GERC to Revise Tariff for Surplus Energy Purchased from Captive Wind Projects

The Gujarat Electricity Regulatory Commission (GERC) has partly approved a petition filed by Gujarat Urja Vikas Nigam Limited (GUVNL) to establish tariffs to procure surplus power by the distribution licensees from wind projects set up for captive use or third-party sale availing open access in the state.

Background

GUVNL, along with its four subsidiary distribution companies, had filed a petition asking for the modification in the orders relating to the purchase of surplus energy by distribution licensees from wind projects set up for captive use or third-party sale utilizing open access. Torrent Power Limited, another distribution licensee in the state, has also joined GUVNL in this petition. Further, the petition also asked the commission to decide the rate for the purchase of such surplus power from wind power projects.

In a previous order issued in 2015 by the Commission,  it had decided that in case of wind power projects availing open access for captive use or third-party sale but not opting for renewable energy certificates (RECs), the distribution licensee would purchase the surplus power at the rate of the Average Pooled Power Purchase Cost (APPC) of the year of the commissioning of the project. In case of such projects opting for RECs, the distribution licensee would purchase the surplus power on a 15-minute time block basis at 85% of the APPC of the year of commissioning of the project, throughout the life of the project.



After the recent competitive bidding in Gujarat, it is clear that the wind tariffs have fallen to as low as ₹2.43 (~$0.034)/kWh, while the APPC is at ₹3.47 (~$0.049)/kWh.

Now the distribution licensees want the Commission to note that it is not justified to pay a lower tariff of ₹2.43 (~$0.034)/kWh for wind projects exclusively set up for sale of power to distribution licensees while paying more (₹3.47 (~$0.049)/kWh) to the projects set up primarily for captive use or third-party sale and selling only surplus (irregular) power to distribution licensees.

Taking this into account, the distribution licensees have requested the Commission to modify the policy, allowing the distribution licensees to purchase the surplus power at the rate of APPC or the tariff discovered through competitive bidding anywhere in India during the previous six months, whichever is lower for projects not opting for RECs. In case of such projects opting for RECs, the distribution licensee would purchase the surplus power at 85% of the APPC or 85% of the tariff discovered through competitive bidding anywhere in India during the previous six months, whichever is lower.

The Commission in reply has that this request of the distribution is not permissible.

The reasons given by the Commission for rejecting this request is that, if the Commission accepts the request of the distribution licensees, it has to determine the tariff to be given to the wind power generators either through APPC (which is monetary compensation for surplus energy injected after self-consumption or through tariff discovered under competitive bidding.

Since the rate of purchase of surplus power is not fixed in nature, it is challenging to decide the tariff with the prevailing conditions of the competitive bidding in India as there will always be two rates required to be determined by the Commission and the lowest of the two rates will have to be applied for surplus energy purchased by the licensees.

The Commission also added that the tariff for the wind projects applicable in Gujarat and the capacity utilization factor (CUF) in other states would vary, and therefore, they are not comparable.

The Commission stated that the wind power projects set up for captive use or third-party sale set up under open access, cannot be compared with the wind or other generating projects set up exclusively for the sale of electricity to the DISCOMs.

Understanding the concerns raised in the petition regarding this issue, the Commission assured that it would take appropriate decision and revise the relevant regulations and orders to decide about the monetary compensation for the projects. It also directed its staff to initiate the process of revising the relevant orders and regulations.

Mercom also reported a similar petition for a solar project. In that case, too, the commission acknowledged the ambiguity in the regulations and stated that the matter would be further examined.

In the same month, the state came up with the average pooled purchase cost for various licensees. The commission came up with the new costs for the distribution companies that have been purchasing electricity at different prices from various sources. The commission also stated that the APPC of distribution licensees should not exceed the APPC of the state.

Image credit: By Chris Lim from East Coast, Singapore – Windmills in China, CC BY-SA 2.0