SUMMER INTERNSHIP REPORT

ANALYSIS OF POWER PURCHASE AGREEMNT AND

TARIFF PETITIONS FOR HYDRO AND SOLAR PROJECTS

UNDER THE GUIDANCE OF

Mr. S K Choudhary, Principal Director, CAMPS, NPTI

& Mr. H R Satija, Executive Director, DERC

At

Delhi Electricity Regulatory Commission

Submitted by

DIGPALSINGH

ROLL NO: 1120812214

MBA (POWER MANAGEMENT)

(Under the Ministry of Power, Govt. of India)

Affiliated to

MAHARSHI DAYANAND UNIVERSITY, ROHTAK

AUGUST 2012

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DECLARATION

I, Digpal Singh, Roll No.1120812214, student of MBA-Power Management (2011-13) at National

Power Training Institute, Faridabad hereby declare that the Summer Training Report entitled

“ANALYSIS OF POWER PURCHASE AGREEMENT AND TARIFF PETITION FOR HYDRO

AND SOLAR PROJECTS” is an original work and the same has not been submitted to any other

institute for the award of any other degree.

A seminar presentation of the Training Report was made on ______________________ and the

suggestions approved by the faculty were duly incorporated.

Presentation In charge

(Faculty)

Signature of the Candidate

Countersigned

Director/Principal of the Institute

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CERTIFICATE

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ACKNOWLEDGEMENT

I would like to express my sincere gratitude to all the people who had been associated with me in some

way or the other and helped me avail this opportunity for my summer Internship on the topic “Analysis

of Power Purchase Agreement and Tariff Petitions for Hydro and Solar Projects”.

I acknowledge with gratitude and humanity my indebtness to my Summer Internship guide Mr. H R

Satija, Executive Director, DERC for providing me excellent guidance and motivation under whom I

completed my summer internship.

I express my heartily thanks to Mrs. Jayshree Raghuraman, Secretary, DERC for providing me the

opportunity to work on such an insightful project.

I would like to thank my Project In-charge Mr. S K Choudhary, Principal Director, CAMPS,

Faridabad for his support and guidance throughout the course of summer internship.

A special thanks to Mrs. Indu Maheswari, Dy. Director, NPTI for her guidance throughout my summer

internship.

I would like to thank Mr. J.S.S. Rao, Principal Director (NPTI), Mrs. Manju Mam, Dy. Director, NPTI

and all faculty members for arranging my internship at DERC and being a constant source of

motivation and guidance throughout the course of my internship.

DIGPAL SINGH

MBA (Power Management)

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EXECUTIVE SUMMARY

The NCT of Delhi is witnessing continuously growing electricity requirement which has created a

situation of power deficit. In July 2012, the peak load of Delhi touched a new high of 5500 MW.

After restructuring of Delhi Vidyut Board, three Distribution Companies (Discoms) were

rechristened on 26th June 2002 as BSES Yamuna Power Limited (BYPL), BSES Rajdhani Power

Limited (BRPL) and North Delhi Power Limited (NDPL). On 28th

June 2006, the Government of

NCT of Delhi issued Policy Directions to DERC for making power arrangements in Delhi beyond

the 1st April,2007. The Policy Direction stated as “With effect from 1

st April 2007, the

responsibility of arranging supply of power in the NCT of Delhi shall rest with the Distribution

Companies”. Each discom is now arranging supply of power for its own area of supply. As per the

provisions of the Electricity Act, 2003 and DERC’s Comprehensive Conduct of Business

Regulation, Discoms need approval of the Commission before entering into a contract of Power

Purchase. The discom need to file a petition in the Commission for the approval of Power purchase

including the price at which power will be purchased. The Commission after analysing the petitions

including Power Purchase Agreement and Tariff in the context of Demand and Supply and

competitiveness of the tariff may approve or disapprove the petition.

The report is focussed on analysis of the petitions filed by two Discoms i.e., BSES and NDPL in the

Commission for the purchase of power from Hydro and Solar projects respectively.

The report starts with the introduction of Power Purchase Agreement and Tariff Petition. It further

provides the background of the projects from which power purchase is proposed. It analyses each

project on the purview of Demand and Supply conditions. It analyses Power Purchase Agreement

(PPA) of these projects and compares these PPAs with the Standard Document issued by Ministry

of Power. It further analyses the tariff of the project and compares the tariff with the Average power

Purchase Cost (APPC) of Discoms and with tariff of other proposed power projects. It provides an

insight to purchase of power by the Delhi Discoms from various sources.

The report emphasizes on securitization of power purchase from these projects in case of any

unfavourable developments and ensures a firm and reliable supply of power to the consumers of

NCT of Delhi.

The report concludes with the evaluation of acceptability of these Petitions for Power Purchase and

followed by the recommendation regarding these Power Purchase Petitions.

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LIST OF ABBREVIATIONS

APPC Average Power Purchase cost

ARR Annual Revenue Requirement

BOOT Build, Own, Operate and Transfer

BYPL BSES Yamuna Power Limited

BRPL BSES Rajdhani Power Limited

CEA Central Electricity Authority

CERC Central Electricity Regulatory Commission

CFA Central Financial Assistance

COD Commercial Operation Date

CSP Concentrated Solar Plant

DERC Delhi Electricity Regulatory Commission

DISCOM Distribution Companies

DPR Detailed Project Report

DMRPS Dynamic Minimum Renewable Purchase Standard

DSM Demand Side Management

DVC Damodar Valley Corporation

EA, 2003 Electricity Act, 2003

EPC Engineering, Procurement and Construction

EPS Electric Power Survey

ERC Electricity Regulatory Commission

FIT Feed In Tariff

GENCO Generation Company

GOI Government of India

GoNCTD Government of National Capital Territory of Delhi

HEP Hydroelectric Project

ICB International Competitive Bidding

IDC Interest During Construction

IPP Independent Power Producer

JNNSM Jawaharlal Nehru National Solar Mission

JV Joint Venture

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MOA Memorandum of Agreement

MNRE Ministry of New and Renewable Energy

MYT Multi Year Tariff

NAPCC National Action Plan for Climate Change

NCT National Capital Territory

NDPL North Delhi Power Limited

NPTI National Power Training Institute

NSM National Solar Mission

O&M Operation and Maintenance

PAF Plant Availability Factor

PLF Plant Load Factor

PPA Power Purchase Agreement

PV Photo Voltaic

RFP Request for Proposal

RoE Return on Equity

RPO Renewable Purchase Obligation

RPSSGP Rooftop PV & Small Solar Power Generation Programme

SBD Standard Bid Document

SoP Standard Operating Procedure

SERC State Electricity Regulatory Commission

SLDC State Load Dispatch Centre

TPDDL Tata Power Delhi Distribution Limited

THPPL Tato Hydro Power Private Limited

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LIST OF FIGURES

Figure 1Research Methodology ..................................................................................................... 14

Figure 2 Location of Project .......................................................................................................... 18

Figure 3 Demand Projection as per EPS......................................................................................... 22

Figure 4 Projection of actual peak Demand .................................................................................... 23

Figure 5 Demand and Supply of Power .......................................................................................... 25

Figure 6 Peak Energy Trend .......................................................................................................... 25

Figure 7 Daily Operation hours of Delhi ........................................................................................ 26

Figure 8 Tariff Profile of Tato II HEP ............................................................................................ 39

Figure 9 Power purchase cost of Delhi .......................................................................................... 40

Figure 10 Power purchase cost from New Stations ........................................................................ 40

Figure 11 Comparison of Tato II project with various Coal based projects ..................................... 41

Figure 12 Overview of FIT in INR of 37 JNNSM bid winners (all PV projects of 5 MW) ............. 51

Figure 13 JNNSM first phase projects available for round II .......................................................... 52

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LIST OF TABLES

Table 1 Salient Features ................................................................................................................. 17

Table 2 Location of Project............................................................................................................ 18

Table 3 Sources of Supply ............................................................................................................. 24

Table 4 Comparison of PPAs ......................................................................................................... 27

Table 5 Project cost of Tato II HEP ............................................................................................... 35

Table 6 Tariff Assumptions ........................................................................................................... 35

Table 7 Tariff Sheet of Tato II HEP ............................................................................................... 36

Table 8 Comparison of Tato II HEP Tariff with Average Power Purchase cost .............................. 40

Table 9 Details of Projects ............................................................................................................. 45

Table 10 Technical details of the Projects ...................................................................................... 54

Table 11 Solar radiation in Delhi .................................................................................................. 55

Table 12 Efficiency comparison ................................................................................................... 56

Table 13 Reduction in CO2 Emission ........................................................................................... 56

Table 14 RPO of Delhi .................................................................................................................. 57

Table 15 RPO of TPDDL ............................................................................................................. 57

Table 16 Comparison of Capital cost of projects ............................................................................ 60

Table 17 Comparative Analysis of Tariff of Projects ..................................................................... 61

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TABLE OF CONTENT

DECLARATION ........................................................................................................................ ii

CERTIFICATE ......................................................................................................................... iii

ACKNOWLEDGEMENT ..........................................................................................................iv

EXECUTIVE SUMMARY .......................................................................................................... v

LIST OF ABBREVIATIONS .....................................................................................................vi

LIST OF FIGURES ................................................................................................................. viii

LIST OF TABLES......................................................................................................................ix

TABLE OF CONTENT ............................................................................................................... x

CHAPTER 1 INTRODUCTION ..................................................................................................... 1

1.1 Power Purchase Agreement ............................................................................................... 1

1.2 Tariff Petition .................................................................................................................... 2

1.3 Need for Analysis of Power Purchase Agreement and Tariff Petitions ............................... 2

1.4 Objective of the Project ..................................................................................................... 3

1.5 Scope of Work .................................................................................................................. 3

1.6 Organisation Profile .......................................................................................................... 4

1.6.1 Delhi Electricity Regulatory Commission (DERC) ........................................................ 4

1.6.2 Functions of Delhi Electricity Regulatory Commission .................................................. 4

1.6.3 Critical Assessment of Organization .............................................................................. 7

1.6.4 Suggestions and Recommendations to DERC ................................................................ 9

CHAPTER 2 LITERATURE REVIEW, REGULATORY ............................................................ 10

FRAMEWORK & RESEARCH METHEDOLOGY ..................................................................... 10

2.1 Literature Review ............................................................................................................ 10

2.2 Regulatory Framework .................................................................................................... 13

2.2.1 The Electricity Act, 2003 .......................................................................................... 13

2.2.2 Regulation 27(iii) of DERC (Comprehensive Conduct of Business Regulations) ...... 14

2.3 Research Methodology .................................................................................................... 14

2.3.1 Demand Projection ................................................................................................... 15

2.3.2 Supply Planning ....................................................................................................... 15

2.3.3 Analysis of Power Purchase Agreement ................................................................... 15

2.3.4 Analysis of Tariff ..................................................................................................... 15

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CHAPTER 3 ANALYSIS OF POWER PURCHASE AGREEMENT AND TARIFF PETITION

FOR HYDRO PROJECT............................................................................................................... 16

3.1 Petition: ........................................................................................................................... 16

3.2 Project Background ......................................................................................................... 16

3.3 Salient Features of Project ............................................................................................... 17

3.4 Location of the Project .................................................................................................... 18

3.5 Legal and Policy Framework for Hydro Power Projects ................................................... 18

3.5.1 The Electricity Act, 2003 .......................................................................................... 18

3.5.2 National Electricity Policy ........................................................................................ 19

3.5.3 National Tariff Policy ............................................................................................... 19

3.5.4 National Hydro Power Policy ................................................................................... 20

3.5.5 Mega Power Project Policy....................................................................................... 21

3.6 Analysis of Petition ......................................................................................................... 22

3.6.1 Demand Forecast of Delhi ........................................................................................ 22

3.6.2 Supply Projections for Delhi ..................................................................................... 23

