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Maharashtra Government Offers Solar Incentives to Boost Sustainable Textile Industry

Maharashtra Government Offers Solar Incentives to Boost Sustainable Textile Industry

Last Updated:  05 Sept 2023

The Government of Maharashtra has unveiled a groundbreaking initiative to support the state’s textile sector in its transition towards sustainability. As part of the state government’s Integrated and Sustainable Textile Policy, approved in June of this year and effective through 2023-2028, textile units can now benefit from capital subsidies for the installation of solar projects.

The textile industry is a vital contributor to India’s economy, accounting for 2.3% of the country’s GDP, 13% of industrial production, and 12% of exports. Maharashtra, in particular, plays a significant role, representing 10.4% of the nation’s total textile and apparel production and producing a staggering 272 million kgs of yarn, which constitutes 12% of India’s gross production.

The new policy seeks to bolster the textile supply chain while prioritizing long-term sustainability in its processes.

Electricity Subsidy:

Under the new initiative, the government will provide electricity subsidies at a specified rate to existing textile units for a two-year period. The monthly electricity subsidy per textile unit will be capped at ₹4 million (~$48,163).

Sector-specific electricity subsidies are as follows:

Solar Power Subsidy:

Source: MERCOM India

One of the key highlights of the initiative is the capital subsidy offered for the installation of solar power projects. This subsidy will be calculated as either 12/24 months of electricity subsidy, the cost of the solar project installation (with a maximum capacity of 4 MW), or sector-wise capped amounts, whichever is lower.

Different capping limits have been set for various sectors within the textile industry:

  • Ginning and Processing; Private Spinning Mills; Private Power Looms; Knitting, Hosiery, Garmenting sector; Textile Parks; Sericulture; and Processing sector – ₹48 million (~$577,964).
  • Co-operative Spinning Mills and Co-operative Powerlooms – ₹96 million (~$1.16 million).

The subsidies for solar projects will be disbursed in two equal installments with a six-month gap between them, but only after the project has become operational. New textile units or those undergoing expansion must include the installation cost of the solar project in their detailed project reports, with the capital subsidy calculated based on the fixed capital investment, including eligible machinery and solar projects (up to 4 MW). The Maharashtra Energy Development Agency will review and approve the project reports.

Notably, textile units installing solar projects exceeding 4 MW capacity will need to cover the additional installation costs themselves. The total capacity of the solar project cannot exceed the approved load/contract demand of conventional energy by the unit.

Crucially, there is no 1 MW cap for net metering for solar projects installed by textile units. However, these units are responsible for the operation and maintenance of the projects post-installation. If these projects become unserviceable, the Maharashtra State Electricity Distribution (MSEDCL) tariff would apply without any subsidies.

The state government’s energy department will not impose any charges other than transmission charges on projects utilizing non-conventional energy sources. If a textile unit simultaneously uses conventional and non-conventional power, both sources will be considered to determine the load factor.

It’s important to note that the Handloom sector is not included in the subsidy program, but it will receive free electricity for up to 200 units per month under the Supply of Free Electricity to Handloom Weavers Households program.

Other Sustainable Measures:

For the Processing Sector, the government is promoting the use of green technologies, including Effluent Treatment Plants (ETP), Common Effluent Treatment Plants (CETP), and Zero Liquid Discharge (ZLD) systems. To encourage the establishment of ETPs and CETPs, the government will provide a 50% capital subsidy or ₹50 million (~$602,046), whichever is lower, across all zones in the state. Additionally, for ZLD technology deployment, the government will offer a 50% subsidy on eligible civil infrastructure, project, and machinery costs, up to ₹100 million (~$1.20 million). Importantly, the cost of land will not be factored into the total project cost when calculating these subsidies. The government also plans to initiate 12 recycling projects, providing a 50% subsidy or ₹20 million (~$240,829), whichever is less, for these projects focused on recycling old textile products.

Source: https://oldpolicy-mahatextile.maharashtra.gov.in/GR/English_2023_28.pdf

DISCOMs Can Requisition Power from Common Pool After the Expiry of PPA

DISCOMs Can Requisition Power from Common Pool After the Expiry of PPA

Last Updated:  13 Sept 2023

The Ministry of Power (MoP) has recently announced that distribution companies (DISCOMs) will have the opportunity to procure power from a common pool once their existing power purchase agreements (PPAs) have expired, following the provisions laid out in a program introduced by the Ministry back in April.

