Rooftop lag in solar power flop- India fails to reach even half of target, blame on Centre’s policies
Faulty policies prevented India from achieving even half its solar energy target during the last fiscal year, experts say, despite Prime Minister Narendra Modi’s projections of the country as a future global leader in the sector. Many experts blame the lag on the government’s exclusive focus on big-ticket solar plants at the expense of decentralised rooftop solar energy, which can involve even individual households but finds its subsidies withdrawn since 2014. A report by the ministry of new and renewable energy says the country increased its capacity for solar energy production by about 5.5GW (gigawatt) between April 2016 and March 2017, against a target of 12GW. India, whose total solar energy capacity is now about 12GW, has set itself a target of 100GW by 2022, which many consider “over-ambitious”. Overall, the country generated just 11.3GW of grid-connected renewable energy in the 2016-17 financial year, less than 70 per cent of its target of 16.7GW. The ministry report says that apart from wind power and waste-to-energy, India did poorly. “Implementation of rooftop solar is taking place at a much slower pace and it seems unlikely that the government would achieve its 40GW target by 2022,” a report by the PHD Chamber of Commerce and Industry and credit rating agency Care Ratings, released at the National Solar Summit 2017, warned. It advocated specific policy initiatives to support rooftop solar power generation, including incentives to attract investments. India’s total rooftop solar installation stood at 1.247GW on December 31 last year, which is just over 3 per cent of the targeted 40GW by 2022. Last month, the Niti Aayog said that rooftop solar energy generation needed to be promoted “between residential, commercial, industrial and agricultural sectors with a target of achieving 20GW capacity by 2019-20”. Harjeet Singh, a global climate change expert associated with Action Aid, said: “Although there has been improvement compared with earlier years, we are falling back on solar mainly because of failures in the solar rooftop sector.” He added: “This is an important sector as it does not require land, which otherwise is a problem while setting up large-scale solar plants.” An analysis by the US-based NGO, World Resource Institute, too has cited “slow progress on solar rooftop installations, poor transmissions and lack of access to finance”. Some experts also blame the coal lobby for the tardy growth of solar energy in coal-rich eastern India. “Clearly, the coal lobby is pushing back solar energy growth in these states as coal is available there,” said solar energy expert Santipada Gon Choudhury. Bihar, Jharkhand and Bengal have together installed hardly one per cent of their combined target of achieving a capacity to generate 12GW solar energy by 2022. Bengal power minister Sobhandeb Chattopadhyay, however, blamed the state’s poor performance solely on the “Modi government’s abolition of solar energy subsidies, including solar rooftop subsidies, from 2014”. To offset the lag during 2016-17, India will need to increase the rate of solar capacity additions to at least 18GW per year if it is to reach the 100GW goal in 2022. Some experts, however, are optimistic. “India needs to look at its ambitious solar target but things have started to improve,” Sanjay Vashisht of Climate Action Network of South Asia said. “The price of solar energy has fallen below that of coal-based energy, and the future seems bright,” added Chandra Bhushan, a climate expert from the Centre for Science and Environment. India’s overall renewable energy target for 2022 is 175GW, as mentioned in New Delhi’s formal commitment to the United Nations Framework Convention of Climate Change during the Paris climate summit of 2015. Isaiah Wynn Jersey
Work begins on India’s first green energy corridor project