3.6.3 Analysis of Power Purchase Agreement ................................................................... 27

3.6.4 Analysis of Tariff ..................................................................................................... 35

3.7 Conclusion ...................................................................................................................... 42

3.8 Recommendation ............................................................................................................. 43

4.1 Petition : .......................................................................................................................... 44

4.2 Project Background ......................................................................................................... 44

4.3 Details of Projects ........................................................................................................... 45

4.4 Legal and Policy Framework for Solar Power Projects .................................................... 46

4.4.1 The Electricity Act, 2003 .......................................................................................... 46

4.4.2 National Electricity Policy ........................................................................................ 47

4.4.3 National Action Plan on Climate Change (NAPCC) ................................................. 47

4.4.4 National Solar Mission (NSM) ................................................................................. 49

4.4.5 Rooftop PV & Small Solar Power Generation Programme (RPSSGP) ...................... 52

4.5 Analysis of Petition ......................................................................................................... 54

4.5.1 Technical Analysis of the Projects ............................................................................ 54

4.5.2 Demand Projection ................................................................................................... 57

4.5.3 Supply Projection ..................................................................................................... 58

4.5.4 Analysis of Power Purchase Agreement ................................................................... 58

4.5.5 Analysis of Tariff ..................................................................................................... 60

4.6 Conclusion ...................................................................................................................... 62

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4.7 Recommendation ............................................................................................................. 63

BIBILIOGRAPHY .................................................................................................................... 64

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CHAPTER 1 INTRODUCTION

1.1 Power Purchase Agreement

A power purchase agreement (PPA) is a legal contract between an electricity generator, one

who is looking for sale of electricity generated, and one or more Power purchaser(s). A PPA

plays a critical role for both the generator, in terms of securing a long-term stream of

revenue for the project through the sale of the electricity generated by the project, and the

purchaser, in terms of securing a reliable and firm supply of electricity.

The PPA is often regarded as the central document in financing a power project

because it defines the revenue terms for the project and credit quality.

PPA involves two parties :

i. Seller : Under a PPA, a seller is the owner of the generation unit.

ii. Buyer : Under a PPA, a buyer is generally a utility that purchase

power to meet demand of its consumers.

While price terms are often thought of as the most important element of a PPA, typically

PPAs include many vital provisions addressing issues such as the length of the agreement,

the commissioning process, the purchase and sale of energy, metering and accounting, Force

majeure conditions, curtailment agreements, transmission issues, milestones and defaults,

credit, insurance and environmental attributes or credits.

In India, Ministry of Power issues Standard documents which provide the framework for

PPA. The Ministry of Power has issued PPA for long term power procurement under Case 1

and Case 2 bidding.

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1.2 Tariff Petition

Tariff petition is the request by utilities to Regulatory Commissions to determine/approve

the tariff of a power project. Tariff petitions are filed by utilities with the appropriate

commissions.

Tariff petitions are filed in appropriate structure as specified by the appropriate commission

and include all the details of the project.

A tariff petition generally includes Prayer from the petitioner, Detailed Project Report,

Tariff of the project for throughout its life and Techno-economic justification for the project.

1.3 Need for Analysis of Power Purchase Agreement and Tariff Petitions

DERC’s functions include –

To regulate power purchase and procurement process of the licensees and

transmission utilities including the price at which the power shall be procured from

the generating companies, generating stations or from other sources for transmission,

sale, distribution and supply in the National Capital Territory of Delhi.

To promote competition, efficiency and economy in the activities of the electricity

industry to achieve the objects and purposes of the Electricity Act, 2003.

To regulate the working of the licensees and other persons authorized or permitted to

engage in the electricity industry in the National Capital Territory of Delhi and to

promote their working in an efficient, economical and equitable manner.

Regulation 27 (iii) of DERC (Comprehensive Conduct of Business Regulations)

2011 requires approval of the Commission before entering into a contract for

procurement of power for transmission, distribution and supply in the state. The

aforesaid regulation reads as under:-

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“Any transmission or distribution utility, henceforth proposing to enter into a contract

to procure and purchase power, including the price at which power may be purchased,

from any Generating Company, Generating Station or from any other source for

transmission, distribution and supply in the State, shall take approval from the

Commission, before entering into such contract.”

To effectively discharge the above mentioned functions and in order to protect the interest

of electricity consumers of NCT of Delhi and to provide them reliable electricity at

competitive price, DERC needs to analyse the petitions of Power Purchase filed by Delhi

Discoms.

1.4 Objective of the Project

The objective of this project is to analyse the petitions filed by the Delhi distribution

companies at Delhi Electricity Regulatory Commission for Power Purchase from Hydro

and Solar generation sources. The analysis is focussed on Power Purchase Agreement and

Tariff of the power purchase in purview of Demand and Supply of electricity in Delhi with

an aim to determine acceptability of the power purchase petitions.

1.5 Scope of Work

Scope of this project is limited to analysis of two nos. of petitions –

i. Petition for approval of Power Purchase Agreement for Procurement of Power from

700 MW TATO – II Hydro-Electric Power by M/s BRPL and M/s BYPL

ii. Petitions for approval of Power Purchase Agreement and adoption of Generic Tariff

for Generation of Electricity from 11 nos. Grid interactive Solar PV projects of

TPDDL

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1.6 Organisation Profile

1.6.1 Delhi Electricity Regulatory Commission (DERC)

The Govt. of India had enacted the Electricity Regulatory Commission Act, 1998 on 2nd

July, 1998 with the objective of providing for the establishment of a Central Electricity

Regulatory Commission and State Electricity Regulatory Commissions, rationalization of

electricity tariff, transparent policies regarding subsidies, promotion of efficient and

environmentally benign policies and for matters connected therewith or incidental thereto.

Delhi Electricity Regulatory Commission (DERC) was constituted on 03-03-1999 under the

Electricity Regulatory Commission Act, 1998. DERC is Regulatory body entrusted with a

responsibility of regulating the electricity sector in the state in a rational, transparent and

participative manner. Its responsibilities include tariff setting, overseeing service quality,

approving PPAs between a DISCOM and a generating company etc. All deliberations before

DERC are public. Therefore, any consumer can participate in the decision making process in

the electricity sector ranging from setting the service quality standards to tariff revision.

1.6.2 Functions of Delhi Electricity Regulatory Commission

The Delhi Electricity Regulatory Commission was constituted by Govt. of NCT of Delhi

vide Notification No.F.11 (28)/98-EB/341 dated 03-03-1999 for discharge of the following

functions:

To determine the tariff for electricity, wholesale bulk, grid or retail, as the case

maybe, in the manner provided in section 29 of the Electricity Regulatory

Commissions Act, 1998;

To determine the tariff payable for the use of the transmission facilities in the

manner provided in section 29 of the Electricity Regulatory Commissions Act, 1998;

To regulate power purchase and procurement process of the transmission utilities

and distribution utilities including the price at which the power shall be procured

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from the generating companies, generating stations or from other sources for

transmission, sale, distribution and supply in the National Capital Territory of Delhi.

To promote competition, efficiency and economy in the activities of the electricity

industry to achieve the objectives and purposes of the Electricity Regulatory

Commissions Act, 1998.

Subsequently the Govt. of NCT of Delhi notified the Delhi Electricity Reforms Act, 2000

deemed to be in force from 3rd day of November 2000.

The Delhi Electricity Reforms Act provides that the Commission established and constituted

under section 17 of the Electricity Regulatory Commissions Act, 1998 shall be the first

Commission for the purposes of this Act also.

Under this Act the following functions have been assigned to the Commission:

To determine the tariff for electricity, wholesale bulk, grid or retail, as the case

maybe;

To determine the tariff payable for the use of the transmission facilities;

To regulate power purchase and procurement process of the licensees and

transmission utilities including the price at which the power shall be procured from

the generating companies, generating stations or from other sources for transmission,

sale, distribution and supply in the National Capital Territory of Delhi;

To promote competition, efficiency and economy in the activities of the electricity

industry to achieve the objects and purposes of this Act;

To aid and advise the Government in matters concerning electricity generation,

transmission, distribution and supply in the National Capital Territory of Delhi;

To regulate the operation of the power system within the National Capital Territory

of Delhi;

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To set standards for the electricity industry in the National Capital Territory of Delhi

including standards related to quality, continuity and reliability of service;

To promote competitiveness and make avenues for participation of private sector in

the electricity industry in the National Capital Territory of Delhi and also to ensure a

fair deal to the customers;

To aid and advise the Government in the formulation of its power policy;

To collect and publish data and forecasts on the demand for, and use of, electricity in

the National Capital Territory of Delhi and to require the licensees to collect and

publish such data;

To regulate the assets, properties and interest in properties concerned or related to

the electricity industry in the National Capital Territory of Delhi including the

conditions governing entry into and exit from the electricity industry in such manner

as to safeguard the public interest;

To issue licenses for transmission, bulk supply, distribution or supply of electricity

and determine the conditions to be included in the licenses;

To regulate the working of the licensees and other persons authorized or permitted to

engage in the electricity industry in the National Capital Territory of Delhi and to

promote their working in an efficient, economical and equitable manner;

To require licensees to formulate prospective plans and schemes in coordination with

others for the promotion of generation, transmission, distribution, supply and

utilization of electricity, quality of service and to devise proper power purchase and

procurement process;

To adjudicate upon the disputes and differences between the licensees and/or

transmission utilities and to refer the matter for arbitration;

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To aid and advise the Government on any other matter referred to the Commission

by the Government;

1.6.3 Critical Assessment of Organization

Strengths

Best SERC in the whole country as per its performance, establishment and

implementation of regulations and overall performance

Excellent work Culture and environment.

Only SERC to complete two Consumer Satisfaction Surveys (C.S.S. 2007 and

C.S.S. 2009) providing nearly 95% accuracy.

Strong balance sheet showing profits coming from license incomes exceeding the

total expenditures incurred.

All up to date annual reports, regulations and tariff orders

Strong and sound top management.

Weakness

Shortage of trained manpower.

Most of the employees are on deputation or on contract for a term of 1 to 3 years

or at the maximum of 5 years which leads to wastage of time whenever a new

employee joins.

Lack of continuity owing to temporary staff.

Non-availability of soft database available for previous year‘s information during

the period 2003 till date.

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No well established algorithm or process for testing of technology or monitoring

the DISCOMs.

Opportunities

Tremendous Pace of electricity distribution performance improvement prevailing

in the state.

Improvement in Electricity Distribution SoPs successfully at later ends.

Awareness among the consumers regarding Electricity Distribution SoPs and

CGRFs.

Regulating open access.

Promotion of DSM measures and Renewable sources in the state.

Overcoming Technology testing and other bottlenecks to ensure quality, reliable

and uninterrupted power to consumers.

Threats

Lack of consumer awareness and participation about DERC and its functioning

affecting performance of the commission.

Lack of consumer satisfaction owing to no well established monitoring of

performances of DISCOMs

Loss of efficient employees after completion of deputation tenure or contract of

the employees.

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1.6.4 Suggestions and Recommendations to DERC

Increase in the tenure or contract of employees and design provision of extension as

per the performance of the employee.

In order to motivate the employees, the management should look to the monetary as

well as the non-monetary performance based incentives and benefits.

Manpower training in terms of:

Reorientation of work culture

Development of managerial skills

Up gradation of technical skills should be laid more emphasis on.

To develop monitoring mechanisms and IT interfacing to ensure access to real

performance of the DISCOMs.

Being a statutory body under Delhi Government, DERC does not have any vision or

mission as such specified. Hence, DERC should look into the development of the

same.

To start special department to work for consumer awareness and education regarding

electricity distribution and power consumption with emphasis on DSM, energy

conservation, renewable energy sources and Electricity Distribution SoPs

Regulations.

DERC should ask for the authority to create posts for the required staff or

employees, i.e. recruitment of staff to be taken care by DERC.

