Monthly Archives: April 2012

Power Ministry may not accept CIL’s minimum penalty clause in FSA

The Power Ministry may not accept Coal India’s minimum penalty clause in the fuel supply agreement and may seek Prime Minister Office’s intervention on the issue.

“We are awaiting the minutes of the Coal India Board meeting and then we may approach PMO,” a Power Ministry official said, adding that the penalty clause was bit of a “downer”.

State-owned Coal India Ltd (CIL) in its board meeting last week approved signing of the agreements with the power producers for minimum assured supply of the fuel, following a directive from the government.

Failure to supply at least 80 per cent of the committed quantity to the power firms would attract a penalty of 0.01 per cent. The penalty clause would be operational after three years.

The government issued a directive on April 3 to CIL to commit a minimum of 80 per cent of fuel supply to power producers, with a penalty clause, following a meeting between the private power company heads and the PMO.

Country’s largest power producer NTPC, which is supposed to sign the FSA for additional supply of about 25 million tonne for capacity addition between 2009 and 2012, refused to ink the pact on the issue of quality of coal.

CIL, meanwhile, has entered into fuel supply pacts with five power firms for minimum assured supply of coal as per the directive.

“So far five firms have signed fuel supply agreements with CIL, including Lanco Anpara Power and Bajaj Hindustan,” a source in the know of the development said.

CIL, world’s largest coal producer, which accounts for over 80 per cent of the domestic production has fixed a production target of 468.74 million tonne (MT) for 2012-13.

The company had set a goal of producing 447 MT of coal during the last fiscal (2011-12), but managed to do only 435.84 MT.

NTPC, which generates major chunk of its electricity from coal requires 160 million tonnes of the fuel during the current financial year.

The current installed power generation capacity of NTPC is close to 40,000 MW.

According to the Planning Commission’s estimates, the country’s energy supply needs to grow at 6.5 per cent annually if the nation wants to achieve annual economic growth of 9 per cent during the plan period.

The Power Ministry may fix generation target close to 1,00,000 MW for the XIIth Plan period (2012-17).
Source: ET

India’s clean tech research “abysmal,” says Pachauri

The amount of research on clean technologies being carried out in Indian institutions is “abysmal,” and a major restructuring of Indian science and technology institutions and infrastructure is required, said Rajendra Pachauri, president of the The Energy and Resources Institute (TERI), on the sidelines of the ongoing, third India-U.S. Energy Partnership Summit here.

When asked by The Hindu about whether India would press for support in financing technology transfers for clean energy Dr. Pachauri answered, “My own view is that we are probably making too much of this business of technology transfer and getting clean technologies free of cost.”

Yet, he added, if India had not come up with new and clean technology innovations thus far, that was the failure of India’s scientific and technical institutes. “If you look at the amount of research being carried out in our universities, including the IITs, it is abysmal. It is pathetic for a country of our size and development,” Dr. Pachauri said.

Emphasising the need for a rapid ramp-up in India’s strategy to attract and retain the best scientific minds, he noted that if India continued with the “business as usual,” by 2031-32 the country would be importing 750 million tonnes of oil annually, and 13 million tonnes of coal, raising serious questions about where such large amounts of fossil fuels imports would be sourced.

The ongoing summit is an effort to bring policymakers, business leaders and representatives of the research and academic community to take up the most pertinent challenges in the clean energy field and spur on activities that might be beneficial to both countries.

On the Indian side the strength is in terms of the cost of labour at every level including highly qualified scientists and technologists as well as those who work in production systems, Dr. Pachauri explained.

In contrast, “there is no getting away from the fact that in some of these cutting-edge technologies innovations will probably originate more from the U.S. than anywhere else,” he said. Describing the extent and intensity of research that takes place in U.S. universities as “quite amazing,” Dr. Pachauri argued that neither Europe nor any other part of the world was as yet at the same level.

Among the areas where TERI is hoping to see greater India-U.S. collaboration is in biofuels technology and research. In this regard there are still some open question on the U.S.’ first-generation biofuels based on corn and ethanol, but second-generation biofuels based on cellulose material and third-generation algal biofuels may be the way forward for India, he said.
Source: The Hindu

India sparks solar energy market: Report

India’s ambitious national solar programme has catalysed rapid growth in the solar market driving solar energy prices low and demonstrating how government policy can stimulate clean energy markets, according to a new report.

In only two years, competitive bidding under India’s National Solar Mission drove prices for grid-connected solar energy to nearly the price of electricity from fossil fuels, said the report released here Wednesday by the Natural Resources Defence Council (NRDC) and the Council on Energy, Environment and Water (CEEW).

