Policy Updates for Solar and Other Renewables in April 2020

The coronavirus (COVID-19) outbreak has grounded the economy to a halt. The pandemic has not only caused enormous economic loss but has killed tens of thousands of people across the globe.

At this point, there’s still considerable uncertainty about its effect on various segments of the economy, including the renewable industry.

In March 2020, the Government of India called for a 40-day countrywide lockdown which started from March 25, 2020. Only a few days ago, the government announced of easing the lockdown beginning from May 4, 2020. Given this situation, the government-announced several relaxations in the existing policies related to power generation.

The following are some of the key announcements made by the state and central governments in April 2020.


Center

The Ministry of New and Renewable Energy (MNRE) issued a blanket commissioning time extension for all renewable energy projects under construction in the country on account of the nationwide lockdown due to the COVID-19 outbreak. The Ministry directed renewable energy implementing agencies to grant an extension of time for projects amounting to the total period of the lockdown plus 30 days for normalization.

Earlier in the month, the Ministry also issued a clarification regarding the payment to renewable energy generating stations during the moratorium provided to distribution companies by the Ministry of Power. In the clarification notice, the MNRE granted a ‘must-run’ status to renewable energy generating stations and said that this status would remain unchanged throughout the lockdown period.

The Ministry of Shipping issued a notice directing all major ports of the country to allow free storage time to all port users for the lockdown period. Under the remission of charges to port users, the Ministry has directed the ports to allow deferment of annual lease rentals or license fees on a pro-rata (proportionate) basis without any interests for April, May, and June. However, this can be availed only on request from the lessee or licensee.

Earlier in the month, the Ministry also issued a clarification regarding the payment to renewable energy generating stations during the moratorium provided to distribution companies by the Ministry of Power. In the clarification notice, the MNRE granted a ‘must-run’ status to renewable energy generating stations and said that this status would remain unchanged throughout the lockdown period.

The Ministry of Shipping issued a notice directing all major ports of the country to allow free storage time to all port users for the lockdown period. Under the remission of charges to port users, the Ministry has directed the ports to allow deferment of annual lease rentals or license fees on a pro-rata (proportionate) basis without any interests for April, May, and June. However, this can be availed only on request from the lessee or licensee.

The MNRE with the approval of the Union Minister of Power, decided to extend the deadlines for approved list of models and manufacturers (ALMM) List 1 (solar PV modules) and ALMM List-II (solar PV cells) by six months from March 31, 2020, to September 30, 2020. To ensure the reliability of solar PV manufacturers and protect the consumers’ interests, the MNRE had issued Approved Models and Manufacturers of Solar Photovoltaic Modules Order 2019.

Also, the Central Electricity Regulatory Commission (CERC) decided to defer implementing the real-time power market until June 1, 2020. India’s power sector is currently in a transitional phase, shifting from long-term generation contracts to a greater reliance on short-term contracts and electricity spot markets. According to the Commission, the energy trade for the first half an hour (00:00 hours to 00:30 hours) of the day would start at 22:45 hours of the previous day and would be repeated every half an hour after that.

The Ministry of Power also issued a clarification regarding letters of credit (LoC) to be given by distribution companies. It stated that DISCOMs are expected to deposit LoCs for 50% of the cost of power they want to be scheduled, while the remaining 50% will have to be paid within 45 days of the presentation of the bill or as specified in the power purchase agreement. If the payment is not made as specified, the late payment surcharge will apply.

Meanwhile, the Reserve Bank of India (RBI) announced the second round of monetary measures to help boost the economy. The RBI governor Shaktikanta Das said that the fixed reverse repo rate under the liquidity adjustment facility (LAF) had been reduced by 25 basis points (bps) from 4% to 3.75% with immediate effect. However, the policy repo rate remains unchanged at 4.40%, and the marginal standing facility rate and the bank rate remain unchanged at 4.65% economy, which has come to a standstill during the lockdown.

The CERC also reduced the rate for late payment surcharge (LPS) payable by distribution companies to power generators. The LPS was reduced to 12% per annum from the earlier 18% if the due date falls between March 24, 2020, and June 30, 2020. According to the CERC, if there’s any delay in the payment to the generating companies (GENCOs) and inter-state transmission licensees beyond 45 days from the date of presentation of the bills (between March 24, 2020, and June 30, 2020), then the DISCOMs can make the payment of LPS at a reduced rate of 1% per month instead of 1.5%.

States

Following the CERC’s order, many states have reduced the late payment surcharge. These are:

The Chhattisgarh Electricity Regulatory Commission (CSERC) reduced the payment of the late payment surcharge to 0.75% per month.

Similarly, the West Bengal Electricity Regulatory Commission (WBERC) reduced the rate of late payment surcharge at 1% per month.

The Madhya Pradesh Electricity Regulatory Commission (MPERC) reduced the rate of current LPS to be paid by the state’s distribution companies to power generators and inter-state transmission licensees by 0.50% per month.

For Goa and union territories, the Joint Electricity Regulatory Commission (JERC) reduced the LPS from 2% to 1% per month.

The Punjab State Electricity Regulatory Commission provisionally reduced the rate of late payment surcharge to 6% per annum if the due date falls between March 24, 2020, and June 30, 2020.

Also, the Delhi Electricity Regulatory Commission (DERC) reduced the rate LPS from 18% to 12% per annum for bills that are raised between March 24, 2020, and June 30, 2020. The rebate will apply to the net amount to be paid by the consumer.

The Rajasthan Electricity Regulatory Commission (RERC) issued an order directing stakeholders to adopt measures to ease the burden on power consumers, generators, transmission licensees, and distribution companies in the state amidst the ongoing coronavirus crisis. The Commission stated that to make things easier for all parties in these difficult times, a normative rate equivalent to the interest rate on working capital should be adopted in place of the current penal rate of late payment surcharges.

Meanwhile, the MNRE has directed the state government of Haryana to honor all the allocations made to the solar power projects and solar parks and treat them as sacrosanct. This latest directive comes on the heels of a letter submitted by Connect Solar on February 14, 2020, in which it had stated that since the last two years, renewable energy developers are being asked to invest in open access solar projects in Haryana and then the new projects are being canceled with newer conditions imposed on them, leading to considerable losses for the developers.

The Punjab State Electricity Regulatory Commission extended the validity of the Central Electricity Regulatory Commission’s Renewable Energy Tariff Regulations, 2017, and the Levelized generic tariffs for renewable projects for FY 2019-2020 for another three months. The Commission also noted that the generic tariff issued by the Commission in the order dated March 19, 2019, will continue to remain in force until June 30, 2020.