In April, the Ministry had issued a program aimed at pooling tariffs for coal or gas-based thermal power plants, particularly those with expired PPAs. This initiative comes at a crucial time when India is transitioning towards non-fossil fuel energy sources, with a growing demand for electricity. The program’s main objective was to ensure a stable and sufficient supply of resources within the grid for various purposes, including peaking, balancing, flexing, and redistributing benefits like reliability and cost-effectiveness among beneficiaries.

This April program effectively supersedes previous government notifications. Notably, the Ministry had issued notifications on March 22, 2021, and July 5, 2021, which permitted DISCOMs to continue procuring electricity even after their PPAs had expired. However, some DISCOMs opted to discontinue purchasing power from facilities with higher operational costs while continuing to source electricity from more economical sources. This situation raised concerns among power generators, who were left with costlier assets, while DISCOMs benefited from cheaper alternatives, all at the expense of the generators.

After careful deliberation, the government has now decided that, upon the expiration of a PPA, both parties (DISCOMs and generators) can enter into new agreements for power purchase or allow the generator to sell power on the open market or to other entities. This decision grants DISCOMs the flexibility to choose their power sources.

Furthermore, the government has determined that central generating stations with expired PPAs will be aggregated into a common pool, alongside gas-based power. The power from this pool will be offered to any interested buyers at a transparent and uniform rate, ensuring fairness for all purchasers.

To facilitate the implementation of this program, the Central Electricity Regulatory Commission has been tasked with taking the necessary actions. It’s worth noting that in 2021, the Ministry of Power had already provided DISCOMs with the option to either continue or exit from PPAs for projects that had completed 25 years of operation or reached the specified tenure outlined in the PPA with central generating stations.

Source: https://powermin.gov.in/sites/default/files/webform/notices/Withdrawal_of_the_Guidelines_dated_22nd_March_2021_and_5th_July_2021_regarding_the_Discoms_PPA.pdf

Cabinet approves the Scheme titled Viability Gap Funding for development of Battery Energy Storage Systems (BESS)

Cabinet approves the Scheme titled Viability Gap Funding for development of Battery Energy Storage Systems (BESS)

Last Updated:  07 Sept 2023

The Union Cabinet has given its nod to provide viability gap funding (VGF) for the development of battery energy storage systems (BESS) program, allocating an initial budget of ₹94 billion (~$1.1 billion), which includes ₹37.6 billion (~$452 million) in budgetary support. This VGF support could potentially cover up to 40% of the project’s capital costs, subject to the condition that the projects are finalized and become operational within an 18 to 24-month timeframe.

The primary objective of this program is to significantly reduce the costs associated with battery storage systems, thereby enhancing their economic feasibility and supporting the government’s sustainability efforts. The approved program aims to develop 4,000 MWh of BESS projects by 2030-31, with up to 40% of the capital cost provided in the form of VGF.

This approval comes shortly after the Ministry of Power introduced a comprehensive framework to establish an ecosystem for energy storage system development. To improve the economic viability of energy storage and make BESS a viable option, there was a proposal to extend VGF support to initial BESS projects.

A central goal of the program is to harness the abundant potential of renewable energy sources, such as solar and wind power, to deliver clean, reliable, and affordable electricity to citizens across the country.

Providing VGF support under this program serves a strategic purpose: to achieve a Levelized Cost of Storage (LCoS) ranging from ₹5.50 (~$0.06) to ₹6.60 (~$0.07) per kWh. This cost target makes stored renewable energy an economically attractive option for managing peak power demand nationwide. The VGF will be distributed in five installments, closely tied to various stages of BESS project implementation.

At least 85% of the BESS project capacity will be allocated to distribution companies (DISCOMs) to ensure that the benefits of the program reach consumers directly. This allocation is expected to facilitate the integration of renewable energy into the electricity grid, minimize energy wastage, and optimize the use of transmission networks. Consequently, it will reduce the necessity for costly infrastructure upgrades.

The selection of BESS developers for VGF grants will be conducted through a transparent, competitive bidding process, creating a level playing field for both public and private sector entities.

Last year, the Ministry of Power issued the Renewable Purchase Obligation (RPO) and Energy Storage Obligation (ESO) until the financial year 2029-2030. The ESO will be calculated in energy terms as a percentage of total electricity consumption and will only be considered fulfilled when at least 85% of the total energy stored in the ESS comes from renewable energy sources each year.

Source: https://pib.gov.in/PressReleasePage.aspx?PRID=1955112

Ministry of power releases comprehensive framework to transform India’s energy storage landscape

Ministry of power releases comprehensive framework to transform India’s energy storage landscape

Last Updated:  05 Sept 2023

The Ministry of Power has unveiled an extensive plan to reshape the country’s energy sector, with a specific focus on strengthening energy storage systems (ESS). This blueprint includes a range of measures, from financial incentives to regulatory changes, designed to promote the development of ESS.

