the world bank group ashish khanna india energy team leader south asia sustainable development
TRANSCRIPT
Regulatory Craft in Renewable Energy:
Experience of India
The World Bank Group
Ashish Khanna
India Energy Team LeaderSouth Asia Sustainable Development
2
RECENT TRENDS ON RENEWABLE
ENERGY IN INDIA
3
RE installed capacity has grown at an annual rate of 31 percent, rising from about 2.5GW in 2003 to about 15GW in 2010
Additions to renewable energy capacity, 1993/94–2009/10
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
0
500
1000
1500
2000
2500
-60.0
-40.0
-20.0
0.0
20.0
40.0
60.0
80.0
100.0
120.0
SHPWindBiomass & CogenerationPercentage Growth (%)
MW %
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Small Hydro is cheapest, followed by biomass, wind, and solar
Biom
ass AP
& M
P
SHPAll
States
Wind TN &
Karnataka
WindAP
WindGujarat &
MP
Wind K
erala &
Mahara
shtra
Biom
ass Various states*
Wind R
ajastha
n & W
est Beng
al &
Haryana B
iomass
0.00
1.00
2.00
3.00
4.00
5.00
6.00
2.9 2.93.0 3.1
3.2
3.7 3.7 3.7 3.7 3.7 3.7 3.83.9 3.9 3.9
4.04.2
4.5 4.5 4.64.7 4.8
4.8 4.95.0 5.0 5.0 5.0
5.2 5.2 5.2
5.7
Eco
nom
ic C
ost
of G
ener
atio
n R
s /
Kw
h
0.11 67.9 51.0 37.8
.
Cumulative Capacity (in GW)
Coal Avoided Cost 3.08 Rs / Kwh
With Global Environmental Premium4.96 Rs / Kwh
With Local Environmental Premium3.74 Rs / Kwh
Economic competitiveness of wind, biomass, and small hydropower
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Rapidly reducing cost differential RE has become much cheaper than diesel, where
cost of electricity from diesel genset has increased from 8 cents/ kwh to 30 cents / kwh Even the most expensive RE technology -
solar is now cheaper than diesel generators (allowing for benefits of any time availability of diesel gensets)
However, Diesel generator capacity (~ 19 GW, as on 2009) is more than installed RE capacity (Currently, ~ 15 GW)
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India has success stories in each RE Sector that other states can learn from
State wise % RE Potential developed*Figures in ( ) are generation cost in Rs / kwh
> 10%
• Andhra Pradesh (3.16)
• Karnataka (2.10)• Tamil Nadu
(2.44)• Maharashtra
(2.8)
> 50%
5-10%
• Karnataka (3.06)• Tamil Nadu (2.96)• Orissa
• Maharashtra (2.10)• Andhra Pradesh
(1.74)• Tamil Nadu
• Gujarat (2.7)• Karnataka (2.5)• Rajasthan (2.8)
10-50%
< 5%
• Uttar Pradesh• Punjab • Maharashtra• Rajasthan (3.16)• Madhya Pradesh• Gujarat (3.10)• Haryana
• Himachal Pradesh (1.65)
• NE states (2.02)• Uttarakhand (1.70)• Uttar Pradesh• Jammu & Kashmir
• Andhra Pradesh (2.7)
• Madhya Pradesh (2.98)
• Orissa• Kerala
< 10%
Biomass Hydro Wind* Only states with more than 500 MW of potential in the specific RE sector is shown
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SOLAR EXPERIENCE OF
INDIA
BEYOND WHAT HAS BEEN ACHIEVED –
THE WHY AND HOW OF
THE JOURNEY
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Initial Phase of Feed in Tariffs
States like Gujarat went in for Feed in Tariff based projects, with levelized tariff of $0.27 per kilowatt-hour for PV and $0.21 per kilowatt-hour for CSP over 25 years
Meanwhile as part of domestic policy on National Action Plan for Climate Change, central government launched National Solar Mission Target of 1 GW solar (500 MW each for PV and
CSP) – low capacity in 200 GW system, so solar is primarily industrial policy initiative and not energy security
Central regulator offered feed in tariff of $0.36 per kwH for utility scale PV and $0.31 per kwH for CSP
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Institutional Model to make solar attractive
For reducing 4 times difference in tariff of solar with conventional sources, a 1:1 blending of conventional and solar power done
Outsourcing of bidding and power purchase contracting to third party credible government agency with improved institutional capability (NVVN)
Bids received for 1,815 MW against target of 150 MW for PV, and for 3,311 MW against target of 500 MW for CSP
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Reverse Auction routeBelief in cost reduction as more important
policy objective than creation of industry capacity; and Ability of vibrant private sector of India to reduce cost - led to policy of Reverse Auction
Non serious bidders dis-incentivized through higher proportional bank security for lower bids
Price discovered through Reverse Auction for PV between 21.9 cents to 25.5 cents per unit and 21.2 cents to 24.7 cents for CSP (upto 32% discount to FiT). Further bids in late 2011 for PV at 15 cents.
While RoE on investments expected to be low, business models based on encashing early entry strategy through capital markets/ private equity route
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Continuation of FiT at state level with Reverse Auction at Central level
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Further twist – Move to RPOs and RECs
With no more availability of cheaper conventional power to blend, Regulators asked to define state specific and RE source specific Renewable Purchase Obligations (RPOs)
Over and under achievement traded through RECs (White Certificates)
Challenge of subjectivity as over performing states are
penalized (high marginal cost of RPOs) potential gaming by states on low RPOs and
high RECsInter linkages with Energy Saving
Certificates
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Some Early LessonsCapital Markets, VC, PE industry can crowd in RE inv, under suitable policy
Private sector led models more amenable to reverse auctions and sourcing innovative finance
Public Policy required for Innovation
Innovative technologies on CSP (Concentrated Tower, Linear Fresnel, Hybrid, etc) being left by private sector in favor of conventional trough technology
Competition early on reduces systemic inefficiency
Advantage of auctions in separating “Men from Boys” early on, unlike FiTs where competitiveness discovered only with international competition
Technology specific regulation
Mature technologies like PV assist price discovery through reverse auctions
Long term certainty and transparency
Long term price and volume certainty to private sector essential for cost reduction – combining reverse auctions with RPOs create undue complexity