India today conducted the ground-breaking ceremony for its first green energy corridor project with an ultra high-voltage direct current (UHVDC) link over 1,800km with the aim to bring power to 80 million people. The project by state-run Power Grid Corporation of India (PGCIL) is being executed by ABB Group in partnership with Bharat Heavy Electricals Limited (BHEL). “This link is a key element of integrating renewable energy with the main grid. It will integrate thermal and wind energy for transmission of power to high consumption centers located thousands of kilometers away, supporting electricity demands in the south and transmitting clean energy to the north, when there is excess wind power,” a statement issued by the ABB said. The mega project is worth over Rs 4,350 crore. The Raigarh-Pugalur 800 kilovolt (kV) ultrahigh-voltage direct current (UHVDC) system aims to connect Raigarh in Central India to Pugalur in the southern state of Tamil Nadu. “The project is a great example of the Make in India initiative where design, engineering, manufacturing of major components and project execution is done locally,” the statement said. According to the statement, HVDC technology has assumed greater significance worldwide to transmit more power over longer distances. Willie Young Womens Jersey
GST may push up cost of solar power projects
The goods and services tax may increase solar energy project costs by 12%-18% and generation costs by 40-50 paise per unit, some industry leaders said, although the government said the new taxation regime won’t have much of an impact on them. However, officials said even if costs increase, it won’t affect project economics because the additional charges can be passed on to customers. “Following GST, solar projects will be about 18% costlier on an average, while cost of generation would go up by around 20%. We have estimated the incidence of GST to be around 23%-25% on various inputs for the segment,” said Ratul Puri, chairman, Hindustan Power Projects. “It would require project developers to go back to banks for additional funding for projects under construction. It might require a minimum of three months to get additional funding, thus delaying projects.” Power, coal, renewable energy and mines minister Piyush Goyal had said earlier the GST rates would not have much impact on his sectors. Sunil Jain, CEO at Hero Future Energies, said solar modules, which weren’t taxed earlier, will have an 18% levy, while inverters – a major component in solar projects used to convert direct current into alternating current – would now be taxed at 28% instead of zero. Taxes on cement and other materials have been increased, he added. “Our calculation suggests that project costs would go up by at least 16% on an average, since electricity has been excluded from GST and thus would not qualify for input tax credit. This translates into a 40-50 paise per unit rise in generation costs,” he said. “The new regime will result in an increase of 18% in module cost, about 12% in inverter cost and 3% in all service costs – increasing overall project cost by about 12%,” said Vinay Rustagi, managing director, Bridge to India, a consulting firm. “New rates would hit more than 10 GW of ongoing utility scale projects and pose a threat to their viability.” Ashvini Kumar, managing director of Solar Energy Corporation of India, the company that arranges solar project auctions on behalf of governments, doesn’t anticipate any stumbling blocks. “Almost all power purchase agreements include a clause that allows hikes or declines in power generation costs as a result of change in laws – GST in this case – to be passed on to consumers,” Kumar said. “The math behind tariffs quoted by developers in successive auctions thus remains intact since they would be able to pass this on.” Kyle Juszczyk Authentic Jersey
Failure by states to pay for renewable power may trip 2022 target
States are lagging behind in meeting their renewable purchase obligation target which is a key policy instrument to meet the goal of installing 175 gigawatt (GW) of green energy by 2022, stakeholders and experts say. Renewable purchase obligation (RPO) refers to the mandate imposed by law on some entities, mainly power distribution companies, to procure a certain part of their power requirement from renewable sources. Consulting firm Bridge To India, in a recent report, said the Union Ministry of New and Renewable Energy has allocated individual targets for states in line with the eight per cent solar RPO target for the country for March 2022, but says actual performance varies highly across states and enforcement is poor. “Power being a concurrent subject, solar renewable purchase obligation targets are actually administered and regulated at the state level. Unfortunately, because of poor finances of discoms (power distribution companies), the obligations have never been enforced anywhere in India on a consistent basis,” the consulting firm’s Managing Director Vinay Rustagi told IANS. He alleged that the state