During that same period, cumulative installed solar capacity in India surged from 17.8 MW to over 500 MW, as discussed in “Laying the Foundation for a Bright Future: Assessing Progress Under Phase 1 of India’s National Solar Mission.”

“As the world’s second-fastest growing economy, India has sparked a powerful solar market in only two years,” said Anjali Jaiswal, senior attorney for the India Initiative of NRDC, a US headquartered international nonprofit environmental organization.

“While the National Solar Mission still faces significant hurdles, India has already made important strides to attract new domestic and international players into the market, and lower the price of solar energy faster than most anticipated.”

The report from NRDC and CEEW provides recommendations to aid the Indian government, private sector and other stakeholders in overcoming obstacles to achieving the Mission’s goal of 20 GW of installed solar capacity by 2022, equivalent in energy capacity to 40 mid-sized coal-fired power plants.

These include encouraging financing, boosting domestic manufacturing, and creating a conducive environment.

“As nations race to become clean energy leaders, governments around the world will be closely following the progress of India’s National Solar Mission,” said Dr. Arunabha Ghosh, CEO for the CEEW, an independent think-tank based in New Delhi.
Source: ET

UP power regulator urged to dismiss Torrent’s Agra rollout plan

A public interest application on Wednesday urged Uttar Pradesh Electricity Regulatory Commission (UPERC) to dismiss the rollout plan of Torrent Power for its power distribution franchisee in Agra.

UP Rajya Vidyut Upbhokta Parishad (UPRVUP) made such representation before UPERC chairman Rajesh Awasthi here.
UPRVUP has demanded the rollout plan of Rs 360 crore for strengthening the power system in Agra should be dismissed and the matter be probed.
Parishad chairperson, who is also member of the London-based World Energy Council, Avadhesh Kumar Verma said the rollout plan submitted before UPERC by UP Power Corporation Limited (UPPCL) pertained to 2010-11, 2011-12 and 2012-13 financial years.

“It is strange that UPPCL has informed the Commission that Torrent Power had already incurred Rs 99 crore in capital expenditure during 2010-11 in anticipation of approval by UPERC,” he added.

Verma told Business Standard the rollout plan expenditure would be included in the Annual Revenue Requirement (ARR) of UPPCL and would ultimately be borne by the consumers.

He said UPPCL had submitted the rollout plan to the Commission in March 2012.

He sought to know why the rollout plan was not placed before the Commission, when Torrent Power had entered into an agreement with the state power discom of Agra for the input based franchisee in 2010.

“UPPCL wants a legal sanction of UPERC’s approval to conceal its mistakes,” Verma alleged. He pointed out that UPPCL was providing power to Torrent below the average cost of power. In 2010-11 and 2011-12, the average cost of power incurred by UPPCL was Rs 2.97/unit and Rs 3.71/unit respectively, while Torrent was getting power at the rate of Rs 2/unit from UPPCL.

Recently there had been reports that the state government was planning to privatise power distribution in some more cities viz. Lucknow, Meerut, Muzaffargnagar, Ghaziabad, Bareilly, Varanasi and Robertsganj. This had been opposed by state power engineers and employees.

However, state infrastructure and industrial development commissioner (IIDC) Anil Kumar Gupta had clarified neither there had been any such proposal before him nor such proposal had been mooted by the energy department.

Power Employees Joint Action Committee (JAC) convener and All India Power Engineers Federation secretary general Shailendra Dubey had said the clarification should have come from either the energy department or UPPCL.

Dubey claimed a high level meeting was held on April 19, wherein the proposal of privatising power distribution in UP was discussed and a presentation was also given by UPPCL.

JAC claimed UPPCL was incurring over Rs 600 crore losses annually due to Agra franchisee. Torrent Power was awarded Agra franchisee on April 1, 2010 and it later bagged Kanpur also, however, it failed to take off.
Source: BS

RPower secures legal thumbs-up on coal diversion

Ahead of Saturday’s ministerial panel meeting to examine the attorney general’s opinion on the legality of a government decision allowing Reliance Power to divert surplus coal from its Sasan captive mines, the private developer has independently secured a favourable opinion from the country’s top legal brains, including retired chief justices AS Anand and AM Ahmadi and former attorney general Soli Sorabjee.
In opinion given to Reliance Power, the legal luminaries said since there was no violation of Sasan UMPP bid conditions, cancelling the permission granted to Reliance Power to divert surplus coal would be illegal. Anand and Ahmadi also cautioned that the cancellation would amount to violation of the principle of promissory estoppel.

