–NEPRA dismisses review motion of Sindh government
The future of 2600 megawatts wind power projects of Sindh province is in doldrums as the National Electric Power Regulatory Authority (NEPRA) has dismissed the review motion of the provincial government, seeking a determination of upfront tariff for 34 wind power projects being developed under unsolicited mode in the province.
The NEPRA, in its order, said that the request of Sindh government to restrict the impugned determination to solicited projects and determine upfront tariff for wind power projects being developed under unsolicited mode was not maintainable. “In view thereof, the subject review motion stands dismissed,” said NEPRA’s order.
The NEPRA also made it clear that it is governed by the NEPRA Act and the rules/regulations made so far. And, keeping in view the developments in the market, global trends and other factors, it is the role of the NEPRA to decide the suitable tariff and corresponding regime for the induction of certain technology of electric power.
“Hence, the authority considers that the policy document provides guidance for tariff purposes; however, the governing legislative framework of NEPRA supersedes the policy for the purpose of tariff determination. Nevertheless, the authority agrees with the submission of Alternative Energy Development Board (AEDB) that the impugned determination of the NEPRA is consistent with the overall long-run objective of competition as provided in the policy,” the NEPRA said.
Earlier, Sindh’s Energy Department Directorate of Alternative Energy on behalf of the government filed a review motion with the NEPRA against the determination of new tariff for wind power generation projects dated January 27, 2017.
In the review motion, Sindh government said that it has initiated development of a number of unsolicited wind power projects which are in various stages of development. The Sindh government stated that Renewable Policy 2006 has allowed tariff setting through competitive bidding only for solicited proposals; whereas, for unsolicited projects, the Policy allows for either negotiated tariff or an upfront tariff.
In view thereof, Sindh government requested the authority to review the impugned determination and issue the upfront tariff for wind power projects being developed under unsolicited mode.
“Policy expressly restricts the competitive bidding process to solicited proposals only, making no mention of a competitive bidding process for unsolicited proposals,” Sindh government said.
Sindh government submitted that pursuant to the policy, it has initiated thirtyfour (34) unsolicited wind power projects which are at different development stages, while two projects of 50 MW each were initiated under solicited proposals.
During the course of hearing, Sindh government and the project developers have submitted that the policy describes two separate modes for setting up a renewable energy project, i.e. solicited and unsolicited mode. Their arguments were based on the pretext that the policy is binding on NEPRA for the tariff determination purposes. They submitted that the policy provides tariff setting through competitive bidding only for solicited proposals whereas negotiated tariff or upfront tariff has been prescribed for unsolicited proposals. Also, by announcing benchmark levelized tariff, the regulating authority has parted from the tariff scheme given in the policy as it requires all unsolicited project sponsors to participate in the competitive bidding for obtaining a tariff.
Highlighting the difference between award of project and award of tariff, the AEDB submitted that the policy talks about how the project proposals are initiated, i.e. unsolicited proposals and solicited proposals. These modes of proposals for procurement of projects do not dictate authority the mode for the award of the tariff.
The AEDB further stated that the tariff setting is prerogative of the NEPRA under the NEPRA Act and not upon the purview of the policy for any project, either develop by public sector or private sector, while the relevant agencies have issued a large number of LOIs (letter of interests) without taking into account whether the power purchaser will be able to evacuate power. Similarly, the NTDCL system has limited interconnection capacity and it is understood that competition is a good method for the allocation of interconnection slots.
The AEDB maintained merely a fact that a large number of LOIs have been given does not mean that now it has become mandatory on the national transmission to make sure that interconnection capacity is made available. It clarified that provision of LOI does not create the right of mandatory purchase of electricity and applies to those projects which are at a mature stage.
While referring the statistics, the AEDB submitted that as per the World Bank report published in 2013, the competitive bidding tendering has grown from 7 in 2005 to 45 in 2013.
The AEDB submitted that the as the market evolves, the policy responds accordingly, which says the wind risk must be borne by the power purchaser which is still there in the policy; however, NEPRA in 2013 shifted the said risk to the purchaser, and the AEDB accordingly changed the Energy Purchase Agreement and every wind project signed the same.
During the hearing, numerous project developers including Trans-Atlantic Energy Pvt Ltd, Noririco International Power Limited, Din Energy etc stated that they are developing their projects under an unsolicited mode of the Policy and have spent a huge amount in achieving the milestones listed in LOI. Therefore, application of competitive regime on their projects is contrary to the policy, as well as violates their rights. They submitted that competitive bidding process is discriminatory as the projects that have invested huge amount for last few years cannot be treated equally to the new projects.
They also requested for issuance of an upfront tariff to accommodate the existing LOI holders of wind power projects being developed under unsolicited mode and then competitive bidding process should initiate.
Similarly, Iran-Pak Wind Power Pvt Limited proposed the authority to convert the benchmark tariff into upfront tariff, while Shaheen Foundation requested that all those projects which have been given power evacuation certificate by NTDCL may be approved upfront tariff in chronological order with respect to their grid availability at any tariff as the authority may deem fit.
The representative of NTDCL during the hearing stated that as per the study carried out by its consultant, wind power evacuation capacity of 1756 MW was specified for the spot year 2016; the NTDCL submitted that it was required to set up grid to evacuate 1756 MW of power which shall be completed by 2019; therefore, the stated power can be evacuated by that time.
NTDCL further submitted that the growth in issuance of LOIs has been the serious concern for the power purchasers and it repeatedly advised Sindh government in several meetings to link the issuance of LOIs with any spot year for evacuation of power so that the sponsor should certainly know that in which year its project will complete.
