancing cost.” For rooftop solar projects, the applicable tariff for net metering or gross metering should not exceed “the difference of pooled variable cost and balancing cost” (or) the applicable tariff at the time of COD (whichever is less).

The APERC will be the authority that will be responsible for setting the pooled variable cost and balancing cost every year.

This will amend the provision in the solar policy 2018, which stated that the state would procure around 2,000 MW of solar in five years, signing PPAs for 25 years at the tariff determined in competitive bidding for large-scale solar projects. For rooftop solar projects, the tariff would be equal to the average pooled power purchase cost, which will be determined by APERC, and the PPA would also be for 25 years. The wind policy 2018 which stated that the tariffs would be determined through competitive bidding with PPAs for 25 years, will also stand amended.

Land

Lastly, the amendment mandates that the procurement of government land for the development of solar, wind, and hybrid projects can only be done on a lease-hold basis.

The solar and wind policy 2018 which stated that the District   Collector  would hand over advance   possession of land to Non-conventional Energy Development Corporation of Andhra Pradesh Limited (NREDCAP) which would in  turn  enter  into  lease  agreement  with  the  developer  collecting lease rentals for 25 years at 10% of the value of land with 10% increase every five years from the date of commissioning of the project, now stands amended.

The amendments, which take away many incentives from renewable energy generators, have been issued to strengthen the financial position of state DISCOMs, according to the Andhra government.

Andhra Pradesh had announced its wind-solar hybrid policy In January 2019.

Around the same time, the state came up with its new solar policy to promote widespread usage of solar power and targeted a minimum total solar power capacity addition of 5,000 MW in the next five years in the state.

Earlier this year, the state’s new chief minister Jaganmohan Reddy had announced forming a high-level negotiation committee to deliberate and bring down the costs in all the high-priced PPAs for wind and solar power projects signed during the term of the previous Chandrababu Naidu-led government.

Reddy had ordered a slew of measures for the sector, starting with the issuance of recovery notices to all solar and wind power developers of the state that had entered the PPAs. The notices were served for the alleged losses caused to the state DISCOMs and the government due to the higher tariffs quoted in these PPAs.

Power Minister R.K. Singh has urged Jaganmohan Reddy not to revisit power purchase agreements (PPA) for solar and wind projects in the state. In a letter, Singh had asked Reddy to act in a manner that is fair, transparent, and according to the law. “The investment and development processes will grind to a halt, warned Singh through his letter.

Andhra Pradesh has become one of the unfriendliest states for renewable companies since the elections. With these new amendments, investments into renewables in the state will most likely come to a standstill.

Image credit: Optimal Power Solutions