At its December meeting, the empowered group of ministers on ultra mega power projects (UMPPs), headed by finance minister Pranab Mukherjee, had decided to seek legal opinion from the AG Goolam E Vahanvati to defuse the controversy arising from the group’s earlier decision in 2009 to allow Reliance Power to divert surplus coal. The company is now likely to flag the favourable legal opinion before the EGoM.

The government has allocated Moher, Moher-Almohri and Chhatrasal captive coal blocks to help the private developer meet the fuel requirement of the Sasan UMPP, which it bagged through tariff-based competitive bidding.

Tata Power, which bid for the Sasan UMPP, has challenged in court the government’s decision permitting Reliance Power to divert excess coal from the Sasan mines to the Chitrangi power project. The CAG too had found windfall gains for the company from the coal diversion.

The EGoM also gave given in-principle approval to Reliance Power to divert surplus coal from its Tilaiya UMPP in Jharkhand, but deferred a final decision after the CAG said last October that the decision to allow diversion of coal at Sasan and Tilaiya resulted in a windfall gain of Rs 1.2 lakh crore to the private developer. The CAG has since reduced the windfall gain estimate to Rs 15,000 crore. The reference to AG by the EGoM is only in relation to the alleged diversion of coal meant for the Sasan project because in the case of Tilaiya project, the company was not actually allowed to divert coal.

The principle of estoppel in India is a rule of evidence incorporated in section 115 of The Indian Evidence Act, 1872. The section reads as follows: “When one person has, by his declaration, act or omission, intentionally caused or permitted another person to believe such a thing to be true and to act upon such belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or his representative, to deny the truth of that thing.”

Former chief justice of India AS Anand has said that since the permission granted by the government to divert surplus coal did not violate Sasan bid conditions, it cannot be cancelled. “No allocation can be cancelled only on the whims and fancies of the government,” the former CJI said while giving his opinion on the reference received from Reliance Power.

Anand further added: “It would be wholly inequitable to allow the ministry (coal ministry) to cancel the permission validly granted by it to Reliance to utilise surplus or excess coal from three blocks, after meeting the complete requirement of Sasan UMPP, for Chitrangi project. The government is estopped by the application of the principle of promissory estoppel.”

“Any action of cancelling one of the coal blocks or cancelling the incremental coal permission would be against public interest. It would be a hostile step for the government to take ignoring the huge expense incurred by the querist (Reliance Power),” said Ahmadi while giving his legal opinion on the matter.

“Any purported cancellation on the ground of breach of conditions of allocation letters or on the ground that there was surplus or incremental coal will be patently illegal and arbitrary,” Sorabjee said.
Similarly, the private developer has secured legal opinion from Mukul Rohtagi, a former additional solicitor general and a senior advocate of the Supreme Court.
Source: FE

Indian Banks Exposure to Coal Limits Lending to Solar, SBI Says

Indian banks have limited scope to boost lending to solar plants after funding for coal projects pushed them close to the limit for financing to the power industry, the nation’s biggest lender said.
Most banks are reaching their 15 percent cap on domestic advances to the power industry and it’s unlikely they’ll seek to separate renewable energy into another category to allow more lending, said S. Vishvanathan, chief executive officer of SBI Capital Markets Ltd., the investment banking unit of the State Bank of India. (SBIN)
“To change sectoral limits, you need approval from the board,” Vishvanathan said yesterday in an interview in Jodhpur in the state of Rajasthan. “What’s the rationale? They really are the same sector.”
A shortfall in commercial project finance could stall the solar industry in India, one of the biggest growth markets, adding to the woes of panel makers like First Solar Inc. (FSLR) and Suntech Power Holdings Co. which are looking to India and China to offset plummeting sales in Europe. India will need at least $3.2 billion of debt finance in the next three years to complete already announced solar projects, according to the Asian Development Bank.
New Technology
Government-backed development banks like the ADB, the World Bank’s International Finance Corp. and the U.S. Overseas Private Investment Corp. have spearheaded financing of solar power projects in India and are training local banks on how to assess the risks of a technology that’s new to the country.
“If solar is going to take off here, the commercial banks are going to have to do the heavy lifting,” said Michael Barrow, director of infrastructure finance in the ADB’s private sector department. “There’s not enough in our kitty or in the IFC’s or OPIC’s to finance this alone.”
Banks failed to foresee risks in India’s coal power industry which has delayed or canceled about $36 billion in new projects because of domestic fuel supply constraints. In February, India’s state-owned lenders were for the first time charging more for coal-power producers to borrow money than for wind and solar farms.
That lesson may be reinforcing local banks’ wariness about expanding into solar, a resource they are less familiar with than coal, Barrow said.
‘Dark Tunnel’
SBI Capital Markets has financed five solar projects developed by Tata Power Co., (TPWR) Kiran Energy Solar Power Pvt., Sunborne Energy Holdings LLC, Alex Astral Power Pvt. and Acme Tele Power Ltd. (ATPL)
“We really struggle to figure out the risks,” Vishvanathan said. “To a person doing it for the first time it’s like going inside a dark tunnel. We’re learning as we put our money in.”
The biggest uncertainty for lenders is the lack of ground data on solar irradiation that could affect a plant’s output, Vishvanathan said. Other factors that worry banks include the viability of solar equipment suppliers and whether they’ll survive long enough to uphold warranties over the 20-year lifetime of a plant, he said.
The financial health of India’s state-run utilities buying the solar power is also a concern for lenders. While solar projects have signed long-term contracts to sell their power at preferential rates, the cash-starved state buyers may default or try to renegotiate terms, Vishvanathan said.
“The credit risk of the buyers is a question mark. We’re not sure that they can pay the money or that they will,” he said.
Source: Bloomberg