One of the key proposals in this framework is the introduction of Viability Gap Funding (VGF) support for Battery Energy Storage Systems (BESS) projects. If approved, this funding could potentially cover up to 40% of the initial capital costs, as long as projects are completed within 18 to 24 months. The main objective is to ensure that the Levelized Cost of Storage (LCOS) remains competitive, making BESS a viable and cost-effective solution for managing peak power demands.

This visionary plan also extends its support to remote and underserved areas by including pumped storage projects. These projects, in addition to their energy storage function, will play a crucial role in promoting infrastructure development, potentially expanding transmission infrastructure to remote areas.

To drive sustainable growth in the ESS industry, green finance mechanisms will play a significant role. Sovereign Green Bonds, integrated into broader government financial initiatives, will become a critical source of funding for eco-friendly infrastructure and emissions reduction projects. Leading financial institutions, including the Power Finance Corporation, REC, and the Indian Renewable Energy Development Agency, will provide extended, long-term loans to support ESS initiatives.

The framework also introduces a transformation in resource adequacy planning by integrating ESS. The Central Electricity Authority (CEA) will introduce a Long-term National Resource Adequacy Plan, projecting the country’s storage needs for the next decade. Simultaneously, distribution companies (DISCOMS) will be responsible for creating a Long-term Resource Adequacy Plan covering a ten-year horizon. This coordinated approach aims to provide clarity on future ESS demand and ensure seamless integration into round-the-clock power supply requirements. To expedite the development of financially viable and environmentally sustainable ESS projects, the government will release technology-agnostic bidding guidelines for long-term energy storage, short-term energy storage, and ancillary services. These guidelines offer flexibility, allowing for composite tariffs or tariffs per MWh for storage capacity, depending on power source arrangements.

In a significant push for renewable energy integration, large-scale renewable projects exceeding 5 MW will be required to include Energy Storage Systems (ESS) with a minimum storage duration of 1 hour. Moreover, ESS developers are preparing to introduce a wide range of market-based energy and power products, including spot energy markets, capacity enhancement through energy arbitrage, and provision of ancillary services to the grid.

To incentivize ESS adoption, the framework suggests waiving electricity duty and cross-subsidy surcharges on input power used for charging ESS. States are also encouraged to waive stamp duty and registration fees for land allocated for ESS installations.

To promote domestic manufacturing, the government may establish a production-linked incentive (PLI) program specifically for BESS in the power sector. This aligns with Union Power Minister R.K. Singh’s proposal in June for a PLI program for grid-scale storage.

To ensure the quality and standards of BESS in power sector applications, the government is considering the creation of an Approved List of Models and Manufacturers (ALMM) for BESS, similar to the one issued by the Ministry of New and Renewable Energy (MNRE) for solar modules. Additionally, a nodal agency will oversee research and development efforts, fostering innovation and collaboration in the sector. An online platform will facilitate knowledge exchange, reducing redundancy in R&D initiatives.

Specialized waste management facilities will also be established to address electronic waste concerns. A structured mechanism, complete with predefined criteria and essential standards, will be put in place to facilitate the repurposing of ESS components. Abandoned mines, excluding those designated for ash back-filling, may be repurposed as hydro storage facilities, further accelerating the deployment of pumped storage projects.

This comprehensive framework underscores India’s unwavering commitment to achieving a sustainable, affordable, and secure energy future. By encouraging innovation, streamlining regulations, and attracting investments, the Ministry of Power aims to position India as a global leader in energy storage technology, with positive implications for both the environment and its citizens.

Source: https://powermin.gov.in/sites/default/files/National_Framework_for_promoting_Energy_Storage_Systems_August_2023.pdf

MNRE Sets Carbon Emission Thresholds for Green Hydrogen Production

MNRE Sets Carbon Emission Thresholds for Green Hydrogen Production

The Ministry of New and Renewable Energy (MNRE) has released a standard dictating the emission criteria for hydrogen to be classified as ‘green’ in India. The Green Hydrogen Standard for India outlines that green hydrogen must be generated through electrolysis-based and biomass-based methods using renewable sources. This definition of green hydrogen also encompasses renewable energy produced from such sources, which can be stored in energy storage systems or deposited into the grid as per existing regulations.