To develop an online portal to ensure the availability of all the data to the DERC

staff for quick reference.

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CHAPTER 2 LITERATURE REVIEW, REGULATORY

FRAMEWORK & RESEARCH METHEDOLOGY

2.1 Literature Review

Crow (2001) in his study on PPA stated that PPAs are considered as the most important

contract underlying the construction and operation of a power plant usually drawn at the

implementation phase of IPP projects, as there can be no project if PPA is not reached. It is

also an extremely complex and politically sensitive issue, since it is the PPA which

ultimately governs the price of electricity delivered to end users. The other project

agreements including those covering Engineering, Procurement, Construction, lending,

operations and maintenance, can be negotiated only after the PPA is concluded.

R B Shrestha and Stephen Ogunlan, (2006) studied on eight existing PPAs in Nepal. Power

Purchase Agreements on IPPs in Nepal are of three types: with foreign investment, local

investment and investment in JV with the Utility. A critical issue in designing power

purchase agreements is to create a level playing field for the players to secure successful and

sustainable IPPs and PPAs. To create this environment, discriminatory clauses or unequal

treatment to IPPs in the key issues of the PPAs should be avoided; the key issues being

power purchase guarantees, force majeure guarantees, financial and foreign exchange

guarantees, operation guarantees, and guarantees concerning insurance and dispute

resolution. The analysis shows that discriminatory clauses and unequal treatment are present

in the key issues of the agreements.

John Besant Jones (2008) in his study of Regulatory Review of Power Purchase Agreement

stated that Power Purchase Agreements are central to the health of power sectors,

particularly in countries that have opted for single-buyer market structure The capital cost of

electricity generating plants often constitutes a large share of the final cost of power

delivered to the consumers. In addition in the case of Thermal generation fueled by imported

oil, input fuel cost have experienced major escalations because of large increase in world oil

prices. If the the risk allocation and sale price in the PPA are one sided, the bulk supply

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price of power that results from the PPA may turn out to be very high and economically

unsustainable.

Mr. Raju B. Shrestha (2009) made a research which aimed to identify the underlying factors

in PPAs in hydropower production in the Nepalese environment. The research provides the

underlying factors in PPAs in hydropower production in the Nepalese environment, which

are of most significance to the stakeholders of independent power production. The research

is carried out with a triangulation approach taking into account both the qualitative

viewpoint, in the form of comparative studies; and quantitative viewpoint, a questionnaire

survey, regarding issues of PPAs.The analyses of the PPAs concluded to date in the

Nepalese environment have shown that discriminatory clauses and unequal treatment are

present in the key issues of the agreements.

The prime stakeholders have divergent perceptions in the key issues of the PPAs, and that

not all the clauses have been acceptable to the parties concerned. The responses of the prime

stakeholders of the contracting parties reflect the past trends and practices in PPAs between

the utility and the IPPs of various types. The clauses in the PPAs are more favourable to

IPPs with foreign investment than IPPs with local investment with guarantees of purchase of

excess energy, interim energy, and better escalation rates, more coverage from exposure to

political and changes in law risks. The clauses of the PPAs with investment in JV with the

Utility have favourable clause for the project sponsors with better escalation rates and

purchase guarantees of excess and interim energy than projects with local investment, and

explicit clause covering political risks.

Javadi and Javadinasab (2011) during study of Power Purchasing Agreements in Modern

Power System stated that the PPA is often regarded as the central document in the

development of independent electricity generating assets (power plants), and is a key to

obtaining project financing for the project. Under the PPA model, the PPA provider would

secure funding for the project, maintain and monitor the energy production, and sell the

electricity to the host at a contractual price for the term of the contract. The term of a PPA

generally lasts between 5 and 25 years. In some renewable energy contracts, the host has the

option to purchase the generating equipment from the PPA provider at the end of the term,

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may renew the contract with different terms, or can request that the equipment be removed.

One of the key benefits of the PPA is that by clearly defining the output of the generating

assets (such as a solar electric system) and the credit of its associated revenue streams, a

PPA can be used by the PPA provider to raise non-recourse financing from a bank or other

financing counterparty.

Rahmat Azmi (2011) stated that Power Purchasing Agreements (PPAs) are the contracts

between Generation Companies (GENCOs) and Independent System Operator. After

restructuring in power system, lack of motivations for Independent Power Producers (IPPs)

to partnership in power generation and long term maintaining energy have affect the long

horizon expansion planning. In this area, long term contracts can help the market entities to

hedging their risks in satisfying the future demands and ensuring the return of their

investment cost. From an IPP point of view, clarifying the rate of return of investment has

an important role in his financial decision making. In competitive power market, each

GENCO would offer in the market and some of them could exercise market power in power

market. One of the proposed ways to controlling the market power is PPA. The PPAs are

also guarantied the renewable resource planning which need high capital investment.

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2.2 Regulatory Framework

Regulatory provisions for Analysis of Power Purchase:

2.2.1 The Electricity Act, 2003

2.2.1.1 Section 62(1)

The Appropriate Commission shall determine the tariff in accordance with

provisions of this Act for:-

(a) supply of electricity by a generating company to a distribution licensee:

Provided that the Appropriate Commission may, in case of shortage of supply of

electricity, fix the minimum and maximum ceiling of tariff for sale or purchase of

electricity in pursuance of an agreement, entered into between a generating

company and a licensee or between licensees, for a period not exceeding one year to

ensure reasonable prices of electricity;

(b) transmission of electricity ;

(c) wheeling of electricity;

(d) retail sale of electricity.

Provided that in case of distribution of electricity in the same area by two or more

distribution licensees, the Appropriate Commission may, for promoting competition

among distribution licensees, fix only maximum ceiling of tariff for retail sale of

electricity.

2.2.1.2 Section 63.

Notwithstanding anything contained in section 62, the Appropriate Commission

shall adopt the tariff if such tariff has been determined through transparent process

of bidding in accordance with the guidelines issued by the Central Government.

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2.2.1.3 Section 86(1)(b)

The State Commission shall discharge the following functions, namely:

regulate electricity purchase and procurement process of distribution licensees

including the price at which electricity shall be procured from the generating

companies or licensees or from other sources through agreements for purchase of

power for distribution and supply within the State;

2.2.2 Regulation 27(iii) of DERC (Comprehensive Conduct of Business Regulations)

“Any transmission or distribution utility, henceforth proposing to enter into a

contract to procure and purchase power, including the price at which power may be

purchased, from any Generating Company, Generating Station or from any other

source for transmission, distribution and supply in the State, shall take approval from

the Commission, before entering into such contract.”

2.3 Research Methodology

Research Approach

Figure 1Research Methodology

DEMAND PROJECTION

SUPPLY PLANNING

POWER PURCHASE AGREEMENT ANALYSIS

TARIFF ANALYSIS

Page | 15

2.3.1 Demand Projection

In order to analyse the petition for Power Purchase, there is a need to forecast the

Demand of NCT of Delhi. This will involve projections from Electric power Survey

of India and the actual Demand occurred. The actual demand can be obtained from

the respective State Load Dispatch Centre.

2.3.2 Supply Planning

Supply Planning helps in order to meet the Demand. This involves Supply of Power

from Current sources as well as Supply of Power from planned future sources. If

there remains any gap between Demand and Supply of Power then it signifies that

there is need of Power Procurement from new sources.

2.3.3 Analysis of Power Purchase Agreement

Power Purchase Agreement of the proposed new Power Procurement needs to be

analysed in order to securitize the power procurement from any adverse situation.

Analysis of Power Purchase Agreement also evaluates the terms and conditions on

which power will be purchased.

2.3.4 Analysis of Tariff

Analysis of Tariff involves examining the price at which the power will be procured.

It is necessary in order to evaluate competitiveness of procurement of power from

the proposed new source.

Page | 16

CHAPTER 3 ANALYSIS OF POWER PURCHASE AGREEMENT

AND TARIFF PETITION FOR HYDRO PROJECT

3.1 Petition:

Petition for approval of Power Purchase Agreement for Procurement of Power from 700MW

TATO – II Hydro-electric Project by M/s BRPL and M/s BYPL.

3.2 Project Background

Tato Hydro-Power Pvt. Ltd. (THPPL) is setting up 700MW (4x175) as run-of- river

hydro power project on ‘Built, Own, Operate and Transfer (BOOT) basis in West Siang

District, Arunachal Pradesh on river Siyom, a major tributary of Siang River in

Arunachal Pradesh.

Memorandum of Agreement (MOA) was signed by the project developer with Govt. of

Arunachal Pradesh (GoAP) on 22-Feb-06 to implement the project on Build-Own-

Operate-Transfer (BOOT) basis for a lease period of 40 years from the commissioning

date.

The Arunachal Pradesh Government awarded the Tato II project to Reliance Infra Ltd on

22.02.2006 by signing a Memorandum of Agreement for project implementation based

on a limited enquiry. Reliance Infrastructure Ltd was selected as the successful bidder

with a bid of 12% free power for 10 years and 15.5% for the balance 25 years. The

project has to give additional 1% free power to the Home State for development of

affected area (100 units free power to each family).

Delhi discoms BRPL and BYPL entered into separate MOUs for 210 MW each in July

2009 with M/s Tato Hydro Power Pvt Limited which is the project developer company

and is a subsidiary company of M/s Reliance Power Limited.

The Tato II HEP qualifies for the Mega Power Status as per the Revised Mega Power

Project Policy dated on 14-12-2009 which states that a project qualifies for the Mega

Page | 17

Power Project Status if it is – “an inter-state hydel power plant of capacity of 350 MW

or more, located in the states of Jammu and Kashmir, Sikkim, Arunachal Pradesh,

Assam, Meghalaya, Manipur, Mizoram, Nagaland and Tripura.”

The estimated project cost is Rs. Rs. 5616.2 Cr i.e. Rs. 8.02 Cr/ per MW. as per the

DPR submitted by Tato Hydro-Power Pvt. Ltd with CEA.

The project has been accorded concurrence by CEA on 25-05-2012.

The scheduled COD is in 2018 i.e. 6 yrs from the consents if obtained in 2012

3.3 Salient Features of Project

Table 1 Salient Features

Parameter Value

Installed Capacity 700 MW ( 4 x 175 MW)

Dam type Concrete Gravity Dam

Dam Height

(above deepest foundation level) 155 m (Dam Top Elevation: 1025 m)

Total Length of dam at top 268 m

Catchment Area 2560 sq. Km

HRT Length 3.876 km

Design Head (rated net head) 207 m

Design Energy / ALF (%) 3153 MU / 51.4% PLF

Secondary Energy (MU) 200

Avg. Peaking Hours > 3 hours

Target Commissioning 2017-18

Page | 18

3.4 Location of the Project

Figure 2 Location of Project

Table 2 Location of Project

District West Siang

River Siyom (A tributary of Siang)

Railhead BG - Nagaon (687 kms)

Airport Lilabari (394 kms)

3.5 Legal and Policy Framework for Hydro Power Projects

3.5.1 The Electricity Act, 2003

The preamble to the Electricity Act, 2003 recognizes the significance and importance

of promotion of efficient and environmentally benign policies. The Hon'ble

Commission under Section 61(h) of the Electricity Act, 2003 has been entrusted with

the promotion of generation of electricity from cogeneration and generation of

electricity from renewable sources of energy. Further, Section 86(1)(e) of the

Electricity Act, 2003 specifically stipulates that one of the functions of the Hon'ble

Page | 19

Commission is to promote cogeneration and generation of electricity from

renewable sources of energy by providing suitable measures for connectivity with

grid..

3.5.2 National Electricity Policy

The National Electricity Policy notified by Govt. of India (GoI) in Feb 2005

identified the following thrust areas for Hydro Generation:

Hydroelectricity is a clean and renewable source of energy. Maximum emphasis

would be laid on the full development of the feasible hydro potential in the

country.