electricity regulators have also been “very lenient”. The market intelligence provider and research firm Mercom Capital Group also pointed out that India made remarkable progress over the last seven years since the inception of the Jawaharlal Nehru National Solar Mission (JNNSM) in 2010. But around 10 GW of solar installation is “not as impressive as it sounds”. The 2022 target includes 60 GW from wind power, 100 GW from solar power, 10 GW from biomass power and five GW from small-hydro power. India needs to install 90 GW of solar in five years — a rate of 18 GW a year to meet the target. “Due to the lack of enforcement of RPO regulations and the absence of penalties when obligations are not met, many of the state discoms are not complying fully with their RPO targets,” the research firm said, adding if all states had adhered to the RPO targets set by respective state electricity regulatory commissions, 17.7 GW of solar power would have been installed by 2016-17. “In the Indian market, strict compliance and penalising states to push for higher installations levels are not enough. There are a lot of underlying issues that the government needs to address — discom financials, must-run status, transmission and evacuation issues, on-time payments and payment guarantees,” the research firm’s CEO Raj Prabhu told IANS. In general, southern states along with Gujarat, Rajasthan and Madhya Pradesh have been at the forefront of compliance, whereas Maharashtra and Uttar Pradesh are lagging far behind the target, Rustagi said. In respect of eastern states, Solar expert S.P. Gon Chaudhuri said lower penetration of renewable energy in the region was one of the major reasons for West Bengal, Jharkhand, Odisha and Bihar failing to meet the RPO target. The eastern states, which are coal rich, have not done enough to attract private investors in renewable energy and experts say these states must incentivise renewable energy developers. “West Bengal’s RPO target by 2022 is 5,000 megawatt while its present achievement was only 27 megawatt. An estimated Rs 20,000 crore of investments would be required in the next 4-5 years to meet the state’s target. The state cannot invest such a huge amount. Private participation is the need of the hour,” Chaudhuri told IANS. Rustagi said RPO targets are being scaled up every year; so even if states buy an increasing amount of renewable energy, their relative performance is unlikely to change in the next 3-4 years. According to the Mercom Capital’s research note, as states crawl to fulfil their renewable purchase obligation, cumulative installation figures for solar and wind energy have increased exponentially, but unless compliance improves drastically it will be a challenge to meet the 2022 installation goals.
Tata Power says generation capacity crossed 52,000 million units in FY17
Tata Power, India’s largest integrated power company, today said it has crossed generation of 52,000 million units (MU), collectively from all its power plants in FY17. The company also reported capacity increase by 16 per cent in FY17 as compared to FY16. The company, together with all its subsidiaries and jointly controlled entities, has an installed generation capacity of 10,613 MW (as of May 2017) as compared to 9,180 MW in FY16 from various fuel sources such as thermal (coal, gas and oil), hydroelectric power, renewable energy (wind and solar PV) and waste heat recovery. Tata Power said the company’s consolidated generation through all its subsidiaries stood at 52,512 MU as compared to 47,347 MU in FY16. The company’s Mundra plant reported generation of 27,460 MU, while Maithon plant reported 7,357 MU. Trombay Thermal Power Station generated 6,394 MU, Jojobera Thermal Power Station generated 2,833 MU and Haldia reported generation of 779 MU. Industrial Energy Limited reported generation of 2,457 MU, TPREL generated 556 MU through clean sources of energy (Solar & Wind) and WREPL generated 884 MU. “The Company aims to pursue a well charted growth strategy by demonstrating a high level of commitment towards cleaner sources of generation thus increasing the share of non-fossil fuel based generation output to 35- 40% by 2025,” Ashok Sethi, Chief Operating Officer and Executive Director, Tata Power said. The company said Tata Power continues to be on the lookout for feasible organic and inorganic projects, both greenfield and brownfield, in India and abroad. Ty Montgomery Jersey
Proposal to extend oil production cut could lead to under investment: Dharmendra Pradhan
