CCoE gives go-ahead to renewable projects

The Cabinet Committee on Energy (CCoE)) of the Cabinet has given the go-ahead to renewable projects which have been issued Letters of Interest (LoIs) and granted determination, generation licence and tariff by Nepra amid charges of "safeguarding vested interests" against the Power Division, well-informed sources told Business Recorder.
Policy for development of renewable energy (RE) for power generation 2006 was a guiding policy for developing different categories of renewable energy resources in Pakistan. This included, small hydel, wind, solar and other RE generation technologies. The policy was amended in 2013 to include baggasse based on co-generation projects. The policy also comprised a short-term, medium-term and long-term framework. In 2013, the policy was extended for a period of five years (ie, up to March 8, 2018). The policy envisaged a gradual qualification from a highly incentivised and protected short-term focus to medium-term and a long-term framework with a healthy open market based competitive regime without any hidden subsidies. It is evident from the policy that various incentives were granted to national grid connection as well as off-grid RE power generation and a process for introducing both solicited and unsolicited proposals by AEB as well as provinces/AJK. All the incentives given in the RE Policy 2006 were aimed at facilitating the short-term investment rather than medium-term and long-term investment and no clear cut framework was given for a phased graduation from the short-term stage to a completely competitive long-term stage. Under the policy, a number LoIs were issued by the provinces and AEDB for different projects. Tariffs and generation licences by Nepra and LoS by AEDB was also granted to some projects.
The Power Division further informed that the Cabinet Committee on Energy (CCoE) in its meeting held on December 12, 2017, approved amendments to the RE Policy, 2006(Framework 2013) and took some decisions. The decisions were as follows: (i) only those project shall be implemented out of the current list where Implementation Agreement (IA) or Energy Purchase Agreement (EPA) has been signed already; and (ii) all projects based on wind, solar, small hydel and baggasse energy will be awarded through competitive bidding, and place an abrupt stop to further processing of the cases that were in pipeline at various stages of development.
The status of projects (categories depending on other various stages of development ) is as follows : (i) category-1 projects at LoS stage-20 projects of 531.01 MW (baggasse 16+ solar 4) have been issued LoS after determination of tariff and grant of generation licence from Nepra;(ii) category-2 projects at LoI stage with tariff and generation licence - 22 projects of 1199.30(baggasse 2+solar 5+wind 15) have acquired tariff position and generation licence from Nepra; and (iii) category-3 projects at LoI stage - 104 projects of 6,547 MW(baggasse 7+ solar 65+ wind 31 - waste to energy 1) are at initial stages of project development and have not received tariff and generation licence from Nepra.
According to sources, Government of Sindh (GoS) considered the CCE decisions as unilateral and arbitrary and similar objections were raised by KP government. Subsequently, Nepra did not consider CCoE''s decisions for implementation due to objections raised by province. Nepra continued tariffs based on cost-plus regime as per Nepra Act.
The Power Division submitted the following recommendations prepared in consultation with provinces and other stakeholders: (i) all future RE investments would be dealt with the RE Policy 2019 which would clearly enunciate a framework that is consistent with current international market norms and greater consumer benefits. The draft RE Policy 2019 is currently in circulation for comments of stakeholders and shall be presented to the CCoE as soon as such comments are finalised; (ii) a resource risk that is linked with the RE projects being considered as pipeline projects under the RE Policy 2006, which conform to Nepra''s decisions taken in various tariff determinations on such projects (resource risk for wind, solar & hydel, would be henceforth borne by the seller; and (ii) all processing of such projects would be linked with the date of grid interconnectivity as provided and confirmed by NTDCL.
The Power Division further proposed that all projects which have been granted LoS by AEDB shall be permitted to proceed towards achievement of their requisite milestones as per RE Policy 2006. However, if more than one year elapses since determination of tariff by Nepra, the said tariffs would be reviewed by Nepra to bring them in line with the prevailing market conditions and rationalisation of cost keeping in view the consumer interests as well as subsequent determinations on the same technologies given by Nepra. Such reviews shall include appropriate time extension to reach financial closing.
