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TERRAFORM GLOBAL, INC. filed this Form 10-K on 06/15/2017
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power plants, in addition to the preferential tariffs approved by SERCs. However, such generation based incentives have now been discontinued for projects commissioned after March 31, 2017.
To further optimize India’s wind power resources, MNRE has introduced a series of important policy measures such as the Draft Guidelines for Procurement of Wind Power through Competitive Bidding 2016, National Offshore Wind Energy Policy 2015, Guidelines for Onshore Wind Power Projects 2016, Draft National Wind-Solar Hybrid Policy 2016 and Policy for Repowering of the Wind Power Projects 2016. The Indian government has also recently conducted a competitive bid process for the development of wind power plants with a cumulative capacity of 1,000 MW and is in the process of conducting another round of bidding for an additional 1,000 MW of wind energy. This highlights a significant shift in the wind industry in the country, as until last year electricity from wind power plants was only sold at tariffs determined by the electricity regulatory commissions as opposed to tariffs determined through a competitive bidding process.
All renewable energy power plants
India’s National Tariff Policy 2006 requires the SERCs to fix a minimum percentage of the electricity that must be purchased by utilities operating in their jurisdiction from renewable energy generators (such as solar power plants), taking into account availability of such resources in the region and its impact on retail tariffs and procurement by distribution companies at preferential tariffs. This obligation to purchase electricity from renewable sources is known as a renewable purchase obligation (“RPO”). This policy was amended in January 2011 to prescribe a minimum solar specific RPO of 0.25% in 2012 to be increased to 3% by 2022. States such as Gujarat, Chhattisgarh, Haryana, Madhya Pradesh, Bihar and Goa have fixed solar power RPO requirements at levels above the minimum level prescribed by the National Tariff Policy 2006. The National Tariff Policy, 2006 was amended effective January 28, 2016 and, inter alia, directs the SERCs to reserve a minimum percentage for purchase of solar energy such that it reaches 8% of total consumption of energy, excluding hydro power, by March 2022 or as notified by the Indian government from time to time. The National Tariff Policy also seeks to exempt inter-state transmission charges and losses for wind and solar power for such period as is notified by the Indian government. Pursuant to the National Tariff Policy, the Ministry of Power has waived the inter-state transmission charges and losses of the electricity generated from wind and solar power for a specified period.
In 2010, the CERC implemented regulations designed to facilitate the development of a power market from non-conventional energy sources by issuing transferable and salable credit certificates. These regulations facilitate fungibility and inter-state transactions of renewable energy by establishing a mechanism through which a market-based instrument can be traded freely and provide a means for fulfillment of renewable purchase obligations by India’s utilities and open access consumers. Although these regulations established the necessary framework, the market for such renewable energy credits has not developed widely and is not liquid. None of our Indian power plants is participating in the renewable energy credit certificate programs at this time.
Further, while the Indian government is proposing massive capacity addition for renewable energy, tax incentives are on the decline, with accelerated depreciation being reduced to 40% and generation based incentives being eliminated entirely. Separately, a minimum alternative tax (generally at approximately 20%) calculated based on book profits is still applicable in respect of renewable energy power plants.
South Africa
In August 2011, South Africa’s Department of Energy (“SA DOE”) launched the REIPPP program, which requires renewable energy developers to bid on a tariff level and the identified socio-economic development objectives of the SA DOE. The REIPPP program has gone through six successive rounds of bidding, which includes the additional bidding round (known as the expedited round) with preferred bidders expected to be announced in the near future. The REIPPP program has been designed to procure a target of 12,825 MW of renewable energy with units of power (in MW) allocated to each technology. Statistics related to the first five rounds of the REIPPP program indicate that a total of 92 developers have secured contracts to produce renewable energy with a combined nameplate capacity of 6,327 MW. Of the total procured capacity under the first five rounds, 2,292 MW is for photovoltaic solar power plants, 0.6 MW is for concentrated solar power plants, 3,357 MW is for wind power plants, and the remainder relates to other renewable energy sources.
Each bid is evaluated under the REIPPP program with an evaluation weighting split 70% on the proposed tariff amount and 30% on the specified economic development criteria, the latter of which includes employment, local content and management control, ownership characteristics, socio-economic spending and smaller enterprise development initiatives. The tariff payable by the offtaker for the particular power plant is determined based on the proposed tariff during the bidding process. Each winning bidder under the REIPPP program will:
enter into a 20-year PPA with Eskom that creates an obligation for Eskom to pay the project company the agreed tariff for power provided by the facility; and