Harnessing hydro potential speedily will also facilitate economic development of

states. The states with hydro potential need to focus on the full development of

these potential at the earliest.

Hydro projects calls for comparatively larger capital investments. Therefore, debt

financing for longer tenure would need to be made available for hydro projects.

State Governments need to review procedures for land acquisition, and other

approval/clearances for speedy implementation of hydroelectric projects.

Proper implementation of National Policy on Rehabilitation and Resettlement

would be essential in this regard so as to ensure that the concerns of project-

affected families are addressed adequately.

3.5.3 National Tariff Policy

The National Tariff Policy came out in 2006 in accordance with the provisions of the

Electricity Act, 2003. The salient provisions of the policy regarding Hydro Projects

are:

Page | 20

The Tariff Policy notified by GoI in Jan-06 also supports procurement of power from

non-conventional sources of energy. As per Para 6.4(1) of the Tariff Policy, “

Pursuant to provisions of section 86(1)(e) of the Act, the Appropriate Commission

shall fix a minimum percentage for purchase of energy from such sources taking into

account availability of such resources in the region and its impact on retail tariffs.

………”

Govt. of India accordingly notified amendment to Tariff Policy 2006 in Mar-08

allowing private hydro power developers an option of getting the tariff determined

by appropriate Commission on basis of performance based cost of service

regulations, subject to fulfillment of certain conditions.

3.5.4 National Hydro Power Policy

National Hydro Power Policy came in 2008 with an objective to provide a policy

framework to promote and accelerate development of Hydro Power in India. The

Hydro Policy also seeks to induce substantial private investments in Hydro power

development. The objectives of Hydro Power Policy are –

Inducing private investment in Hydro power development

Harnessing the balance hydro-electric potential

Improving Rehabilitation & Resettlement

Facilitating Financial viability

Salient features of Hydro Power Policy –

The dispension available to Public sector under the National Tariff Policy 2006,

regarding exemption from tariff based bidding upto January 2011, is also

extended to private sector hydroelectric projects, which obtains CEA’s

concurrence, signs PPAs with distribution licensees and achieve financial closure

before 2011.

State Governments would be required to follow a transparent procedure for

awarding potential sites to the private sector.

Page | 21

The concerned private developer would be required to follow the existing

procedure such as getting the DPR prepared, obtaining concurrence of CEA/

State Government, obtaining environment, forest and other statutory clearances,

and then approaching the appropriate regulator. It would be obligatory for the

developer to go through an International Competitive Bidding (ICB) for award of

contract for supply of equipment and construction of the project.

The Tariff of the project would be decided by the appropriate Regulatory

Commission.

In order to enable the project developer to enable to recover the costs incurred by

him in obtaining the project site, he would be allowed a special incentive by way

of merchant sales up to a maximum 40% of the saleable energy.

Hydroelectric projects displace family in remote areas. In the interest of speedy

implementation projects, the Rehabilitation and Resettlement package can be

more liberal than the National Resettlement and Rehabilitation Policy 2007.

3.5.5 Mega Power Project Policy

Mega Power project Policy was launched by the GOI to promote development of

large scale projects. According to which a hydro power project qualifies for Mega

Power Project if it is –

“A Hydel power plant of capacity of 500 MW or more an inter-state hydel power

plant of capacity of 350 MW or more, located in the states of Jammu and Kashmir,

Sikkim, Arunachal Pradesh, Assam, Meghalaya, Manipur, Mizoram, Nagaland and

Tripura.”

Financial concessions/benefits available with Mega power projects are –

Zero Custom Duty

Deemed Export benefits

Income Tax benefits

Page | 22

3.6 Analysis of Petition

3.6.1 Demand Forecast of Delhi

As per the 17th Electric Power Survey (17

th EPS), by the year 2016-17, Electrical

Energy Requirement of Delhi will be 36292.345 GWh and Peak Electrical Load

will be 8728.8MW and by the year 2021-22, Electrical Energy Requirement of

Delhi will be 52762.386 MUs and Peak Electrical Load will be 12069.05 MW.

In the 17th EPS the projected peak demand for the year 2011-12 was 6092 MW

whereas actual was 5031 MW.

In the EPS the demand projections have been increased by 7.46% for the years

2012-2017 and thereafter 6.69% till 2022.

Following the demand projection pattern of EPS applied on the peak demand of

2011-12 (5031MW), the peak demand projection for the year 2018-19 would be

8206 MW.

Figure 3 Demand Projection as per EPS

6092 6546 7035 7560 8124 8729 9313 9936 10601 11310 12069 36293 39113 42152

45427 48957

52762 56375 60237

64363 68772

73481

0

10000

20000

30000

40000

50000

60000

70000

80000

0

2000

4000

6000

8000

10000

12000

14000

Pea

k e

ner

gy (

MU

)

Pea

k D

eman

d (

MW

)

Peak Demand Peak Energy

Page | 23

Figure 4 Projection of actual peak Demand

3.6.2 Supply Projections for Delhi

As per the ARR 2012-13 filed by the Discoms, the gross capacity allocation from

existing generating stations and future stations in FY 2014-15 is projected to be

6622 MW.

However, the Net Allocation after adjusting for factors like reduction due to

Availability, PLF and outage for both Discoms in FY 2014-15 is projected to be

5018MW and is expected to continue till the year 2018-19 considering the same

projected capacity allocation.

5031

5430 5865 6334

6841 7388 7905

8458 9050 9684

10362

0

2000

4000

6000

8000

10000

12000

Ad

just

ed

Pe

ak D

em

and

(M

W)

Actual Peak Demand FY

11-12

Page | 24

3.6.2.1 Proposed Sources of Supply of Electricity

Table 3 Sources of Supply

Source FY 11-12 FY 12-13 FY 13-14 FY 14-15 FY 15-16 FY 16-17

Current Allocation

(A) 3532 3347 3203 3203 3112 3112

New Projects (PPA signed) excluding DVC projects

Hydro 60 143 143 186 583 865

Thermal 1902 2868 3456 3456 3456 3940

Renewable 7.5 7.5 7.5 7.5 7.5 7.5

Total (B) 1970 3019 3607 3650 4046 4813

Total Allocation

(A + B)

5502 6366 6810 6853 7158 7925

Outage @ 10% (550) (637) (681) (685) (716) (793)

Total Allocation (net

of outage) 4952 5729 6129 6168 6442 7132

Page | 25

Figure 5 Demand and Supply of Power

3.6.2.2 Peak Energy Trend of Delhi vs. Peak Energy Trend of Tato II HEP

Figure 6 Peak Energy Trend

0

2000

4000

6000

8000

10000

12000

FY 15-16 FY 16-17 FY 17-18 FY 18-19 FY 19-20 FY 20-21 FY 21-22

MW

Forecated Peak Demand(MW)

Long Term Availability as per current allocation

Peak Deficit 3163MW

Planned Capacity

Addition

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Peak Energy (MU)

Peak Energy Trend - Delhi Energy Profile - Tato II

Page | 26

3.6.2.3 Daily Operation Hours Of Tato II HEP

Figure 7 Daily Operation hours of Delhi

Tato II Hydroelectric project has daily operation hours of minimum 3 hours. The project has

minimum daily operation hours of 3 hours in the month of February while maximum daily

operation hours of 23 hours in the month of July. The project has yearly average daily operation

hours of more than 12 hours.

0.0 1.5 3.0 4.5 6.0 7.5 9.0

10.5 12.0 13.5 15.0 16.5 18.0 19.5 21.0 22.5 24.0

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Daily

Op

era

tio

n H

ou

rs

Month

Page | 27

3.6.3 Analysis of Power Purchase Agreement

3.6.3.1 Comparison of Draft PPA of Tato II project with Case 2 Standard PPA along with deviations

Table 4 Comparison of PPAs

(Revised) Standard Power Purchase Agreement for long-term Power Procurement under

Case 2

Draft PPA between BSES Rajdhani Power

Limited & BSES Yamuna Power Limited and

Tato Hydro Power Private Limited

ARTICLE 3 : CONDITIONS SUBSEQUENT TO BE SATISFIED BY THE SELLER

AND THE PROCURERS

3.1 Satisfaction of conditions subsequent by the Seller and the Procurers

3.1.1 Prior to the Effective Date, the Seller or the Selected Bidder, on behalf of the Seller, have

provided to the Procurers, the Performance Guarantee from any of the banks in the list of

banks provided in the RFP, of an aggregate amount of Rupees [Insert Amount calculated at

Rs. 7.5 lakhs per each MW of the total contracted capacity] which has been provided

separately to each of the Procurers for the amount calculated pro-rata (and rounded off to

[insert amount]) with the principle that amounts below Rupees [insert amount] shall be

rounded down and amounts of Rupees [insert amount] and above shall be rounded up) in the

ratio of Allocated Contracted Capacities. Subject to Article 3.4, the Performance Guarantee

ARTICLE 3 : CONDITIONS SUBSEQUENT

TO BE SATISFIED BY

SELLER/ PROCURER

3.1 Satisfaction of conditions subsequent by

Seller

This Article is deviated from the standard PPA

as under; Sub Article relating to Performance

Guarantee during construction period is

missing (Compared to the Sub-Article 3.1.1 of

SBD) i.e. “Prior to the Effective date ----the

Seller or the Selected Bidder, on behalf of the

Seller, have provided to the Procurers, the

Page | 28

shall be initially valid till three(3) Months after the Scheduled COD of the Power Station and

which shall be extended from time to time to be valid up to three(3) Months after the actual

COD of the Power Station. In case the validity of Performance Guarantee is expiring before

the validity period specified in this Article, the Seller shall at least thirty (30) days before

the expiry of the Performance Guarantee replace the Performance Guarantee with another

Performance Guarantee or extend validity of existing Performance Guarantee which is valid

and in force till the validity period specified in this Article.

3.1.3 Joint responsibilities of the Procurers and the Seller

The Procurers (jointly) and Seller shall jointly appoint the Independent Engineer for the

purposes of carrying out the functions as specified in Article 4.7.1, Article 6, Article 8 and

Article 12, herein within a period of eight (8) months from the Effective Date

Performance Guarantee from any of the banks

in the list of banks provided in the RFP, an

aggregate amount of Rupees [Insert Amount

calculated at Rs. 7.5 lakhs per each MW of the

total contracted capacity----till the validity

period specified in this Article”.

Validity period as per the SBD is 3 months

after the actual COD.

3.3 Joint Responsibilities of the Procurer & Seller

The Procurer and Seller shall jointly appoint the

Independent Engineer for the purposes of

carrying out the functions as specified in Article

4.9.2, Article 5 and Article 9.

Deviation –

The time period of eight (8) months from the

effective date for appointment of Independent

Engineer as specified in sub-article3.1.3 of SBD

is missing in the draft PPA.

Page | 29

3.3 Consequences of non-fulfilment of conditions under Article 3.1

3.3.1 If any of the conditions specified in Article 3.1.2 is not duly fulfilled by the Seller even

within three (3) Months after the time specified under Article 3.1.2, then on and from the

expiry of such period and until the Seller has satisfied all the conditions specified in Article

3.1.2, the Seller shall be liable to furnish to the Procurers additional weekly Performance

Guarantee of Rs. [Insert Amount not less than that derived on the basis of Rs. 0.375 lakhs per

MW of maximum capacity proposed to be procured] within two (2) business days of expiry of

every such week. Such additional Performance Guarantee shall be provided to each

Procurer in the manner provided in Article 3.1.1 and shall become part of the Performance

Guarantee and all the provisions of this Agreement shall be construed accordingly. The

Procurers shall be entitled to hold and/or invoke the Performance Guarantee, including such

increased Performance Guarantee, in accordance with the provisions of this Agreement.