The Ministry has defined green hydrogen to have a well-to-gate emission, including purification, drying, and compression of hydrogen, of not more than 2 kg of carbon dioxide equivalent per kg of hydrogen, taken as an average over the last 12 months. The emission limits apply to electrolysis-based production methods, including water treatment, electrolysis, and biomass-based methods, including biomass processing, heat/steam generation, and conversion of biomass to hydrogen. The Ministry also plans to introduce a detailed methodology for measurement, reporting, monitoring, on-site verification, and certification of green hydrogen and its derivates soon.

The Ministry’s definition of green hydrogen includes a maximum well-to-gate emission of 2 kg of carbon dioxide equivalent per kg of hydrogen, averaged over the previous year, encompassing purification, drying, and compression. These emission limits are applicable to both electrolysis-based and biomass-based production methods, covering processes like water treatment, electrolysis, biomass processing, heat/steam generation, and biomass-to-hydrogen conversion. Additionally, the Ministry intends to soon introduce a comprehensive approach for measuring, reporting, monitoring, on-site verification, and certification of green hydrogen and its derivatives.

The Bureau of Energy Efficiency, operating under the Ministry of Power, has been designated as the central authority responsible for accrediting agencies to oversee the monitoring, verification, and certification of green hydrogen projects. This notification is expected to provide greater clarity for industry stakeholders.

Earlier this year, India sanctioned the National Green Hydrogen Mission, aimed at promoting the creation, production, utilization, and export of green hydrogen, with an initial budget of ₹197.44 billion (~$2.38 billion). In June, the MNRE released a framework detailing incentive initiative for domestic electrolyzer manufacturing and green hydrogen production, with a combined budget of ₹174.9 billion (~$2.1 billion).

Recently, the Solar Energy Corporation of India invited bids from green hydrogen producers to establish facilities producing 450,000 metric tons per annum across India under the Strategic Interventions for Green Hydrogen Transition program (Mode-I, Tranche-I).

Source: https://static.pib.gov.in/WriteReadData/specificdocs/documents/2023/aug/doc2023819241201.pdf

MERC Allows Maharashtra DISCOM to Procure 7 GW of Solar Power for Farm Sector

MERC Allows Maharashtra DISCOM to Procure 7 GW of Solar Power for Farm Sector

Solar Power for Farm Sector

The Maharashtra Electricity Regulatory Commission (MERC) has granted approval to the Maharashtra State Electricity Distribution Company (MSEDCL) to proceed with a competitive bidding process for the procurement of 7,000 MW of solar power as part of the Mukhyamantri Saur Krishi Vahini Yojana (MSKVY 2.0) initiative. This initiative aims to address the increasing demand in the agricultural sector. MERC has also given the green light to the majority of the 34 requested amendments to be incorporated into the request for selection (RfS) document and the draft power purchase agreement (PPA) submitted by MSEDCL.

Background

MSEDCL submitted a request for approval to initiate competitive bidding, facilitated by MSEB Solar Agro Power (MSAPL), to acquire 7,000 MW of solar power. MSAPL, a wholly owned subsidiary of MSEB Holding Company, serves as the nodal agency. MSAPL established eight special purpose vehicles (SPVs) and identified 2,731 substations across Maharashtra. The procurement plan involves phased bidding for different districts, with the first 4,000 MW phase targeted for April 2025. MSEDCL seeks deviations from standard bidding guidelines for long-term solar power procurement. The second phase of the MSKVY 2.0 initiative aims to enhance power quality, lower costs, reduce reliance on conventional sources, and meet renewable purchase obligations (RPO) using decentralized solar power. To replace nighttime conventional power with daytime solar supply for agricultural needs, considering an average sector demand of 14,000 MW, MSEDCL looks to reduce dependency on Koyna hydroelectric power due to water table constraints. With existing contracts covering 13,465 MW, the proposed MSKVY 2.0 solar procurement can fill potential RPO gaps. MSEDCL plans to utilize a mix of short and long-term power tenders for RPO targets. The strategy involves various amendments to bidding documents, encompassing capacity utilization factor (CUF) and compensation, excess generation, right of first refusal, deemed generation compensation, grid unavailability compensation, and MERC-mediated dispute resolution. Additionally, MSEDCL seeks to remove an insurance-related clause present in KUSUM PPA or MNRE Guidelines that pertains to economically and technically unviable scenarios caused by force majeure events.