Oil producing countries’ proposal to extend production cut could end up creating possibility of under investment in the sector and leaving consumers’ demand unmin the long run, Oil Minister Dharmendra Pradhan has said. “While the production cut is an attempt to arrest the slide in prices, however, it also has an inherent chance of under investment and consumer’s needs not being met in the long run, which is not in the interest of a balanced and healthy global oil and gas market,, an Oil Ministry statement quoted Pradhan as having told representatives of oil cartel OPEC in Vienna. Pradhan co-chaired the 2nd India-OPEC Institutional Dialogue at the OPEC headquarters two days ahead of the OPEC Ministerial meeting scheduled from May 25. Pradhan highlighted the importance of India – OPEC engagement and discussed the effects of the production cut of 1.8 million barrels per day by OPEC and non-OPEC countries on the global oil market volatility, according to the official statement. Oil prices have risen 11% since May 9 on media reports that a pledge by OPEC and other producers, including Russia, to cut supplies by 1.8 mbpd would be extended to March 2018, instead of covering just the first half of this year. There have also been reports of producers considering deepening the production cut. Pradhan stressed that the OPEC should work towards “Responsible Pricing,, which would allow India to provide energy to the common and marginalised people who have been deprived of access to energy so far. Higher crude prices would retard growth rate which will result in slowing down the demand of crude oil, he said. Pradhan said India’s energy mix was undergoing major changes with renewables becoming important. “The oil Industry is at a delicate cross road and higher crude prices will give a further push to renewables,, he said. About 86% of India’s import of crude oil, 70% of natural gas, 95% of LPG are from OPEC countries. Andy Levitre Jersey
GAIL in time-swap deal for US LNG
State-owned gas utility GAIL India Ltd today said it has signed a first-ever time-swap deal to sell some of its US liquefied natural gas (LNG) as it rejigs the supply portfolio in line with domestic demand. GAIL Chairman and Manging Director B C Tripathi said the company is to receive LNG from its shale gas project in US from March next year. It has however time swapped some of the supplies. Under the agreement, it will g15 cargoes or about 0.8 million tonnes of LNG from an unnamed trader this year. In return, GAIL will sell 10 cargoes or about 0.6 million tonnes next year from Sabine Pass on the US Gulf coast. “We imported 55 cargoes of LNG on short or medium term contracts in 2016-17. This equals to under 4 million tonnes of LNG in a year. This volume we expect to replace from our US portfolio,” he said. GAIL has a deal to buy 3.5 million tonnes a year of LNG for 20 years from Cheniere Energy and has also booked capacity for another 2.3 million tonnes at Dominion Energy’s Cove Point liquefaction plant. Against a supply of 5.8 million tonnes of LNG from US, GAIL has been able to create a market for just under 4 million tonnes in India and so it wants to sell of the remaining overseas. Tripati said GAIL had separately signed a deal with Royal Dutch Shell to sell about 0.5 million tonnes of its US LNG. So from a potential supply of 5.3 million tonnes (after the Shell deal), GAIL feels Indian market can absorb only 4 million tonnes or so. “We hope to replace the short and medium term contracted volumes with US LNG,” Tripathi said, adding that the company has floated a tender to time-charter four LNG ships to ferry the gas in its liquid form (LNG) from US coast to Dahej in Gujarat. The LNG that GAIL will receive this year between April and December under the time-swap deal will be at oil-linked prices. The sale of US gas next year will be at a premium to its pricing formula on a free-on-board (FOB) basis. Tripathi said there are not many new takers for imported LNG particularly in the power sector which is price sensitive, thereby forcing the rejig of supply portfolio. The company is also renegotiating price and time of supply of 2.5 million tons per annum of LNG by Gazprom of Russia. GAIL is saddled with long-term deals for US and Russian gas after it went on a contracting spree between 2011 and 2013 when when the fuel was scarce and prices kept rising. Devin Hester Jersey
How will the new tax rates impact the oil and gas sector?
