States free to give coal to efficient private power producers

News:


The power ministry on Tuesday framed rules giving state governments the freedom to get power generated by the most efficient private companies in the state using the coal allocated to states by miners under a new system that replaces the earlier rigid allocation of coal to individual state-owned plants.

The rules framed in line with the cabinet decision of 4 May last year rationalising coal allocation, to allow states to invite power tariff bids from independent power producers at which they are willing to sell power using the coal that the state is willing to assign to them.

The landed cost of power from the private generation company including transmission charges has to be less than the variable generation cost of power from the state power generation unit, which the private player is seeking to replace, according to the rules released by the power ministry. Power tariff has two components—a fixed cost of the power plant and the variable or the energy cost.

The private power producer has to assess transmission infrastructure availability before making the bid. The state will check with the ministry of railways before assigning coal to the winning bidder whether transportation of the fuel to the private player’s plant was feasible.

The easing of the coal allocation rules is part of the government’s efforts to reduce power generation cost by utilising the fuel at the most efficient plant and enable distribution companies to buy more power.

On 21 December, coal and power minister Piyush Goyal had said that he had cleared the plan to allow state-owned and private companies to swap their allocations of coal so that power plants can source the fuel from the closest available location and improve power generation efficiency. The minister had also said then that eventually he would like such swap of coal to be allowed across sectors of the industry such as power, steel or cement.




My View:


The initiative by Government is quite good which will help to reduce the cost of electricity. But to come under the policy the rules are quite tough as stated in news. There should be some flexibility to private generation companies. 

35 open access companies return to Maharashtra power discom's fold

News:

Altogether 35 firms drawing power for their units have decided to become consumers of the Maharashtra State Electricity Distribution Company Limited (MSEDCL) again.

The 35 companies were among 130 firms in the Konkan region of the state power utility and had been buying power from private producers as part of the open access system introduced last year.

These consumers are known for prompt and huge payments, as they buy power in bulk. The companies had opted for the open access system. It allows the firms to buy power from independent producers located anywhere by paying some duty and the wheeling (carrying) charges to the electricity company.

What came as a boon for MSEDCL is that the state energy regulator, Maharashtra Energy Regulatory Commission (MERC), in November 2016 tariff order allowed it to increase the wheeling charges and duty for consumers buying power from other producers, which use its network to supply to its consumers.

"The result was that the electricity tariff of consumers buying power from private players became costlier. This is the reason why some of these companies have decided to return to us," a senior MSEDCL official told TOI.

The officer added out that the tariff provided to them by the independent producers was lower than that of MSEDCL. But the new conditions mean that the companies have to cough up more as power tariff.

"Had the regulator's ruling not come, these firms would not have approched the MSEDCL for power supply," said Siddharth Soni, a consumer representative from Nashik.

MSEDCL officials are, understandably, happy with the development. "We are reaching out to the companies promising best services. As a result, we are gaining back their confidence. The tariff and other conditions are favourable no doubt, but the company has also improved its services and infrastructure over a period of time," MSEDCL regional director Satish Karpe said.

My View:

Such orders will reduce the competition from the market. There are many pvt players which will get affected by such orders. Many power trading companies will  get affected as there consumers will be moving towards DISCOM's. Government should take necessary steps otherwise it will ruin the open access market in Maharashtra.

Panama Energy Sector – Overview Of Incentives

Panama is one of the the fastest growing and most dynamic economy in Latin America, with GDP growth of 6.0 percent in 2015 and estimated 6.3 percent in 2016. All of this growth has become a challenge for the energy sector by demanding more electricity and new energy sources.

Panama has traditionally relied mainly on hydroelectric production to meet its energy needs. However, during the last few years it has sought to change its energy mix due to the effect of climate change on its water reservoirs. Today, Panama's energy matrix is composed of hydropower (56.6%), thermal/oil (41.34%) and other sources (2.06%) including wind and solar.

Panama expects that its energy demand will grow at an average rate of 6% until 2030 according to a proposed 2016-30 expansion plan by state power transmission company Etesa. The plan projects that annual electricity use and load demand will grow around 6%, spurred by expansion of the likes of the Panama Canal, new airport operations and new potable water and sewerage system. Forecast demand scenarios include exchange with Central America power grid Siepac and a planned interconnection with Colombia helping position Panama as an energy hub for the Central American region.