According to the Power Division, while protecting investor interest, consumers'' interest is to be protected and huge variations between various tariffs on the same energy resource is considered counter to consumer interest.
The Power Division also proposed that all projects that have been issued LoIs have been granted determination of tariff by Nepra and issued a generation licence would be allowed to proceed ahead towards the achievement of their requisite milestones as per the RE Policy 2006. However, if the tariff determination has been done since more than one year or if the tariff validity period has lapsed, Nepra would be requested for review of it to make it consistent with the current market environment/conditions and consumer interest. Such review shall include appropriate time extension to reach financial closing. In all these projects, grid connectivity date would have to be approved by NTDC and the COD would be subject to the same.
In case of wind projects that all fall in the above categories and are situated in the wind corridor of Jhimpir, Sindh, NTDC and Sindh government would work on Sindh''s proposal for construction of evacuation facilities from the corridor by the Sindh government and would be reflected in a firm agreement between the two. Based on NTDC''s confirmation of evacuation and the timeline decided for completion of the projects, the CPPA-G would consider granting of consent.
Projects that have been issued LoI prior to the expiry of RE Policy 2006 on March 8, 2018 but have not received a tariff from Nepra, may be allowed to proceed ahead subject to becoming successful in the competitive bidding process to be undertaken by AEDB specially designed for each technology under this category based on the quantum ascertained for each technology by Indicative Generation Capacity Expansion Plan (IGCEP) by NTDCL. Once IGCEP by NTDCL determines how much additional power is needed to induct in the system by June 2023 as approved by the regulator and NTDCL confirms its interconnection including the completion of pre-requisites for issuance of power acquisition request. AEDB shall conduct competitive bidding, one for each technology, for the capacity to be procured under each technology, with the resource risk being borne by the project. The determination of size of each block shall be borne by NTDCL within 60 days of the approval of IGEP and accordingly the capacity of wind, solar and baggasse power to induct through competitive bidding shall be intimated to AEDB. Thereafter, AEDB will develop the bidding documents based on the parameters determined by Nepra. For projects which are regarded successful in the bidding process, a LoS shall be issued subsequently allowing the projects to achieve financial closing as per the time period allowed in the LoS. All other LoIs that are not successful in the bidding process shall stand lapsed and bank guarantees provided against the LoI shall be returned in full.
The sponsors willing to proceed with the development of their respective projects under this mechanism shall be required to provide an understanding to withdraw all lawsuits against federal/provincial government and its entities. The ECC approved all the recommendations of Power Division.
It was pointed out that the subject "electricity" is at entry No.4 of the Federal Legislative List (Part II) of the Constitution. Therefore, it is not the domain of Council of Common Interests (CCI). The Law and Justice Division was of the view that the RE Policy 2006 is no more valid. The proposed recommendations made by the Power Division are in fact for safeguarding vested interests of the investors who have already got LoIs and LoS, tariff and generation licences from the concerned departments under the RE Policy 2006.
Nepra argued that as Nepra Act, it is not binding on them to follow/implement government''s instructions. Therefore, Nepra did not implement the amendments in the RE 2006 as approved by the CCoE in December 2017. They continued determination of tariff for new RE projects on cost plus basis. It was also pointed out that validity of RE Policy 2006 expired in March 2018. New Policy 2019 is under preparation in consultation with all stakeholders and will be finalised soon.
The only issue at present is how to deal with the projects initiated under the RE Policy 2006, which got LoS, tariff generation licence and LoIs. It was suggested that all those projects which have been issued LoIs, LoS from AEDB and granted tariff and generation licence from Nepra may be allowed to proceed ahead for achievement of COD as per RE Policy 2006. It was suggested that the best available technologies should be inducted for under process projects'' as well as new projects under the RE Policy 2009, in order to ensure system stability. For this purpose, Nepra may be requested to give a timeline to all RE projects to induct such stabilizing technologies.