Forest clearance for mine now must to set up thermal power project

Getting an environmental clearance for a thermal power plant is going to remain tough. The ministry of environment and forests (MoEF) had earlier linked clearance to having an assured coal supply for the power plant. Now, it has clarified that promoters of a thermal power plant will have to wait till the linked mine gets a stage 1 forest clearance.

Forest clearance is an approval to divert forest land for industrial use. Stage 1 is in-principle permission for the same, and a power venture will get approval only if the mine gets the MoEF go-ahead.

Industry sources said that getting a clearance to a power plant is relatively is easy, but getting clearance for a mine is a very long process. So, linking the two has complicated the whole process.

Sources in the coal and power sector said that a MoEF circular issued a few days ago says that even as the processes for getting clearance for the mine and power plant will run parallel, a green signal to the latter now hinges on the mine getting forest land. Incidentally, mine blocks allotted for private use are generally in forest areas.

The notification also covers mines belonging to Coal India Limited (CIL) in the definition of a linked mine. So, clearance to a power plant being supplied coal from a group of CIL mines will also depend on forest clearance to each mine, said a source in this mining PSU after interpreting the notification.

The ministry has further specified that detailed information of the calorific value, ash content, as well as level of sulphur in the coal to be used, has to be put up while seeking an approval for the power plant. Calorific value determines the amount of coal to be consumed in the process. Fly ash is a major pollutant generated due to burning of coal in a power plant. Sulphur content too determines the quantum of air pollution. The coal linkage or fuel supply agreement has to specifically mention the details of these values or other parameters mentioned from time to time.

The move will lengthen the process of getting environmental clearance for a power plant. Industry players have always complained about not getting forest clearance in time. Although the official time taken is 18 months, the delays are inordinate. City-based Western Coalfields Limited (WCL) itself is waiting for over 5 years to get forest clearance for its expansion projects, said a senior official in the company.

At the same time, the move will also prevent mushrooming of power projects as has happened in recent years, say industry sources.

Sanjay Jain of Abhijeet Power says the move will weed out non-serious players and also lead to finance being extended only to entities with the requisite clearances. A lot of smaller companies that had no intention to running a power plant had set up projects, but will face rough weather now. However, at the same time, it may dampen investor sentiment, with not many new projects coming up.
Source: TOI

Khandwa power plant clears boiler test

Struggling hard to keep its old power units going, MP power generating company limited (MPPGCL) on Wednesday received a shot in the arm when its 600 mega watt (mw) upcoming unit of the multi-crore Shree Singaji Thermal Power Station (SSTPC) in Khandwa cleared the boiler (steam generator) test – the first essential step – for commissioning a unit.

“We have been able to clear the first milestone in a prelude to set up 600 mw unit with successful boiler test at SSTPC,” MPPGCL managing director Vijendra Nanavati told TOI.

“Water is pumped into boiler to generate steam for power generation,” he added.

Nanavati said two units of 600 mw each were coming up in the first phase of SSTPC from where power generation is expected to start this fiscal.

In the project’s second phase, he said two units of 660 mw each to come up at the cost of Rs 6,050 crore would be installed.

The first phase of the project will come up at a cost of Rs 6,750 crore over 1107 hectares area at Dongalia village, officials said. The coal fired project was coming with 80% loan from the Power Finance Corporation (PFC), they added.