In March 2016, the Panamanian government approved the National Energy Plan 2015-2050. This new plan proposes that by 2050, 70% of the energy matrix coming from renewal energy with emphasis in solar and wind power.

Currently, there is a planned investment of:
Construction of the 4th Transmission line with capacity of 1,280 (MW) by circuit of 500 KV with a length of 330 km.
Incorporation of liquefied Natural Gas (LNG) energy generation plants.
The Colombia-Panama interconnection line through an underwater cable with capacity of 400 megawatts ( MW ).
Construction of the large Changuinola Dam II
Update and expansion of transmission and distribution network.

As part of Panama's strategy to diversify the country's energy matrix, in 2011, 2012 and 2013, the Panamanian Government enacted various statutes that set forth tax and other incentives for renewable sources of energy, such as wind-based, biomass, natural gas-based and solar-based power generation facilities.

An excerpt of the tax benefits that applies to each of type of energy source follows:

Gas Based Power Generation Facilities

• Tax credit applicable to the income tax of a maximum of 5% of the total direct investment value for civil works that become infrastructure for public domain, like highways, road, bridges, sewage systems, schools, health centers and other of similar nature, previous to an evaluation by the Public Entity that receives the corresponding work, in coordination with the Ministry of Economy and Finance. The referred credit cannot be subject of compensation, cession or transfer.
• Exoneration of customs duties that could be caused due to the importation of equipment, machinery, materials, spare parts and others necessary for the construction, operation and maintenance of the plants.
• Right to use an accelerated amortization method to depreciate fixed assets.
• The exemption of all national taxes, for a period of 20 years, for companies dedicated to the manufacturing of natural gas generation equipment within Panama. Equipment includes mechanical, electronic, electromechanical, metallurgical and electrical type of equipment.

Wind Based Power Generation Facilities

• Tax credit applicable to the income tax of a maximum of 5% of the total direct investment value for civil works that become infrastructure for public domain, like highways, road, bridges, sewage systems, schools, health centers and other of similar nature, previous to an evaluation by the Public Entity that receives the corresponding work, in coordination with the Ministry of Economy and Finance. The referred credit cannot be subject of compensation, cession or transfer.
• Exemption of all taxes pertaining to the importation (which includes customs duties, introductions fees and VAT) of equipment and materials for the construction, operation and maintenance of wind powered generation plans. The exemption applies also to any natural or legal persons who import equipment for the construction, operation and maintenance of wind-powered generation plants with the purpose of promoting and selling this type of equipment.
• The application of the accelerated depreciation method for equipment used for wind-powered generation.
• The exemption of all national taxes, for a period of 15 years, for companies dedicated to the manufacturing and installation of wind-powered generation equipment within Panama.

Biomass Power Generation Facilities (Applicable for a period of 10 years) 

• Full income tax exemption.
• Payment exemption of commercial or industrial license tax.
• Exemption on taxes, fees, contributions or any other municipal charges.
• Exemption from VAT on importation.
• Full exemption of custom duties, applicable to equipment and materials used for the development of the power generation project

Solar-Based Power Generation Facilities

• Tax credit applicable to the income tax of a maximum of 5% of the total direct investment value for civil works that become infrastructure for public domain, like highways, road, bridges, sewage systems, schools, health centres and other of similar nature, previous to an evaluation by the Public Entity that receives the corresponding work, in coordination with the Ministry of Economy and Finance. The referred credit cannot be subject of compensation, cession or transfer.
• Exemption of all taxes pertaining to the importation (which includes customs duties, introductions fees and VAT for specific items) of equipment and materials for the construction, operation and maintenance of solar-based generation plans.The application of the accelerated amortisation method to depreciate fixed assets.

In addition to the tax incentives previously mentioned, there are additional tax benefits that applies to other renewable power projects, such as mini and small hydro generation facilities.

Progress of green energy corridor very different on paper and on ground: Mercom Capital

My View:

The Government should take necessary step to promote green corridor. It will help to reduce transmission losses and improve the quality of power if renewable power travels through green corridor. There are various Power transmission companies which will be interested to invest in green corridor if the tenders come out in faster pace and the policies become more business friendly.