How will the new tax rates worked out by the GST Council last week impact the petroleum sector? The oil and gas industry will be left with stranded taxes, higher blockage of working capital and dual compliance under the GST regime effective July 1, tax experts say. “Upstream and downstream companies will be left with stranded taxes leading to higher blockage of working capital, on which they will suffer opportunity loss,” K Ravichandran, Senior Vice President at rating agency ICRA said. India will roll out GST that includes most goods and services but excludes crude oil, natural gas, petrol, diesel and jet fuel. Other oil products such as kerosene, liquefied petroleum gas and naphtha are included in the GST. This means oil companies will have to comply with both the old and the new tax regimes. But the tax credit can’t be transferred between the two systems. Input tax credit allows an oil producer at time of paying the tax on the final output to deduct the tax already paid on inputs (purchase of machinery, crude oil etc). As most of the core petroleum products have not been included in the GST ambit, the tax credit which could have been availed cannot be availed under the new tax regime effective from July 1. “Procurement of goods and services for the upstream and downstream sector will be under GST whereas the majority output will be outside the ambit of GST. This would mean that the majority of GST paid on goods and services by these companies would be a cost to them. This would substantially increase their costing,” said Abhishek Jain, Partner, Indirect Taxes at E&Y. Ravichandran also said the biggest issue will be complying with both GST and existing tax framework as five products are kept outside GST. This will lead to higher compliance-related efforts by companies. The oil ministry had recently submitted its concerns to a Parliamentary panel on the issue including additional stranding of taxes on inter-state purchase of goods, non-availability of credit on local purchase of goods, additional burden due to levy of GST on stock transfer and dual compliance. “The GST Law would not apply on five petroleum products including Crude Oil, Natural Gas, High Speed Diesel, Motor Sprit, and ATF. Consequently, the main products of the E&P Sector, Crude Oil & Natural Gas, shall continue to be leviable to existing levies. However, purchase of goods and services required for exploration and production of Crude Oil and Natural Gas, would attract GST. Hence, it would have adverse implication on E&P Sector,” The ministry submitted to the Parliamentary Standing Committee on Petroleum and Natural gas. State-run ONGC produces Value Added Products such as LPG, Kerosene, Naphtha, ATF and HSD in addition to crude oil and gas. Crude Oil, Natural Gas, HSD and ATF would continue to attract taxes under existing law — Excise Duty, VAT/CST, OID Cess, NCCD, and Royalty — whereas LPG, SKO and Naphtha would be under GST. This would create a complex situation for dual compliance of GST as well as existing laws in addition to increase in compliance cost. The GST council has finalized a four-tier GST rate structure of 5 percent,12 percent, 18 percent and 28 percent with lower rates for essential items and highest for luxury and de-merit goods, many of which would also attract an additional cess. The centre last Thursday released the list of goods which would fall under each tax rate category. According to the document, Kerosene, Liquefied Propane, Liquefied Butane and Liquefied Petroleum Gases (LPG) for supply to consumers will be taxed under the 5 percent bracket. Also, coal gas, water gas, producer gas and similar gases, other than petroleum gases and other gaseous hydrocarbons will also be taxed under the lower tax bracket. “Currently excise duty is nil on PDS Kerosene and LPG-domestic as they are subsidised products. VAT varies from nil to 5% in different States. Hence there will be marginal increase in consumer prices in certain States,” Ravichandran said. Prashant Modi, Chief Executive Officer and Managing Director of Great Eastern Energy Corporation, India’s first coal bed methane producer, hailed the tax structure given under GST and called for inclusion of natural gas under the GST regime. “This is a very positive move for the energy sector. Also, natural gas being a clean and environment-friendly hydrocarbon should be brought under the GST at 5% at the earliest in order to enhance domestic production and consumption. This will also help in achieving reduction in the import of LNG.” Modi said. Under the new system, products that will be taxed under the higher rate of 18 percent include petroleum oil and oil obtained from bituminous minerals, Superior kerosene Oil, Fuel oil, Base oil, textile oil, lubricating oil, waste oil, petroleum gas and other gaseous hydrocarbons such as propane, butane, ethylene, propylene, butylene and butadiene. Greg Lloyd Authentic Jersey
