Gujarat: No Cross-Subsidy and Additional Surcharge for Captive Solar Projects

The Gujarat Electricity Regulatory Commission (GERC), in a recent order, approved the amendments sought by the Gujarat Urja Vikas Nigam Limited (GUVNL) to the earlier order passed by the Commission for tariff framework to procure power by distribution companies (DISCOMs).
The amendments addressed several issues such as energy accounting, captive projects, cross-subsidy surcharge, wheeling charge, and additional surcharge, among others.
However, the Commission rejected the request for the qualification of group captive projects based on the provisions of the Gujarat Solar Power Policy, 2021. The Commission said that the generating projects fulfilling the criteria of ownership and consumption on an annual basis as specified in the Electricity Rules, 2005, qualified as captive projects.
The solar projects commissioned before the date of the issuance of the order would be governed by the provisions of the earlier order.
GUVNL had filed a petition seeking incorporation of provisions of the Gujarat Solar Power Policy, 2021, in the tariff framework order to procure power by distribution licensees and others from solar projects and GERC Net Metering Regulations, 2016.
Background
The DISCOM, in its submission, said that the banking charges proposed in the solar policy are with consideration of the variance in the generation available from the solar power projects as it is infirm in nature.
Moreover, the banking time and its rates are considered as the promotional aspects like the removal of the ceiling to set up the solar project at 50% of capacity to unrestricted capacity by removing the cap without consideration of sanction load. The banking time, facility, and charges are in the general public interest.
It also added that the cross-subsidy surcharge, additional surcharge, transmission charges, and wheeling charges and losses are determined by the Commission in its tariff orders, and they are applied to the open access customers.
Commission’s analysis
The order dated May 8, 2020, was issued by the Commission for the tariff framework to procure power by distribution licensees. Later, a suo moto order was passed by the Commission on August 5, 2020, with certain amendments to the earlier order dated May 8, 2020.
Based on the submission of all the parties, the Commission approved the following amendments to the earlier order.
Captive projects
The Commission said that there would be no capacity restrictions for solar projects set up by residential consumers, captive consumers, and projects under third-party sale.
In the existing clause, the maximum capacity for solar power projects was up to 50% of consumer’s approved load for captive use, third-party sale, power projects set up under the National Solar Mission with the sale of power to consumers within the state.
Energy accounting
For residential consumers, the energy accounting will be carried out based on a billing cycle.
The surplus energy generated from the solar project will be purchased by the respective DISCOM at the following rates:
In the case of self-owned systems and SURYA Gujarat program consumers: At ?2.25 (~$0.031)/kWh for the first five from commissioning of the project and after that for the remaining term of the project at 75% of the simple average of tariff discovered by GUVNL for solar projects in the preceding six-month period, i.e., either April to September or October to March, from the commercial operation date (COD) of the project.
In case of third-party sale: At 75% of the simple average of tariff discovered and contracted under competitive bidding process conducted by GUVNL for non-park-based solar projects in the preceding six-month period.
No banking charges will be applicable on solar power consumed by residential consumers.
Projects under captive use
In the case of solar projects set up by high-tension (HT) consumers for captive use, the energy set-off will be allowed between 7 AM and 6 PM the same day.
In the case of solar projects set up by low-tension (LT) demand-based consumers for captive use, the energy set-off will be allowed between 7 AM and 6 PM of the same billing cycle.
The distribution licensee will compensate the surplus energy not consumed by the consumer during the set-off (consumption) period at the following rates:
In the case of micro, small, and medium enterprise (MSME) manufacturing units: At ?2.25/kWh for the first five years from commissioning of the project and after that for the remaining term of the project at 75% of the tariff discovered by GUVNL.
In case of other than MSME manufacturing units: At 75% of the simple average of tariff discovered by GUVNL for solar projects in the preceding six-month period from the COD of the project.
The same will be applicable for projects under third-party sale.
Projects under REC mechanism
The energy accounting for the projects set up under the renewable energy certificate (REC) mechanism will be carried out on a 15-minute time block basis.
In case of projects set up for captive or third-party sale under the REC mechanism, the surplus energy will be compensated by the distribution licensee at 65% of the simple average of tariff discovered and contracted by GUVNL through a competitive bidding process for solar projects in the preceding six-month period from the COD of the project.
In case the DISCOM agrees to purchase the electricity component of power from a project under the REC mechanism, the applicable tariff payable by the DISCOM will be 65% of the simple average tariff
discovered by GUVNL for solar projects in the preceding six-month period from the date on which the power purchase agreement (PPA) is executed.
Under the existing mechanism, the energy accounting was to be carried out on 15 minutes time block basis. Any surplus solar energy that was not consumed as per energy accounting based on a 15-minute time block, such that excess electricity was to be compensated by the DISCOM concerned at the rate of ?1.50 (~$0.021)/kWh.
Solar projects set up for RPO compliance
The surplus solar energy purchased by the DISCOM from captive or third-party solar projects will be considered for fulfilling the renewable purchase obligation targets of the DISCOM.
The surplus energy injected into the grid will be compensated by the distribution licensee at 75% of the tariff discovered and contracted by GUVNL.
Wheeling and transmission of electricity
Wheeling of power for captive consumption or third-party sale will be allowed to pay transmission charges, transmission losses, wheeling charges, and wheeling losses, as applicable to normal open access consumers.
If a solar power generator desires to wheel electricity to more than one location, he will have to pay ?0.05 (~$0.0007)/kWh on energy fed into the grid to DISCOM in whose area power is consumed in addition to the transmission charges and losses, as applicable.
Under the existing arrangement, if a solar generator desired to wheel electricity to more than two locations, he would have to pay ?0.05 (~$0.0007)/kWh on energy fed into the grid to the distribution licensee in whose area power is consumed in addition to the transmission charges and losses, as applicable.
Cross-subsidy surcharge and additional surcharge
The cross-subsidy surcharge and additional surcharge will not be applicable in the case of captive projects. In the case of projects set up for third-party sale, the cross-subsidy surcharge and additional surcharge will be equal to charges for normal open access consumers. The Commission will determine these charges from time to time.
Under the existing provision, for solar projects registered under the REC mechanism with the sale of power to a third party within the state, 100% of cross-subsidy surcharge and additional surcharge applicable to normal open-access consumers would be applicable. For solar projects set up by MSMEs above 50% of its contracted demand, 100% of the cross-subsidy surcharge and additional surcharge applicable to normal open access consumers would be applicable.
For solar projects not registered under the REC mechanism with the sale of power to a third party within the state, 50% of the cross-subsidy surcharge and additional surcharge applicable to normal open access consumers would be applicable.
Security deposit
If the DISCOM decides to procure solar power from the solar developers and sign PPA, the developer will be required to provide a bank guarantee towards security deposit at the rate of ?500,000 (~$6,815)/ MW at the time of signing of PPA with obligated entities.
Where projects are set up for captive or third-party sale, solar generators will have to submit a bank guarantee of ?500,000 (~$6,815)/MW to the Gujarat Energy Transmission Corporation (GETCO). If the solar generator fails to commission the entire evacuation line along with bays and metering system within the stipulated time, GETCO or the DISCOM will encash the bank guarantee.
The solar developer will have to commission a project of at least 10% of the allotted capacity within one month of charging of evacuation line, failing which, the developer will be liable to pay long-term transmission charges for 10% of allotted capacity until such 10% of allotted capacity is commissioned. The balance of 90% capacity will be required to be commissioned within two years, failing which GETCO will cancel the capacity allotment to the extent of capacity not commissioned.
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