3.4 Consequences of non-fulfilment of conditions

subsequent

Sub-Article (3.3.1 of SBD) related to additional

performance guarantee by seller, i.e.; “If any of

the conditions specified in Article 3.1.2(i.e

Achieving Financial Closure, Placing of EPC

Contract, Initial Consents) is not duly fulfilled

by seller ……...the Seller shall be liable to

furnish to the Procurer/Procurers additional

weekly Performance Guarantee of Rs. [Insert

Amount not less than that derived on the basis of

Rs. 0.375 lakhs per MW of maximum capacity

proposed to be procured] within two (2) business

days of expiry of every such week............ in

accordance with the provisions of this

Agreement” is not included in the draft PPA.

Page | 30

3.3.2 Subject to Article 3.3.3 and 3.3.3A, if:

fulfilment of any of the conditions specified in Article 3.1.2 is delayed beyond the period of

three (3) Months and the Seller fails to furnish any additional Performance Guarantee to the

Procurers in accordance with Article 3.3.1 hereof; or

the Seller furnishes additional Performance Guarantee to the Procurers in accordance with

Article 3.3.1 hereof but fails to fulfil the conditions specified in Article 3.1.2 for a period of

eight (8) months beyond the period specified therein, all the Procurers (jointly) or Seller

shall have the right to terminate this Agreement by giving a Termination Notice to the Seller

/ Procurer in writing of at least seven (7) days.

If the Procurers or the Seller elect to terminate this Agreement in the event specified in the

preceding paragraph of this Article 3.3.2, the Seller shall be liable to pay to the Procurers an

amount of Rupees [Insert amount not less than that derived on the basis of Rs. 10.00 lakhs

per MW of the maximum capacity proposed to be procured] only as liquidated damages.

The Procurers shall be entitled to recover this amount of damages by invoking the

Performance Guarantee to the extent of Rupees [Insert amount not less than that derived on

the basis of Rs. 10.00 lakhs per MW of the maximum capacity proposed to be procured] and

shall then return the balance Performance Guarantee, if any, to the Seller. If the Procurers

are unable to recover said the amount of Rupees [Insert amount not less than that derived on

the basis of Rs. 10.00 lakhs per MW of the maximum capacity proposed to be procured] or

any part thereof from the Performance Guarantee the amount not recovered from the

Sub-Article (3.3.2 of SBD) related to

termination of Agreement i.e. “If the

Procurers or seller elect to terminate this

Agreement......... the Seller shall be liable to

pay to the Procurers an amount of Rupees

[Insert amount not less than that derived on

the basis of Rs. 10.00 lakhs per MW of the

maximum capacity proposed to be procured]

only as liquidated damages. The Procurers

shall be entitled to recover this amount of

damages by invoking the Performance

Guarantee to the extent of Rupees [Insert

amount not less than that derived on the basis

of Rs. 10.00 lakhs per MW of the maximum

capacity proposed to be procured] and shall

then return the balance Performance

Guarantee...........................from the end of

eight (08) months period from the due date of

completion of conditions subsequent” is not

included in the draft PPA.

Page | 31

Performance Guarantee, if any, shall be payable by the Seller to the Procurers within ten (10)

days from the end of eight (8) Months period from the due date of completion of conditions

subsequent.

It is clarified for removal of doubt that this Article shall survive the termination of this

Agreement.

3.4 Reduction in the amount of Performance Guarantee

3.4.1 On the due fulfilment by the Seller of all the conditions specified under Article 3.1.2 and

investment by the Seller of at least twenty five percent (25%) of the total equity required for

the Project as certified by the lead lender of the Seller, the Performance Guarantee then

existing shall be reduced by an aggregate amount of Rupees [Insert amount calculated at Rs.

2.5 lakhs per each MW of the total Contracted Capacity] and such reduced Performance

Guarantee/s shall be provided separately to each of the Procurers in the ratio of their then

respective Allocated Contracted Capacities [and rounded off to the nearest Rupees [Insert

amount] with the principle that amounts below Rupees [Insert amount] shall be rounded

down and amounts of Rupees [Insert amount] and above shall be rounded up and for the

period specified in Article 3.4.2.

3.4.2 The Performance Guarantee specified in Article 3.4.1 hereof shall be in substitution of the

earlier Performance Guarantee furnished under Article 3.1.1.

The Performance Guarantee furnished under this Article shall be initially valid till three (3)

Sub-Article (3.4 of SBD) related to

“Reduction in the amount of Performance

Guarantee - On the due fulfilment by the

Seller of all the conditions specified under

Article 3.1.2 and investment by the Seller of

at least twenty five percent (25%) of the total

equity required for the Project as certified by

the lead lender of the Seller, the Performance

Guarantee then existing shall be reduced by an

aggregate amount of Rupees [Insert amount

calculated at Rs. 2.5 lakhs per each MW of the

total Contracted Capacity” is not included in

the draft PPA.

Page | 32

Months after the Scheduled COD of the Power Station and which shall be extended from

time to time to be valid upto three (3) Months after the actual COD of the Power Station.

3.4.3 The Performance Guarantee furnished under Article 3.1, 3.3 and 3.4 shall be for guaranteeing

the due and timely completion of the Project and achievement of Scheduled Commercial

Operation Date of each Unit within the time specified in this Agreement.

3.4.4 The failure on the part of the Seller to furnish and maintain the Performance Guarantee as

mentioned above shall be a material breach of the term of this Agreement on the part of the

Seller.

3.4.5 If the Seller fails to achieve COD of each of the Units on their respective Scheduled

Commercial Operation Date specified in this Agreement, subject to conditions mentioned in

Article 4.5.1, the Procurers jointly shall have the right to encash the Performance Guarantee

and appropriate in their favour as liquidated damages an amount specified in Article 4.6.1,

without prejudice to the other rights of the Procurers under this Agreement.

3.5 Return of Performance Guarantee

3.5.1 The Performance Guarantee as submitted by Seller in accordance with Article 3.4 shall be

released by the Procurers within three (3) Months from the actual Commercial Operation

Date of the Power Station. In the event of delay in achieving Scheduled COD of any of the

Units by the Seller (otherwise than due to the Procurers’ inability to complete the activities

mentioned in Article 3.1.2A, or Force Majeure event) and consequent part invocation of the

Performance Guarantee by the Procurers, the Procurers shall release the Performance

Sub-Article 3.5 of SBD related to “ Return Of

Performance Guarantee --- The Performance

Guarantee as submitted by Seller in

accordance with Article 3.4 shall be released

by the Procurers within three (3) Months from

the actual Commercial Operation Date of the

Page | 33

Guarantee if any, remaining unadjusted under Article 3.4, after the satisfactory completion

by the Seller of all the requirements regarding achieving the Scheduled Commercial

Operation Date of the remaining Units of the Power Station. It is clarified that the Procurers

shall also return/release the Performance Guarantee in the event of (i) applicability of Article

3.3.2 to the extent the Performance Guarantee is valid for an amount in excess of Rupees

[Insert amount not less than that derived on the basis of 10.00 lacs per MW of the maximum

capacity proposed to be procured], or (ii) termination of this Agreement by any Party under

Article 3.3.3 or Article 3.3.3A of this Agreement.

3.5.2 The release of the Performance Guarantee shall be without prejudice to other rights of the

Procurers under this Agreement.

ARTCLE 4 : DEVELOPMENT OF THE PROJECT

4.6 Liquidated damages for delay in providing Contracted Capacity

4.6.1 If any Unit is not Commissioned by its Scheduled Commercial Operation Date other than for

the reasons specified in Article 4.5.1, the Seller shall pay to each Procurer liquidated

damages, proportionate to their then existing Allocated Contracted Capacity, for the delay in

such Commissioning or making the Unit’s Contracted Capacity available for dispatch by

such date. The sum total of the liquidated damages payable by the Seller to the Procurers for

Power Station” is not included in the draft

PPA.

8. Liquidated Damages for delay in

commencement of supply of power to

Procurer

The liquidated damages payable by the seller for

such delay in commencement of supply from the

scheduled delivery date of the unit(s) shall be an

Page | 34

such delayed Unit shall be calculated as follows:

SLDb = [CCun x dn x DR1] , if dn <= 60

SLDb = [CCun x 60 x DR1] + [CCun x (dn - 60 ) x DR2] , if dn > 60

Where:

a) “SLDb” are the liquidated damages payable by the Seller during the period beginning

with the from the Scheduled Commercial Operation Date of a Unit up to and including the

day on which Unit is actually Commissioned;

b) “CCun” is the Contracted Capacity of Unit “n”;

c) “d” is the number of days in the period beginning with the day after the Scheduled

Commercial Operation Date of Unit “n” up to and including the day on which such Unit is

actually Commissioned;

d) “DR1” is Rs. Ten Thousand (10,000) of damages per MW per day of delay in case “d” is

less than 60 days and

“DR2” is Rs. Fifteen Thousand (15,000) of damages per MW per day of delay in case “d” is

equal to or more than 60 days

amount equal to Rs. 1,00,000(One Lakh) for

each day of delay till 180 days, and thereafter

Rs. 5,00,000 (Five Lakh) per day, provided, that

the aggregate of all liquidated damages payable

under this article shall be limited to a maximum

of Rupees 45 crores for the project.

Deviation –

The above mentioned liquidated damages

amount is not in line with the Standard Bid

Document.

Page | 35

3.6.4 Analysis of Tariff

3.6.4.1 Project Cost of Tato II Hydro-Electric Project

Table 5 Project cost of Tato II HEP

Sr.

No.

Item Hard Cost (in Cr) Completed Cost (in Cr)

1. Civil Works 2624.39 3354.00

2. Electrical Works 820.19 1062.42

3. Misc Works 23.66 30.16

4. Project Cost 3468.24 4446.58

5. IDC & Financing

Charges

1169.62

6. Completed Cost 5616.20

3.6.4.2 Tariff Assumption as per CERC Tariff Regulations 2009-14

Table 6 Tariff Assumptions

Parameters Value

Return on Equity 15.5%

O&M Charges 2 % of Project cost

O & M Escalation Rate 5.72% p.a

Depreciation Rate (Yrs 1-12) 5.28%

Depreciation Rate (Balance Years) 1.69%

Interest rate on Loan 12%

Interest rate on Working Capital 14%

Maintenance Spares 15% of O & M Charges

Corporate Tax 32.45%

Minimum Alternate tax Rate 20.01%

Discounting rate 10.74%

Auxiliary Power Consumption 1.2%

Free Power 13%

Page | 36

3.6.4.3 Tariff Sheet of Tato II Project

Table 7 Tariff Sheet of Tato II HEP

Parameters

/Years 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Applicable Tax

Rate 20.01% 20.01% 20.01% 20.01% 20.01% 20.01% 20.01% 20.01% 20.01% 20.01% 32.45% 32.45% 32.45% 32.45%

Return on

Equity 326.47 326.47 326.47 326.47 326.47 326.47 326.47 326.47 326.47 326.47 386.58 386.58 386.58 386.58

Interest on

Loan 444.51 409.67 374.83 339.98 305.14 270.30 235.45 200.61 165.77 130.92 96.08 61.24 38.56 28.05

O & M

112.04 118.45 125.22 132.39 139.96 147.97 156.43 165.38 174.84 184.84 195.41 206.95 218.40 230.90

Depreciation 296.54 296.54 296.54 296.54 296.54 296.54 296.54 296.54 296.54 296.54 296.54 296.54 89.47 89.47

Interest on

Working

Capital

31.93 31.46 31.02 30.60 30.20 29.83 29.48 29.16 28.87 28.61 29.82 29.63 24.82 25.28

Annual Fixed

Charges 1211.49 1182.59 1154.08 1125.98 1098.31 1071.10 1044.37 1018.16 992.48 967.38 1004.43 980.57 757.83 760.28

Saleable Energy 2710.19 2710.19 2710.19 2710.19 2710.19 2710.19 2710.19 2710.19 2710.19 2710.19 2710.19 2710.19 2710.19 2710.19