Continuing gas price cuts to deter fresh exploration capex
The ongoing rupee surge coupled with continuing price reductions of gas will push fuel cost down by around 5 per cent, which in turn will lower the gross margins of upstream oil and gas players and deter fresh investment into the sector, says a report. For the fifth consecutive time since implementation of the domestic gas pricing formula in November 2014, the government in March lowered domestic gas prices by 0.8 per cent to USD 2.48 per million British thermal units (mmbtu). The price will be in force from April 1 to September 30, 2017. This came even as the average Henry Hub gas prices rose 12 per cent y-o-y to USD 2.52/mmbtu during the same period. “The latest lowering of domestic gas prices, coupled with the 4 per cent rise of the rupee against the greenback in the second half of FY17, will lower the gross margins for upstream players, especially for ONGC and Oil India which contribute around 80 per cent of the domestic production, while their operating cost is around USD 2.5/mmbtu,” India Ratings said in a note. The price ceiling for gas produced from discoveries in deep-water, ultra-deep water and high pressure-high temperature areas for the period April-September 2017 is USD 5.56/mmbtu on gross calorific value basis, while the domestic prices has been lowered to USD2.48/mmbtu on gross calorific value basis for this period. The report further cautioned that “any reduction in the realisation from this level will adversely impact their gross margins and will act as a deterrent for fresh investments towards gas exploration and related capex”. However, it will marginally benefit the midstream entities like Gail India, which will see its trading revenue fall by Rs 2.50 billion from domestic sales during in 1H of FY18. But since Gail sells its domestic gases on a cost-plus basis, its gross margins will be protected. The report also warned that petroleum crack spreads and GRMs will drop in FY18 in the absence of inventory gains, while crack spreads will have a downward bias. The products crack spread, which is the difference between wholesale petroleum product prices and crude prices, is estimated to remain under pressure in FY18, on the back of the fragile global demand growth amid net capacity additions as Chinese and the US export volumes are likely to remain high helping maintain utilisation levels. The agency expects the rally in crude prices to fade and price to remain in a narrow range in FY18. George Hill Jersey
GAIL India quarterly profit unexpectedly plunges on investment loss
GAIL India, the nation’s largest natural gas distributor, said profit in the fourth quarter plunged to a third from a year earlier, after the company incurred a one-time loss on an investment in a joint venture. Net income for the quarter ended in March stood at 2.60 billion rupees ($40 million), compared with 8.32 billion rupees a year earlier, the state-owned company said in a statement on Monday. Mumbai-based brokerage Kotak Institutional Equities had expected a profit of 11.18 billion rupees. GAIL said the latest quarter included a provision of 7.83 billion rupees towards a loss in the value of its stake in joint venture Ratnagiri Gas and Power. Sales from operations grew more than 16% to 136.44 billion rupees. Revenue from petrochemicals business jumped more than 57% to 17.66 billion rupees, aided by expansion in capacity of its plant in the northern Indian state of Uttar Pradesh. Natural gas sales grew 13% to 103.71 billion rupees, while gas transmission revenue expanded 14% to 11.74 billion rupees. GAIL has been grappling with unsold inventory of expensive long-term contracts of U.S. natural gas which it had bought in the early part of this decade when prices were higher. The U.S. natural gas exports are priced based on domestic prices, while global LNG sales are linked to the price of crude oil. GAIL had got into the agreement with U.S. suppliers when global oil prices hit $100 a barrel, while American gas prices slumped amid a boom in production from Shale fields. However, amid a global glut and a slump in prices, GAIL struggled to find customers for the expensive gas. In a news conference on Monday, Chairman B.C. Tripathi said the company will swap 1 million tons of imported LNG through time contracts in the next fiscal year, he said. According to a Reuters report in March, GAIL has signed its first time-swap deal with Swiss trader Gunvor to sell some of the U.S. LNG. India plans to more than double its liquefied natural gas import capacity to 50 million tons a year, as the nation seeks to reduce pollution and cut reliance on thermal fuels such as coal. India imports more than three-fourth of its crude oil requirements. Revenue from LPG and liquid hydrocarbons sales increased 30%. GAIL’s LPG business has benefited in the second half of the last fiscal year from higher prices and lower domestic gas prices. Garret Sparks Womens Jersey