UP publishes draft solar policy 2012

The newly elected government in U.P. seems quite determined to rejuvenate the haggard power sector of state. Under the 12th Plan, it aims an additional generation of 16,000 MW power and increasing PLF to 70%, while reducing AT&C losses to 18%. Endeavors are also being made to strengthen the state’s renewable energy portfolio. For the same, UPNEDA (Uttar Pradesh New and renewable Energy Development Agency) has released second version of draft Solar Power Policy – 2012 and has invited suggestions from various stakeholders.

Salient features of draft policy:

  • Policy to remain valid up to March 31, 2017 and aims to achieve 1000 MW of solar power of capacity addition till then.
  • Grid connected solar power projects are divided into 3 sub categories: Small (2-10 MW), Medium (10-25 MW) and Large (> 25 MW).
  • These (grid connected) projects will be implemented either as ‘Private Projects’ wherein developers themselves have to identify and procure suitable land banks or as ‘Government land/space based projects’ wherein land will be provided by government for a suitable charge.
  • The developers will have option to sell power to distribution licensee/utility on tariff based competitive bidding, subject to approval by UPERC or at Average Pool Price under REC Mechanism.
  • To give a sense of security (payment) to developers, provision of Letter of Credit and Default Escrow Account will be provided in the PPAs to be signed by the Discom/STU.
  • Policy allows for sale of electricity to a 3rd party at a mutually agreed price but restricts use of fossil fuel in solar thermal power plants.
  • Policy offers various facilitations and incentives to developers like exemption from transmission/ wheeling and open access charges for 3rd party use and captive units, single window clearance system, exemption from electricity duty on energy consumed by developers for its own use, facilitation in land allotment by state nodal agency etc. Again, generation solar power will be treated as industry and all relevant incentives under industrial policy of the state will be available to solar power developers.
  • For speedy development of projects, the policy also contains a provision for creation of Solar Parks at appropriate locations in the state on PPP basis. This concept was first introduced by state of Gujarat in its solar policy.
  • For further promoting renewable energy in state ‘Uttar Pradesh Renewable Energy Development Fund’ shall be established. The fund will have initial corpus of INR 1 Billion.
  • Nodal Agency at state level will facilitate and assist the project developers to achieve the objectives of policy. An Empowered committee will be constituted under the chairmanship of the Chief Secretary of the State to oversee, monitor and resolve various issues arising out of this policy. The committee will have members from various other departments of government.

 

Some provisions of the (draft) policy are not in congruence with that of CERC. E.g. the draft policy exempts solar power projects from transmission/wheeling and open access charges for third party sale and captive use still leaving them eligible for RECs whereas CERC’s notification on Sept 29, 2010 (Terms and Conditions for recognition and issuance of Renewable Energy Certificate for Renewable Energy Generation- First Amendment) clearly states “… Captive Power Producer (CPP) based on renewable energy sources shall be eligible for the entire energy generated from such plant including self-consumption for participating in the REC scheme subject to the condition that such CPP has not availed or does not propose to avail any benefit in the form of concessional/promotional transmission or wheeling charges, banking facility benefit and waiver of electricity duty.”

Again, the policy imposes much stringent technical eligibility criteria when compared to other state policies like that of Gujarat and Rajasthan. This will restrict entry a lot of players thus resisting competition.
Also, projects with greater installed capacity will find difficulty in adhering to time schedule as they ought to be completed within 12 months if based on Solar PV and 18 months if otherwise (from the date of issue of concurrence from the Distribution licensee/utility). Other states like Rajasthan and Karnataka offer much leniency in their state policies.

Again, proposed ‘UP Renewable Energy Development Fund’ with nominal initial corpus does not seem too promising to support such an expensive technology like Solar PV.

Nevertheless, if (this policy is) formalized, Uttar Pradesh will join the list of states having their dedicated policy for promoting solar power. The state has seldom been a preferred investment destination but with government offering various facilitations and incentives through the policy, the next big thing to see is weather the sun shines over the state or not.

See draft solar policy

Author Profile: Mr. Suyash Agrawal is pursuing MBA (Power Management) from National Power Training Institute, Faridabad. His areas of interest are Renewable Energy and Financial Modeling.

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