Annual Tariff 4.47 4.36 4.26 4.15 4.05 3.95 3.85 3.76 3.66 3.57 3.71 3.62 2.80 2.81

Levelized Tariff Rs.3.80/

kwh

Page | 37

Parameters

/Years 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Applicable Tax

Rate 32.45% 32.45% 32.45% 32.45% 32.45% 32.45% 32.45% 32.45% 32.45% 32.45% 32.45% 32.45% 32.45% 32.45%

Return on

Equity 386.58 386.58 386.58 386.58 386.58 386.58 386.58 386.58 386.58 386.58 386.58 386.58 386.58 386.58

Interest on Loan

17.54 7.02 0.88 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

O & M

244.10 258.07 272.83 288.43 304.93 322.38 340.82 360.31 380.92 402.71 425.74 450.10 475.84 503.06

Depreciation 89.47 89.47 89.47 89.47 89.47 89.47 89.47 89.47 89.47 89.47 89.47 89.47 89.47 89.47

Interest on

Working

Capital

25.79 26.34 27.04 27.91 28.86 29.86 30.91 32.03 33.21 34.46 35.78 37.18 38.66 40.22

Annual Fixed

Charges 763.48 767.48 776.80 792.39 809.84 828.28 847.78 868.39 890.18 913.22 937.57 963.32 990.55 1019.32

Saleable Energy 270.19

MU

270.19

MU

270.19

MU

270.19

MU

270.19

MU

270.19

MU

270.19

MU

270.19

MU

270.19

MU

270.19

MU

270.19

MU

270.19

MU

270.19

MU

270.19

MU

Annual Tariff 2.82 2.83 2.87 2.92 2.99 3.06 3.13 3.20 3.28 3.37 3.46 3.55 3.65 3.76

Levelized Tariff Rs.3.80/

kwh

Page | 38

Parameters/Years 29 30 31 32 33 34 35

Applicable Tax

Rate 32.45% 32.45% 32.45% 32.45% 32.45% 32.45% 32.45%

Return on Equity 386.58 386.58 386.58 386.58 386.58 386.58 386.58

Interest on Loan

0.00 0.00 0.00 0.00 0.00 0.00 0.00

O & M

531.83 562.26 594.42 628.42 664.36 702.36 742.54

Depreciation 89.47 89.47 89.47 89.47 89.47 89.47 89.47

Interest on

Working Capital 41.87 43.61 45.46 47.41 49.47 51.65 53.95

Annual Fixed

Charges 1049.75 1081.91 1115.92 1151.87 1189.88 1230.06 1272.53

Saleable Energy 2710.19

MU

2710.19

MU

2710.19

MU

2710.19

MU

2710.19

MU

2710.19

MU

2710.19

MU

Annual Tariff 3.87 3.99 4.12 4.25 4.39 4.54 4.70

Levelized Tariff Rs. 3.80/ kwh

Page | 39

3.6.4.4 Tariff Profile of Tato II Project

Figure 8 Tariff Profile of Tato II HEP

3.6.4.5 Power Purchase Cost of Delhi

1.01 1.01 1.01 0.84

2.26 2.28 2.28 2.56

3.27 3.29 3.29 3.4

0

1

2

3

4

BRPL BYPL NDPL NDMC

Existing Stations

Fixed Variable

Page | 40

Figure 9 Power purchase cost of Delhi

3.6.4.6 Power Purchase Cost from New Projects

Figure 10 Power purchase cost from New Stations

3.6.4.7 Average Cost of Power Purchase vis-a-vis Tato II Tariff

Table 8 Comparison of Tato II HEP Tariff with Average Power Purchase cost

Parameters As per DERC Tariff Order

(Jul-12)

FY 14-15

Projected

FY 19-20

BRPL BYPL BRPL BYPL

FIXED CHARGES (Rs./kwh) 1.41 1.42 1.41 1.42

Variable Charges (Rs./kwh) 2.62 2.63 3.35 3.35

Average Cost (Rs./kwh) 4.03 4.05 4.76 4.77

Tato II 1st year Tariff/ levelized

Tariff

4.47/3.80

Page | 41

3.6.4.8 Comparison of Tato II project Tariff with various Coal based projects

Figure 11 Comparison of Tato II project with various Coal based projects

Tato II HEP project has a single tariff component as it does not have any fuel component while Coal

based power plants have two components in its tariff. The levelized tariff of Tato II project comes

lower than the coal based power plants of same capacity. Levelized tariff of Tato II is less than the

that of coal based power plant with Domestic Load Center and Coal base power plant with blended

coal. Tariff of Domestic Pit Head coal based power plant comes to lower than that of Tato II but

Domestic Pit Head plant has variable charge as fuel component which is not there in Tato II.

Variable charge goes on increasing as the price of coal rises with passes of time.

3.8 3.62

1.72 1.72 1.72

1.56 2.24

4.75 3.28

3.96

6.47

0

1

2

3

4

5

6

7

Tato II Tato II - With Sec. Energy **

Domestic Pit Head

Domestic Load Center

Blended *

Lev

Tari

ff (

Rs

/ K

wh

)

Fixed Variable

Page | 42

3.7 Conclusion

The NCT of Delhi is facing power crunch and will need power from new sources to fulfil the

demand. By the Year 2021, there will be a peak load requirement of 10362 MW and as per

ARR filed by Discoms till FY 14-15, with existing and future tie up for power supply, there

will be a power deficit of 3163 MW.

Tato II Hydroelectric project is scheduled to be commissioned on FY2018-19. The Project is

proposed to supply 420 MW power to Delhi.

Tato II Hydroelectric project has peak load profile matching to the peak load profile of Delhi

and a minimum peak load supply of 3 hours. Being a hydroelectric project the daily operation

hours from the project is at peak in the month of June to October which is time when demand

at Delhi touches its peak.

The draft Power Purchase Agreement signed between BYPL, BRPL and THPPL has some

deviations with respect to the Standard document for Power Purchase for Long Term which

are mainly in terms of Contract Performance Guarantee and Liquidated Damages. The draft

PPA has enough provisions to protect the supply of power in unfavourable situation and to

absorb the shock in case of termination of PPA by the owner of the project.

Levelized tariff of Tato II project is Rs. 3.80/kwh and 1st year tariff is Rs. 4.47/kwh. Tariff of

the project decreases in the initial year with a minimum tariff of Rs.2.76/kwh in the 13th

year

of supply and then increase to a maximum tariff of Rs. 4.66/kwh in 35th

year of supply.

The projected average power purchase cost of BRPL and BYPL for the FY 19-20 is Rs.

4.76/kwh and 4.77/kwh respectively while the maximum tariff of Tato II project is Rs.

4.66/kwh.

Delhi’s power purchase portfolio has a Hydro–Thermal mix of 11:89 as against the national

level of Hydro-Thermal mix of 24:76.Escalable component in hydro power projects are only

Operation & Maintenance cost as against a no. of escalable components in thermal power

projects which implies a stable tariff from the hydro projects.

As per analysis of power situation of Delhi and analysis of various aspects of the proposed

purchase of power from Tato II Hydroelectric Project, the proposed power purchase is

meeting the power requirements of Delhi.

Page | 43

3.8 Recommendation

The Delhi Electricity Regulatory Commission can accept the petition for power purchase

from Tato II hydroelectric project with certain modifications in Draft Power Purchase

Agreement as per deviations from Standard Power Purchase Agreement for Long Term.

The following amendments in the Draft Power Purchase Agreement are required –

i. Inclusion of provision of Contract Performance Guarantee

ii. Inclusion of provision of additional Contract Performance Guarantee upon non-fulfilment

of conditions subsequent by the seller

iii. Inclusion of provision of Reduction in the amount of Contract Performance Guarantee

iv. Inclusion of provision of Return Contract Performance Guarantee

v. Inclusion of time period of eight (08) months in the provision of Joint responsibilities of

the Procurers and the Seller

vi. Increase in the amount of Liquidated Damages for delay in providing Contracted

Capacity as per Standard Power Purchase Agreement.

The Hon’ble Commission can accept the petition for power purchase from Tato II

hydroelectric project on the following aspects –

i. Cheaper Power

ii. Reliable Power

iii. Clean Energy

iv. Peaking Capacity of more than 3 hours

v. No fuel price fluctuations

vi. Increase in Hydro : Thermal mix of Delhi

Page | 44

CHAPTER 4 ANALYSIS OF POWER PURCHASE AGREEMENT

AND TARIFF PETITION FOR SOLAR PROJECT

4.1 Petition :

Petition for approval of Power Purchase Agreement and Adoption of Generic Tariff for

generation of electricity from 11 nos. Grid Interactive Solar PV projects of Tata Power Delhi

Distribution Limited

4.2 Project Background

North Delhi Power Limited ("NDPL") now Tata Power Delhi Distribution Limited

(TPDDL) is a 51:49 Joint Venture of M/s The Tata Power Company Limited and Govt.

of Delhi (GoNCTD). NDPL came into existence after implementation of reforms package

initiated by the GoNCTD in July 2002 as a distribution licensee for North and North-

West of Delhi.

Tata Power Delhi Distribution Ltd. have installed a total of 11 Nos. Solar rooftop PV

projects in their area of supply in Delhi.

Power Purchase Agreement has been signed between the two divisions of NDPL i.e.,

NDPL-G (Generation) and NDPL-D (Distribution).

7 out of 11 projects have been selected under the MNRE scheme of “Tail End Grid-

demonstrative programme” under which NDPL is entitled to receive a subsidy/Central

Financial Assistance (CFA) from MNRE which is 50% of actual cost of the project.

Page | 45

4.3 Details of Projects

Table 9 Details of Projects

Sr.

No

Project

Capacity

Location Status COD Date Subsidy Tariff filed

by TPDDL

1. 1 MW Keshavpuram Commissioned 16.112010 No 18.44

2. 54 KW Poothkhurd Commissioned 20.03.2010 Yes 11.11

3. 43 KW Narela Commissioned 10.01.2011 Yes 11.16

4. 25 KW GTK Commissioned 10.01.2011 No 17.91

5. 45 KW Bawana Commissioned 19.04.2011 Yes 11.20

6. 60 KW DSIDC II Commissioned 27.07.2011 No 17.91

7. 25 KW CENNET Commissioned 05.10.2011 No 17.91

8. 50 Kw RG 22, Rohini Commissioned 30.03.2012 Yes 11.07

9. 225 KW RG 5, Rohini Commissioned 30.03.2012 Yes 10.07

10. 48.5 KW RG 24 & 2

Rohini

Commissioned 30.03.2012 Yes 10.50

11. 55.2 KW RG 23, Rohini Commissioned 30.03.2012 Yes 10.79

Page | 46

4.4 Legal and Policy Framework for Solar Power Projects

4.4.1 The Electricity Act, 2003

The preamble to the Electricity Act, 2003 recognizes the significance and importance

of promotion of efficient and environmentally benign policies. The Hon'ble

Commission under Section 61(h) of the Electricity Act, 2003 has been entrusted with

the promotion of generation of electricity from cogeneration and generation of

electricity from renewable sources of energy. Further, Section 86(1)(e) of the

Electricity Act, 2003 specifically stipulates that one of the functions of the Hon'ble

Commission is to promote cogeneration and generation of electricity from renewable

sources of energy by providing suitable measures for connectivity with grid. The said

provision also enumerates that the Hon'ble Commission will specify a percentage of

consumption of electricity from renewable source of energy by the distribution

licensee. The relevant provisions are reproduced below:

“61. Tariff Regulations

The Appropriate Commission shall, subject to the provisions of this Act, specify the

term and conditions for the determination of tariff, and in doing so, shall be guided by

the following namely:-

…………………………

(h) the promotion of co-generation and generation of electricity from renewable

sources of energy;

86. Functions of State Commission.—(1) The State Commission shall discharge the

following functions, namely:—

……………

(e) promote cogeneration and generation of electricity from renewable sources of

energy by providing suitable measures for connectivity with the grid and sale of

electricity to any person, and also specify, for purchase of electricity from such

Page | 47

sources, a percentage of the total consumption of electricity in the area of a

distribution licensee;"

4.4.2 National Electricity Policy

National Electricity Policy notified by the Central Government under Section 3 of the

Electricity Act 2003, also deals with the promotion of generation of electricity from

non-conventional and renewable sources of energy. The relevant portions of the

National Electricity Policy are extracted below:

5.2.20 Feasible potential of non-conventional energy resources, mainly small hydro,

wind and bio-mass would also need to be exploited fully to create additional power

generation capacity. With a view to increase the overall share of non-conventional

energy sources in the electricity mix, efforts will be made to encourage private sector

participation through suitable promotional measures.