The project has been named after sant Singaji, who is believed to have hands-on knowledge of livestock and took samadhi (a mausoleum of sage) near the place.

MPPGCL is struggling hard to generate power from its old power generation units, which frequently develop snags. It has plan to shut down 40-year-old five units of 62.5 mw each at Satpura Thermal Power Station (STPS) in Sarni in Betul after two of its upcoming units of 250 mw each there are commissioned this fiscal.

The state is working hard to bridge the gap of more than 2,000 mw power shortage which crops up during peak hours of the Rabi season. As of now, the rural areas in the state were witnessing power cuts for long hours.
Source: TOI

Bihar proposes to set up 25 hydel power projects

Heavily dependent on the Centre for supply of electricity and facing acute power shortage, Bihar has taken steps for setting up 25 hydel power projects for generating about 800 MW with the proposals at various stages of approval, official sources said.

Bihar State Hydel Power Coporation Limited managing director AK Pandey told PTI that the state had at present 54 MW capacity hydel power plant and work was on at various stages for construction of different hydel power projects with generation capacity of 33 MW.

“Apart from these projects, the proposals for setting up 25 other hydel power projects with generation capacity of around 800 mw are at various stages and levels for according sanction”, Pandey said.

Pandey informed that the state government had sent a proposal to the Centre with Detailed Project Report (DPR) for the long-cherished 130 mw Dagmara Hydel Power Project over River Kosi in Bihar’s flood-prone Supaul district.

“We will be starting work on the project soon after receiving the go-ahead from the Centre”, he said.

The Dagmara Hydel Power Project’s fate hung in balance previously as the Central Electricity Authority had not given its nod to it keeping in view submergence of vast areas in bordering Nepal, he said.

“Now the project is proposed to be set up in the downstream of river Kosi and in keeping with the suggestions to the Centre about it, MS Wapkose prepared a revised Detailed Project Report and sent it the Central Electricity Authority for endorsement”, Pandey said.

The World Bank and Asian Development Bank and Japanese financial institution JAICA too have evinced interest in the project, he said.
Source: TOI

Industries can now purchase power from open market

The government has invoked special powers under the Electricity Act and directed the central and state regulators to implement a long-pending reform to allow industrial consumers to buy cheaper power from the open market.

The move will help 15,000 large consumers particularly the sick textile, cement and steel industrial units in states like Punjab and Tamil Nadu by ensuring regular supply of electricity at competitive rates and boost business of power bourses and 52 power traders including NTPC, PTC India, Tata Power, Reliance Infrastructure, Jindal Steel, Essar Power, JSW Energy, GMR Energy and Indiabulls.

Power secretary P Uma Shankar said the decision was taken because similar directives in the past were taken lightly by regulators. “The ministry has issued letters to regulators to prepare regulations in line with communications sent earlier,” he told ET.

“…the ministry of power, govt of India, in exercise of powers under section 107 of the Electricity Act 2003 hereby issues direction to the central commission to take all necessary steps, including framing of appropriate regulations to implement the provisions of open access…,” the power ministry said in a directive issued on Monday.

Section 107 authorises the government to issue final and binding policy directives to central electricity commission in public interest. Central Electricity Regulatory Commission chairperson Pramod Deo said regulations were already there for inter-state transfer of power.

Traders and large consumers lauded the move but said issues remained with state machinery that have been impeding implementation of the ‘open access’ reform, introduced in Electricity Act 2003 as a powerful tool to induce competition in power sector.

Open access refers to enabling buyers an option to choose source of electricity and giving them right on transmission and distribution system for transfer of power. Distribution companies that fear losing their high paying industrial consumers are impeding implementation of the reform despite directives from power and law ministries asking regulators and distribution companies to set free large industries consuming more than a megawatt of power.

Tariffs for industrial consumers in India are among highest in the world while supply to sectors like agriculture remains highly subsidised. Many states impose huge charges like cross subsidy, transmission, transmission losses, wheeling, wheeling losses charges on open access consumers to discourage industrial consumers buy from elsewhere. An IIT-Delhi study shows distribution companies will earn 10% more revenue if they prudently exclude a portion of large consumers.

NTPC Vidyut Vyapar Nigam, power-trading arm of the company, said it was a good beginning to ensure reliable power to industries provided they have the requisite infrastructure.

Country’s largest power trading platform India Energy Exchange’s managing director and chief executive officer Jayant Deo said it was a welcome move. Manikaran Power Ltd executive director Amit Ailawadi said, “The opinion is a welcome step but needs to be implemented properly at the distribution companies’ level which are opposing it tooth and nail.”
Source: ET

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