News:
The critical green energy corridor, which is important to evacuate renewable energy, is still far from reality and solar power project developers believe the current grid infrastructure is inadequate to handle the increased capacity, solar sector research firm Mercom Capital today said in a report.

“For a project that has already had its share of delays and is being touted as the cure-all for grid issues, the renewable energy sector is skeptical if it will get done in time to make an impact,” Mercom said.

The solar power sector is expected to add close to 9 Gigawatt capacity in 2017 as against 4 GW added in 2016 and this more than double capacity addition would require a better transmission infrastructure.

“The infrastructural development under the green energy corridor is slow; it is not at par with the pace of tenders coming out. Over the next three quarters, solar projects of approximately 9 GW are expected to be commissioned, but the grid is not ready to handle the power produced. The progress of green energy corridor on paper and on the ground is very different,” the report said.

Mercom said the government should provide compensation for projects on standby after they have been commissioned or developers will pay the price.

The project is under implementation in Andhra Pradesh, Gujarat, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Rajasthan, and Tamil Nadu. Once complete, the green energy corridor is expected to facilitate evacuation from solar parks and large-scale grid-connected solar and wind projects.

The report further said solar project developers across the country are struggling with evacuation and transmission issues which account for huge losses and contributes to increased project costs.




“Developers are concerned about solar park integration into the grid as the evacuation system and infrastructure is not yet ready. Due to inadequate transmission lines and grid infrastructure, planning for the next batch of auctions has yet to begin and developers don’t know where these projects will be located,” the report said.

It added that according to some developers, tenders are released in some states without consulting the state electricity regulatory commissions. When power purchase agreements go to regulatory commissions for approval they are getting held up because the SERC is citing a lack of transmission infrastructure.

The Power Grid Corporation of India is developing the inter-state transmission corridor and the state transmission utilities are responsible for setting up and strengthening the intra-state transmission infrastructure. The MNRE will be providing 40 per cent of project costs in the form of a grant. The PGCIL has estimated that the cost to develop the corridor comes to Rs 380 billion.

The green energy corridor is expected to boost the inter-state sale of renewable energy, and coupled with the waiver of Inter State Transmission System charges, renewable energy costs are forecast to come down enough to help states fulfill their renewable purchase obligations and meet energy demand.

The corridor is expected to address certain limitations of renewable energy like intermittency and variation in power quality. Under the project, renewable energy management centres are being set up to predict renewable power generation and demand. These centres will also be interconnected with load dispatch centers to gather real-time information, as well as monitor and control capacity addition, according to CEA.

The GEC is also expected to address the curtailment of renewable energy in the future, Mercom Capital said.

RInfra exits IEX, sells 4% stake for Rs 103 cr to an FPI

My View:

IEX being No. 1 power exchange in India provides competitive price of electricity. Rinfra sold it's stake in IEX by 10 times higher than the purchase price. IEX has evolved the Power Market and now contributes almost 9%. Rinfra on other side sold its stake to reduce its debt burden.




News:
Reliance Infrastructure has sold its entire 4.12 % stake in India Energy Exchange (IEX) for Rs 103 crore, about 10 times higher than the purchase value, to a foreign portfolio investor, sources said.

IEX is the country's largest power exchange. This comes after Jindal Steel & Power sold 4.12 % in IEX to Motilal Oswal PE in March and global investment firm Bessemer selling its stake in two separate deals, to TVS Capital and the Dalmia group.

IEX has nine % of the total power market and R-Infra was a primary investor. It bought the 4.12 % stake in 2007 for Rs 1.25 crore.

It had said discussions were in an advanced stage to monetise its entire road portfolio.

The company is reportedly in talks with Canada-based Brookfield Asset Management to sell its entire portfolio in that segment. This is part of the company's strategy to restructure its heavy debt by exiting from capital-intensive businesses.

R-Infra is also present across the value chain of power businesses i.e. generation, transmission, distribution and power trading. It also provides engineering, procurement and construction services for developing power and road projects.

It reported a 33.8 % rise in consolidated net profit at Rs 570 crore for the quarter ended September, from one of Rs 426 crore in the same period a year before.

The company is targeting projects worth Rs 2 lakh crore planned by the government across infra segments, it had earlier said.

R-Infra's Mumbai Metro (Rail) earned a revenue of Rs 61 crore in the September quarter, an increase of 13 % over the same period a year before.