……………

5.12 Cogeneration and Non-Conventional Energy Sources

5.12.1 Non-conventional sources of energy being the most environment friendly there

is an urgent need to promote generation of electricity based on such sources of

energy. For this purpose, efforts need to be made to reduce the capital cost of projects

based on non-conventional and renewable sources of energy. Cost of energy can also

be reduced by promoting competition within such projects. At the same time,

adequate promotional measures would also have to be taken for development of

technologies and a sustained growth of these sources.

4.4.3 National Action Plan on Climate Change (NAPCC)

On June 30, 2008 Hon‘ Prime Minister of India announced National Action Plan for

Climate Change(NAPCC) which delineated India‘s strategy to tackle menace of

global warming without jeopardizing prospects of economic growth. The Technical

Document annexed to NAPCC includes following provisions for mainstreaming the

RE based resources in India‘s power sector. In particular the document solicits use of

Page | 48

REC mechanism. The provisions listed under section 4.2.2 of NAPCC on Grid

Connected Systems, are as follows:

Dynamic Minimum Renewable Purchase Standard (DMRPS) may be set, with

escalation each year till a pre-defined level is reached, at which time the requirements

may be revisited. It is suggested that starting 2009-10, the national renewable

standard (excluding hydropower with storage capacity in excess of daily peaking

capacity, or based on agriculture based renewable sources that are used for human

food) may be set at 5% of total grids purchase, to increase by 1% each year for 10

years, SERCs may set higher percentages than this minimum at each point in time.

Central and State Governments may set up a verification mechanism to ensure that

the renewable based power is actually procured as per the applicable standard

(DMRPS or SERC specified). Appropriate authorities may also issue certificates that

procure renewable based power in excess of the national standard. Such certificates

may be tradable, to enable utilities falling short to meet their renewable standard

obligations. In the event of some utilities still falling short, penalties as may be

allowed under the Electricity Act 2003 and rules there under may be considered.

Procurement of renewable based power by the State Electricity Boards/other power

utilities should, in so far as the applicable renewable standard (DMRPS or SERC

specified) is concerned, be based on competitive bidding, without regard to

scheduling, or the tariffs of conventional power (however determined).

Renewable based power may, over and above the applicable renewable standards, be

enabled to compete with conventional generation on equal basis (whether bid tariffs

or cost-plus tariffs), without regard to scheduling (i.e.) renewable based power

supply above the renewable standard should be considered as displacing the marginal

conventional peaking capacity). All else being equal, in such cases, the renewable

based power should be preferred to the competing conventional power.

Page | 49

4.4.4 National Solar Mission (NSM)

The National Solar Mission is a major initiative of the GOI to promote ecologically

sustainable growth while addressing India’s energy security challenge. The key driver

envisaged by the National Solar Mission is through a Renewable Purchase Obligation

(RPO) mandated for power utilities with solar specific RPO. The National Solar

Mission pronounced that The National Tariff Policy, 2006 would be modified to

mandate that the State Electricity Regulators fix a percentage for solar power. The

solar power purchase obligations may start with 0.25% initially and to go up to 3% by

2022. This is complemented with a solar specific Renewable Energy Certificate

(REC) mechanism to allow utilities and solar power generation companies to buy and

sell certificates to meet their solar purchase obligations.

The NSM is the main instrument to make solar power a technology of choice in India.

It targets an installation of 20GW of grid-connected and 2GW of off-grid solar power

by 2022. In the first of a total of three phases, from 2010 to 2013, the government

aims to set up 1,000MW grid- connected power plants, encouraging the more

developed PV technology as well as solar thermal equally with 500MW each. In

addition, 200MW of off-grid and 100MW of tail end and other small-grid solar power

are to be installed.

For the financial year 2010-2011, the government originally offered a feed-in tariff of

INR17.91 ($0.44) per kWh for PV projects, rooftop projects as well as projects

migrated from previous incentive programs to the NSM, and INR15.40 ($0.38) for

CSP. Power Purchase Agreements (PPAs) would have a validity of 25 years. In June

2010, the Central Electricity Regulatory Commission (CERC) estimated that the tariff

would allow investors an internal rate of return (IRR) on equity of about 16-21% after

taxes. On September 18th 2010, the application deadline for projects under the first

phase of the NSM, more than 400 project developers put forward bids worth

1,815MW for 150MW of available PV and 3,311MW for 500MW of available CSP.

The maximum size for a CSP bid was 100MW and for a PV bid 5MW. Given the

oversubscription of the first round for projects, the government decided to award

contracts based on competitive bidding to those project developers that offered the

highest discount on the initial tariff of INR 17.91 ($0.44) for PV and INR 15.40

($0.38) for CSP. Companies offering the highest discounts to the tariff rate prescribed

Page | 50

by the Central Electricity Regulatory Commission (CERC) were selected to produce

620MWunder the first phase. Thirty projects worth 150MW for PV and seven

projects worth 470MW for CSP were selected.

For PV, the highest discount offered on the CERC tariff was INR 6.96 ($0.17) per

unit and the lowest successful discount was INR 5.15 ($0.12) per unit. The tariff

range is INR10.95 to INR12.76 ($0.27 to $0.31) per unit with an average tariff of

INR12.16 ($0.30) per kWh. With a 32.1% fall, the new tariff is significantly lower

than the feed-in-tariff announced by CERC earlier in the year. Some of the successful

bidders include well known players such as SunEdison, Azure Power Rajasthan,

Mahindra Solar One and IOC Ltd. However, most of the successful bidders are less

well-known companies. The promoters behind these companies are often unknown.

Some of the larger industrial houses were not awarded projects as they did not bid

aggressively. A possible reason is that the 5MW cap on projects made them too small

to be of any interest. Such companies are instead looking at 10-15 MW projects

available under state programs. A total of 21 successful NSM bids are for projects in

Rajasthan. Eight of these are for a single district, Nagaur, followed by five in Jodhpur

and four in Jaisalmer. Other projects are located in the states of Tamil Nadu, Andhra

Pradesh, Karnataka and Maharashtra.

For CSP projects, the highest discount offered was INR 4.82 ($0.12) per unit and the

lowest was INR 3.07 ($0.07) per unit. All CSP projects have made use of accelerated

depreciation of 80% in the first year. Therefore, the base feed-in-tariff was INR 13.45

or $0.33 (without accelerated depreciation the feed-in-tariff was INR 15.40 or $0.38).

The new tariff range taking into account accelerated depreciation is therefore INR

8.63 to 10.38 ($0.21 to 0.25) per unit. With an average tariff of INR 9.50 ($0.23) per

unit, the new tariff is 29.3% lower than the original base feed-in tariff.

Page | 51

Figure 12 Overview of FIT in INR of 37 JNNSM bid winners (all PV projects of 5 MW)

The first phase of the NSM has a target of 1,000MW of installed capacity by 2013.

PPAs worth 234MW for PV (including migration projects worth 84MW) and

470MW for CSP have been signed so far. The NTPC Vidyut Vyapar Nigam Limited

(NVVN), the government agency implementing the Mission, is set to allot the

remaining capacity of 296MW in August 2011, though the exact date is unknown. It

is likely that projects in this round too will be allotted through competitive bidding.

Page | 52

Figure 13 JNNSM first phase projects available for round II

4.4.5 Rooftop PV & Small Solar Power Generation Programme (RPSSGP)

In order to give a thrust to roof top PV and other small solar power plants connected

at distribution network at voltage levels below 33kV envisaged under Phase I of the

Jawaharlal Nehru National Solar Mission (JNNSM), the Ministry of New and

Renewable Energy (MNRE) proposes to launch a programme on generation based

incentives. Here in after, the programme shall be referred to as 'Rooftop PV & Small

Page | 53

Solar Power Generation Programme' (RPSSGP). The key features of the programme

are as under:

The Project Proponents would be selected as per these guidelines for development

of solar power projects to be connected to distribution network at voltage levels

below 33kV.

The projects should be designed for completion before March31, 2013.

The local distribution utility in whose area the plant is located, would sign a Power

Purchase Agreement (PPA) with the Project Proponent at a tariff determined by

the appropriate State Electricity Regulatory Commission (SERC).

Project schemes from States wherein Tariff tenure for duration of 25 years with Tariff

structure on levelised basis has been determined by SERCs shall alone be considered

to be eligible to participate in this Programme (RPSSGP).

Page | 54

4.5 Analysis of Petition

4.5.1 Technical Analysis of the Projects

4.5.1.1 Technical details of the Projects

Table 10 Technical details of the Projects

Project Grid Connected Solar Photovoltaic System

Name of the Company Tata Power Delhi Distribution Limited

Name of the State Delhi

Cordinates Latitude 28°41’

Longitude 77º11’

Climate

Temperature

i. Annual mean daily maximum 31.4ºC

ii. Annual mean daily minimum 18.8ºC

iii. Extreme High 47.2ºC

iv. Extreme Low (-) 0.6ºC

Mean Wind speed 9.5 Kmph

Seismic Zone Zone IV

Site Elevation 215 Meter above MSL

Annual average Rainfall 1533 mm

Technology Solid Silicon Multi Crystalline Photo Voltaic Technology

Type of Solar Cell Poly Crystalline Silicon Cell with efficiency 16%

Capacity of Solar Panel 170 Wp

Degradation Level 1% Annually

Power Evacuation 11 KV feeder

Technical Life of Power Plant 25 Years

4.5.1.2 Solar Potential in India

The Solar radiation falling over India is about 5,000 trillion KWh/ year (that is 600 TW).

There are about 300 clear sunny days in a year in most part of the country. The average

Page | 55

insulation incident over India is about 5.5 KWh/ sq. Meter over a horizontal surface.

India’s Solar potential is one of the most in the world.

The Indian Meteorological Department maintains a network of radiation measuring

stations. These measure various parameters of solar radiation. According to the Indian

Meteorological Department most part of the country receives 4 to 7 KWh of solar

radiation.