As per the original clause, if insurance providers compensated for a “complete loss” or similar circumstances arising from these events, the DISCOM had the right to request reimbursement from the insurance, up to the DISCOM’s unpaid charges owed to the renewable power producer. Nonetheless, this provision has been removed from the MSKVY 2.0 PPA. This agreement pertains to projects entirely owned and managed by the SPV, with no DISCOM or RPG involvement in this context. As the SPV operates the project under a ‘Build Own Operate’ (BOO) model, the responsibility for insurance claims and settlements solely lies with the SPV. Consequently, the clause concerning insurance claims tied to unpaid DISCOM charges is not relevant within this PPA, warranting its removal. This adjustment brings the PPA in line with the new ownership structure and operational framework of the MSKVY 2.0 Program.

In its supplementary submission, MSEDCL outlined the following points:

Cluster Size: MSEDCL suggests a minimum cluster size of 250 MW for MSKVY 2.0. The ultimate determination of the cluster size is made after a comprehensive evaluation of various factors at the designated cluster locations:

Substation Capacity: The capacity of existing substations in the specified regions constrains the cluster size. The substations assigned to the clusters have been identified.

Land Availability: The availability of government-owned and private land influences the ultimate cluster size. While prioritizing government-owned land is the goal, private land might also be necessary.

Commission’s Analysis

The Commission observed that agricultural feeders provide daytime energy on a rotating basis, with half of them supplying power during the day and the rest at night. As the agricultural sector’s average demand reaches around 14,000 MW, daytime consumption surpasses nighttime demand. This validates the planned 7,000 MW capacity to accommodate the extra daytime load. MSEDCL has also emphasized a deficiency in its Solar Renewable Purchase Obligation (RPO) targets. To bridge this gap and fulfill future RPO obligations, the agency aims to procure solar energy. The MSKVY 2.0 initiative is projected to be operational by December 2025, aligning with new RPO trajectories. The Ministry of Power has introduced long-term RPO and energy storage trajectories until FY 2029-30, indicating a rising trend in “Other RPO,” inclusive of solar. This trend exceeds the combined Wind+Solar RPO of 25% for FY 2024-25, supporting the proposed procurement’s justification. MSEDCL has developed scenarios displaying potential savings in power purchase costs. The analysis anticipates net savings of 0.11 to 0.09 per kWh for FY 2025-26 and 0.15 to 0.13 per kWh for FY 2026-27. This procurement would enable MSEDCL to reduce reliance on the Koyna Hydro project for base load needs, potentially reserving it for peak demands and emergencies. Considering these factors, the Commission granted approval to MSEDCL’s proposal.

In line with the guidelines released by the Ministry of New and Renewable Energy (MNRE) in July 2023, the concept of a ‘State Nodal Agency’ has been acknowledged. Given this accord, the Commission has granted approval to MSAPL for overseeing the bidding process and other nodal agency responsibilities for MSKVY 2.0. This development is also in accordance with the Commission’s earlier suggestion to establish an agriculture electricity supply company. The Commission has assessed the 34 deviations requested by MSEDCL from competitive bidding guidelines for MSKVY 2.0. These deviations include modifications, additions, and removals spanning various clauses within the bidding documents.

Operational and Performance Deviations:

MSEDCL’s request to extend the commercial operation date from 9 to 12 months after the PPA date is justified due to the SPV-driven model. Allowing a 15% CUF for specific units within the project, as long as the total project CUF remains at 19% annually, is reasonable. Increasing the penalty for CUF shortfall to 1.5 times the PPA tariff ensures performance. Transparent formulas for deemed generation compensation and netting auxiliary/start-up power with generated energy support project implementation. Deviations for DC oversizing, repowering, and early commissioning incentives encourage better design and timely completion.

Billing Deviations:

Shortening payment timelines to SPVs and releasing 80% of disputed bills under protest align with Ministry of Power Rules, enhancing payment efficiency.

Procedural and Contractual Deviations:

For PPA extension, projects on public land can exceed 25 years, requiring bid document modification. Linking financial closure to PPA date, not Letter of Award, matches project progress. Accepted deviations enhance clarity, efficiency, and execution. Some clause clarifications and modifications are advised. MERC approves most deviations as they fit MSKVY 2.0 specifics, improving project performance and clarity. Strict timelines are directed for activity prevention. MSEDCL’s proposed CFA claiming should be transparent, specifying eligible substations and offering a single project tariff with CFA-related discounts. Clusters can use a Green Shoe Option for excluded substations, allowing additional capacity purchase at the discovered tariff. RfS and draft PPA with deviations are approved. Post-bidding, a separate petition is needed for tariff adoption. In May, MSEDCL’s 150 MW solar power procurement at ₹3.3 (~$0.040)/kWh was approved.

Source: https://merc.gov.in/wp-content/uploads/2023/08/Order-164-of-2023-1.pdf