ISLAMABAD: The government on Wednesday decided to allow partial revival of renewable energy projects blocked in March last year by the PML-N government subject to a revised tariff mechanism and greater decisive role to National Transmission and Despatch Company (NTDC) to provide interconnection facility.
It also provided an opportunity to the Sindh government to provide interconnection grid facility for renewable projects (RE) projects that it had issued letters of interest (LoI) but were affected by the government’s decision of March 2018.
The decision was taken at a meeting of the Cabinet Committee on Energy (CCoE) presided over by Finance Minister Asad Umar. The meeting also reviewed about 20 per cent increase in revenue collection by power distribution companies through increase tariff, fuel price benefit, loss reduction and better recovery.
The CCoE noted that between November 2018 to January 2019 collection of power bills amounted to Rs244 billion compared to Rs204bn, showing an increase of almost Rs39.7bn. The major increase of Rs16bn came from increase in tariff while Rs13.3bn higher revenues were earned due to improved recovery from consumers. About Rs6.1bn saving was achieved in three months through loss reduction and Rs4.5bn through higher fuel price adjustment.
The CCoE approved proposals from the Power Division, providing for all future RE investments to be treated in line with the Renewable Energy Policy 2019 that envisages a framework consistent with the current international market norms and greater consumer benefits. The policy is currently being reviewed by stakeholders and would be formally taken up by the CCoE later but guiding principles were approved on Wednesday.
It was decided that all projects which have been granted letters of support (LoS) by the Alternate Energy Development Board (AEDB) shall be permitted to proceed towards the achievement of their requisite milestones as per the Renewable Energy Policy 2006. However in those cases where more than a year has elapsed since tariff determination by the National Electric Power Regulatory Authority (Nepra), the rates would have to be reviewed by the regulator as per policy.
The committee was informed that the 2006 policy offered liberal risk covers and attractive power purchase tariffs to the private sector with gradual transition to open market competition with utilities free to choose between supply options competing against each other. It was reported that a number of projects had issued LoI by the provinces. Several of these projects were granted tariffs and generation licences by Nepra and LoS by the AEDB but the then government stopped all these projects beyond a cutoff date without a revised policy for the transition.
It was decided that any resource risk linked with RE projects being considered as pipeline projects under the 2006 policy would be consistent with the Nepra’s decisions taken in various tariff determinations dealing with such projects and resource risk for wind, solar and hydro would be henceforth borne by the seller.
Also, all processing of the subject projects would be linked with the date of grid interconnectivity as provided and confirmed by NTDC.
All projects that have been issued LoI, granted determination of tariff by Nepra and issued a generation license would be allowed to proceed ahead towards the achievement of their requisite milestones as per the 2006 policy. However, if the tariff determination has been done since more than one year or if the tariff validity period, has elapsed, Nepra would be requested for review of the same to make it consistent with the current market environment, lower cost and consumer interest.
In case of wind projects that fall in the above categories and are situated in the wind corridor of Jhimpir, Sindh, the NTDC and Sindh government would work on the latter’s proposal for the construction of evacuation facilities from the said corridor by the provincial government and would be reflected in a firm agreement between the two.
Based on the NTDCs confirmation of evacuation and as per the timeline decided for completion of the projects, the Central Power Purchasing Agency-Guarantee would consider granting of consent. Also projects that have been issued Lol prior to the expiry of the of RE Policy 2006 on March 08, 2018 but have not received a tariff determination from Nepra would be allowed to proceed ahead subject to becoming successful in the competitive bidding process to be undertaken by the AEDB.
For projects which are regarded successful in the bidding process, LoS shall be issued subsequently allowing the projects to achieve Financial Closing as per the time period allowed in the document. The sponsors willing to proceed with the development of their respective projects under this mechanism shall be required to provide an undertaking to withdraw all lawsuits against federal and provincial government and their entities without prejudice.
Published in Dawn, February 28th, 2019