4.5.1.3 Solar Radiation in Delhi

Table 11 Solar radiation in Delhi

Month Ambient Temperature

( ºC)

Solar Radiation

( KWh/sq. Meter/ day)

Jan 14.8 4.00

Feb 18.0 5.00

Mar 23.8 5.70

Apr 29.7 6.50

May 34.5 6.70

Jun 35.0 6.40

Jul 30.9 5.60

Aug 29.3 5.50

Sep 28.9 5.50

Oct 26.2 5.30

Nov 20.6 4.60

Dec 16.1 3.90

Source : Solar Radiation Data HandBook 2008

Page | 56

4.5.1.4 Efficiency Comparison of Different Type of Solar Cell Technology

Table 12 Efficiency comparison

S No Material Thickness

(mm)

Efficiency

(%)

1. Gallium Arsenide cell 0.2 – 0.3 18 – 21

2. Monocrystalline Silicon cell 0.3 16 – 18

3. Polycrystalline Silicon cell 13 – 16

4. Polycrystalline ribbon Silicon cell 0.3 12

5. Polycrystalline transparent Silicon cell 0.3 10

6. Monocrystalline dendritic web Silicon

cell

0.13 13

4.5.1.5

4.5.1.6 Reduction in CO2 Emission

Table 13 Reduction in CO2 Emission

S No Project Name Project Capacity Reduction in CO2

Emission ( kg/ year)

1. Keshavpuram 1 MW 1395781

2. Poothkhurd 54 KW 75372

3. Narela 43 KW 60018

4. GTK 25 KW 34894

5. Bawana 45 KW 62810

6. DSIDC II 60 KW 83746

7. CENNET 25 KW 34894

8. RG 22, Rohini 50 kW 69789

9. RG 5, Rohini 225 KW 314050

10. RG 24 & 2 Rohini 48.5 KW 67695

11. RG 23, Rohini 55.2 KW 77047

Page | 57

4.5.2 Demand Projection

4.5.2.1 Renewable Purchase Obligation of Delhi

As per the Delhi Electricity Regulatory Commission (Renewable Purchase Obligation & Renewable

Energy Certificate Framework Implementation) Regulations, 2011, the RPO of Delhi is as under –

Table 14 RPO of Delhi

Year Solar Non-Solar Total

2011-12 0.10% 1.90% 2.00%

2012-13 0.15% 3.25% 3.40%

2013-14 0.20% 4.60% 4.80%

2014-15 0.25% 5.95% 6.20%

2015-16 0.30% 7.30% 7.60%

2016-17 0.35% 8.65% 9.00%

4.5.2.2 Renewable Purchase Obligation of TPDDL

Based upon Energy purchase estimates approved by DERC the Renewable Purchase Obligation for

the TPDDL is illustrated below:

Table 15 RPO of TPDDL

Energy Purchase RPO Obligation

TPDDL TPDDL

Year MU MU

FY 08 6010 60

FY 09 6379 64

FY 10 6744 67

FY 11 7116 71

Page | 58

4.5.3 Supply Projection

As per ARR filed by the Delhi Discoms for the FY 2011-12, Power purchase from Solar

is nill.

4.5.4 Analysis of Power Purchase Agreement

4.5.1.1 Major Points of PPA between NDPL –G and NDPL - D

NDPL-G is a generating division of NDPL and is developing the aforesaid project,

whereas NDPL-D is the power distribution division of NDPL and it is agreed

between NDPL-G and NDPL-D that, NDPL-G shall generate and make available to

NDPL-D the entire capacity of the Project at the delivery point for a period of 25

years from the COD of the project at the terms and conditions as set out in the

arrangement and at the Tariff as approved by the DERC.

Allocation of Power

The entire capacity of Solar PV Project is allocated to NDPL –D, at the delivery point of

the project.

Transmission/ Wheeling of Power

Power shall be made available by NDPL –G at the delivery point and it shall be the

obligation and responsibility of NDPL-D to make the required arrangement for

evacuation of power from delivery point of NDPL-G.

Operation

It is understood and agreed between the parties that NDPL –G shall operate the station,

as per manufacturer’s guidelines and as per relevant statutory provisions applicable for

Solar PV Project from time to time.

Scheduling

The project shall be treated as ‘MUST RUN’ plant and shall not be subjected to ‘Merit

Order Dispatch’ principles.

Page | 59

Metering

For installation of Meters, Metre Testing, Meter Calibration and Meter reading and all

matters incidental thereto, NDPL –G and NDPL –D shall follow and be bound by the

Central Electricity Authority (Installation and Operation of Meters) Regulations, 2006,

the IEGC and CERC/DERC orders as amended and revised from time to time.

Energy Accounting

NDPL –G shall prepare and submit bills to NDPL –D on the basis of Eergy Accounts

prepared in accordance with the applicable DERC order.

Renewable Energy Certificate

NDPL –G, in accordance with the CERC Regulations on Renewable Energy Certificates

viz Central Electricity Regulatory Commission (Terms and Conditions for recognition

and issuance of Renewable Energy Certificate for Renewable Energy Generation)

(referred to as “REC Regulations), shall have the option of obtaining and trading in

Solar Certificates for the Project.

Transfer Pricing

Transfer Pricing of electricity supplied by NDPL –G to NDPL –D shall be done on the

basis of Monthly Intra State ABT Energy Account issued by the Delhi SLDC at Tariff

including other levies, taxes etc. As determined by DERC from time to time.

4.5.1.2 Following points from PPA between NDPL –G and NDPL -D need clarification:

i. Separation of Accounts of NDPL –G and NDPL –D.

ii. Accounting of expenditure for NDPL –G and NDPL –D.

iii. Whether conditions stipulated in the “in-principle” approval given by DERC have

been complied with.

iv. Cross-checking of Energy accounting mechanism

v. Validity of signing of PPA between two divisions of the same company.

Page | 60

4.5.5 Analysis of Tariff

4.5.5.1 Comparative analysis of Capital cost of the Project as per CERC RE Tariff

Regulation with Actual cost :

Table 16 Comparison of Capital cost of projects

S

No

Project

Name

Project

Capacity

Capital Cost as per

CERC Tariff

Regulation

(in Cr)

Actual Cost

(in Cr)

Difference

(in Cr)

1. Keshavpuram 1 MW 17 17.54 -0.54

2. Poothkhurd 54 KW 0.918 0.7634 0.1546

3. Narela 43 KW 0.7267 0.5845 0.1422

4. GTK 25 KW 0.4225 0.4149 0.0076

5. Bawana 45 KW 0.7605 0.6074 0.1531

6. DSIDC II 60 KW 1.014 0.8690 0.145

7. CENNET 25 KW 0.4225 0.4145 0.008

8. RG 22,

Rohini

50 kW 0.845 0.6968 0.1482

9. RG 5, Rohini 225 KW 3.80 3.56 0.24

10. RG 24 & 2

Rohini

48.5 KW 0.8197 0.7125 0.1072

11. RG 23,

Rohini

55.2 KW 0.9329 0.6969 0.236

Page | 61

4.5.5.2 Comparative Analysis of Tariff of the projects as per CERC RE Tariff Regulation

with Actual cost including subsidy from MNRE:

Table 17 Comparative Analysis of Tariff of Projects

Sr.

No

Project

Name

Project

Capacity

Tariff as per CERC

Tariff Regulation

(in Rs./kwh)

Tariff as per

Actual Cost

(in Rs./kwh)

Difference

(in Rs./kwh)

1. Keshavpuram 1 MW 18.44 19.01 -0.57

2. Poothkhurd 54 KW 11.11 8.15 2.96

3. Narela 43 KW 11.16 7.83 3.33

4. GTK 25 KW 17.91 17.61 0.30

5. Bawana 45 KW 11.20 7.73 3.47

6. DSIDC II 60 KW 17.91 15.49 0.32

7. CENNET 25 KW 17.91 17.59 0.32

8. RG 22,

Rohini

50 kW 11.07 7.80 3.27

9. RG 5, Rohini 225 KW 10.07 8.97 1.10

10. RG 24 & 2

Rohini

48.5 KW 10.50 8.28 2.22

11. RG 23,

Rohini

55.2 KW 10.79 6.17 4.62

Page | 62

4.6 Conclusion

The National Solar Mission has made compulsory for every State Electricity Regulatory

Commission to purchase power from renewable sources in form of Renewable Purchase

Obligation. To promote solar power the NSM has mandated solar specific RPO which will

begin from 0.25 % and will go up to 3% by the year 2022. Delhi Electricity Regulatory

commission has notified its Renewable Purchase Obligation in line with the guidance of

NSM. DERC has set solar RPO target starting from 0.10% for the FY2011-12.

As per the ARR filed by the Delhi Discoms, the power purchase from solar is nil. Delhi

discoms need to purchase power from solar to meet their Solar RPO obligation.

Tata Power Distribution Limited (TPDDL) has commissioned 11 nos. of grid interactive

rooftop solar projects. The combined capacity of these projects is 1.63 MW. These projects

will generate a total electricity of 2.71 MUs.

The power purchase agreement for these 11 nos. Solar project has been signed between,

TPDDL –G and TPPDL –D, two divisions of TPPDL.

Tariffs of these projects are as per CERC Renewable Energy Tariff Regulations. 7 out of 11

of these projects will receive a capital subsidy of 50% of actual cost under the MNRE

scheme of “Tail End Grid- demonstrative programme”. Tariff has been calculated after

considering the subsidy.

The actual costs of these projects are lower than the cost as per CERC RE Tariff Regulations.

Considering the actual cost of the project, tariff of these projects are lower than the tariff

filed in the petition by TPDDL. The difference in tariff is significant and are up to Rs.

4/KWh for some projects.

Analysis of the various aspects petition filed TPDDL shows that approval Power Purchase

from these solar projects will help TPPDL to meet its Solar RPO and indirectly will help

Delhi to meet its Solar RPO obligation.

Page | 63

4.7 Recommendation

The Delhi Electricity Regulatory Commission can approve the Power Purchase Agreement

with direction to TPDDL to properly segregate the accounts of TPDDL –G and TPDDL –D.

The Commission can accept the Generic tariff of the projects or can direct TPPDDL to file a

lower tariff for these projects as the actual cost of the project is lesser than the cost as per RE

Tariff Regulations.

The Commission can accept the petition for purchase of power from these solar projects on

the following aspects –

i. Power Purchase from these solar projects will help Delhi in fulfilling its RPO.

ii. Power purchase from these projects will promote solar rooftop projects in Delhi

which is the only source of renewable power in Delhi due to shortage of free land.

iii. Reduction in CO2 emission.

Page | 64

BIBILIOGRAPHY

[1] J.M Erikson and W. H. Holmes, “The Law of wind Power Purchase Agreements and

Environmental Attributes.” www. AGMRC.org

[2] “Purchasing Agreement Report.” FERC Energy Policy

[3] S. Rives, “Brief Anatomy of a Geothermal Power Purchase Agreement,” North

American Clean Energy, 2010

[4] T. Logan, C. Shah and G. Robbinson, “Power Purchase Agreement Checklist for State

and Local Governments,” Fact Sheet Series on Financing Renewable Energy Projects, 2009.

[5] C. Shah, “Consumer Sited Power Purchase Agreements,” National Renewable Energy

Laboratory (NREL), June 2009.

[6] A. Mazer, Electric Power Planning for Regulated and Deregulated Markets, Hoboken,

New Jersey: John wiley and Sons, 2007.

[7] “Solar Power Purchase Agreements Green Power Partnership US EPA”

http:/www.epa.gov/greenpower/buygp/solarpower.htm, 2011

[8] Guide to Purchasing Green Power, Renewable Electrcity, Renewable Energy Certificates

and Onsite Renewable Generation, DOE/EE-3307, 2011.

[9] CERC- Terms and Conditions of Tariff along with all its amendments

[10] CERC Renewable Energy Terms and Conditions of Tariff 2009-14

[11] CEA Concurrence to Private Hydro Power on 10th

June, 2012

[12] New Hydro Policy

[13] CERC Order on Tato II Hydroelectric Power Project

[14] National Electricty Policy and National Tariff Policy with amendments

[15] CERC Order No 255/2010 on Determination of Benchmark capital cost norm for solar

PV projects during FY 2011-12

[16] New CERC Regulations To Encourage Investment, Efficiency in Power Sector by

ICRA

Page | 65

[17] Uttranchal Hydro Power Policy, 2008

[18] ESMAP study reports on Regulatory Review of Power Purchase Agreements, 2008

[19] Assessment of Power Purchase Agreement by C. Shah for US Department of Energy

[20] “An Integrated Analysis of a Power Purchase Agreemetnt” by Glenn. P.Jekins and

Henry B.f.lim, 1999

[21] www.cea.nic.in on 23rd

June, 2012 and 17th July 2012.

[22] www.cercind.gov.in on 11th June, 17

th June, 05

th July and 21

st July, 2012.

[23] www.derc.gov.in on 06th

June and 19th

June, 2012.

[24] www.powermin.nic on 11th July, 2012.

[25] www.mnre.gov.in on 15th July 2012