The Jharkhand Renewable Energy Development Agency (“JREDA”) has issued the Jharkhand State Solar Policy, 2022 on July 5, 2022, with an operative period of 5 years from the date of its issuance (“Policy”). The Policy has been issued with an objective to deploy a cumulative capacity of 4000 MW in the state by 2007 and increase the share of solar electricity in distribution companies’ (“DISCOM(s)”) energy purchase to 12.5% by 2023-2024, which will be revised from time to time in accordance with the Jharkhand State Electricity Regulatory Commission (“JSERC”), notified renewable purchase obligations (“RPO”) trajectory. The Policy is applicable to distributed solar, utility-scale, solar and off-grid solar projects. The objectives of the Policy shall be achieved by identifying and enabling development and allocation of suitable land, utilization of innovative processes and business models, providing financial and non-financial incentives to investors and developers, adopting viable power purchase agreements (“PPA”), enhancing domestic solar equipment manufacturing, and promoting solar for development of the rural economy. The solar developers executing PPA or commissioning the plant during the operative period of the policy shall be entitled to the incentives available under the policy for a period of 25 years from the date of scheduled commissioning of the project. Some of the key provisions and incentives provided under the Policy has been outlined below:
1. Land: The Policy extensively enumerates the details of land availability, restrictions on land use and various exemptions made available to solar power developers:
a) Land availability: All government departments are required to share information on waste or unused land with JREDA. Once such land is transferred to JREDA, the identified parcels will be converted into a land bank for solar development and will be leased to developers for a 30-year period or project lifetime. For private lands, expression of interest will be issued by JREDA for private landowners who wish to sale or lease their land for installation of solar power plants. The lease rental for such private land shall be calculated based on the market value. The Policy also provides for identification of suitable sites for floating solar or canal top solar projects. The Policy provides specific restrictions on the maximum land that may be allotted to a power producer or developer for setting up of different projects based on the technology used. However, the solar power producer is required to commission the solar power project within 2 years from the date of allotment of land else such land will revert to JREDA.
b) Exemptions on land use: The following exemptions are available on the purchase or lease of land for developing a solar power project during the Policy period:
i) 100% exemption from payment of stamp duty;
ii) 100% waiver on land conversion charges;
iii) Exemption from payment of court fee for registration, land use approval, external development charges, scrutiny fee, and infrastructure development charges shall be provided;
iv) For EV charging stations owned by single service provider, under non-park solar category, a 50% concession on lease payment shall be provided to the providers installing the first 50 MW during the Policy period.
2. Open Access Charges: Open access clearance shall be granted to the developers of solar power plant for the entire tenure of the project or 25 years, whichever is earlier. If there is no response from the DISCOM within 21 days of filing of application for open access, then such open access shall be deemed to have been granted. Further, grid connected solar projects with storage systems shall be entitled to 100% exemption from payment of transmission and wheeling charges for a period of 10 years from the commissioning of the project. However, the transmission and distribution losses shall continue to be applicable to both third party and captive sale. Exemption from payment of cross-subsidy surcharge and additional surcharge shall be provided for all captive users and for third party sale (less than 25 MW).
3. Banking Charges: Banking of 100% energy generated shall be permitted during 12 months of the year, subject to prior approval from transmission company (“TRANSCO”) or DISCOM. Banking charges shall be exempted for grid connected solar rooftop projects and shall be adjusted in kind at the rate of 5% of the energy delivered at the drawl point. Further, drawl from the banked energy shall not be permitted during the peak hours and between April 1 to June 30 and February 1 to March 31 of each financial year. The unutilized banked energy shall be deemed to be a purchase by the DISCOM at the rate of 50% of the average pooled power purchase cost determined by JSERC for the applicable year. The payment of the deemed purchase of the unutilized banked energy shall be capped at 10% of the total banked energy.
4. Grid Connectivity and Evacuation: For solar parks developed on government land, the cost of augmentation of the grid infrastructure for evacuation of power from the generating station to the nearest substation shall be borne by the state government. For parks on private land, the cost of EHV/HV transmission line up to 10 KM shall be borne by the TRANSCO/DISCOM. If the distance between the interconnection point and the point of grid connectivity is more than 10 Km, then the cost for development of grid infrastructure beyond 10 Km shall be equally shared between the developer and the licensee. Any upstream strengthening requirement may be borne by the TRANSCO/DISCOM on a priority basis. The supervision charges payable to the TRANSCO/DISCOM may also be exempted for the solar power projects except utility scale solar projects.
5. Tariff Mechanism: The Policy sets out the tariff mechanism to be adopted for the solar projects commissioned during the operative period:
a) Solarization of Agricultural Feeder: DISCOMs are encouraged to determine appropriate ceiling tariff that adequately captures the smaller project sizes and high transaction cost in accordance with the PM KUSUM scheme.
b) Green Tariff: JSERC may introduce ‘Green Tariff’ for all consumers which shall be lower than the equivalent average pooled power purchase cost of nonconventional sources.
c) Feed-in Tariff: JSERC may introduce time-of-the-use solar energy feed-in tariffs to encourage solar energy producers and storage operators to feed-in energy into grid when demand is high.
d) Virtual Net Metering: Virtual net metering including group virtual net metering will be promoted.
6) Permits and Approvals:
a) Single window facility shall be implemented through a solar policy cell to facilitate procurement of all statutory approvals and clearances, in a time bound manner within a period of 60 days. Rs. 10,000/ MW shall be the transaction charge for processing such applications with a cap of Rs. 2,00,000 for utility scale projects.
b) Height of module structure i.e., up to 3 meters, shall not be counted towards the total height of building as permitted under building bylaws and no approval shall be required from the municipal corporation or the urban development and housing authority for putting up solar plants.
c) Exemption has been granted to power projects using photovoltaic or solar thermal technology, from the requirement to obtain environmental clearances including clearance from department of forest, environment and climate change and department of mines & geology for implementation on retired mine lands.
d) Exemption has been granted to floating solar plants from the requirement to obtain clearance from irrigation department.
e) However, disposal of photovoltaic cells shall attract Hazardous and Other Waste (Management and Trans-Boundary Movement) Rules, 2016, and development of solar parks shall attract the provisions of the Water (Prevention and Control of Pollution) Act, 1974 and the Air (Prevention and Control of Pollution) Act, 1981.
7) Other benefits - Certain other benefits available to solar power developers under the Policy have been set out herein below:
a) Electricity duty shall be exempted/ reimbursed for a period of 5 years from commercial operations date for rooftop solar plants under net metering, captive solar projects, solar pumps, and EV charging stations set up in accordance with Jharkhand Industrial and Investment Promotion Policy, 2021.
b) 100% exemption from payment of SGST for inputs required for rooftop solar plants under net metering, captive solar projects, solar pumps, off-grid solar projects and EV charging stations for a period of 5 years (this exemption is subject to approval from GST council).
c) If the project is completed within the scheduled commercial operation date, then such project will be exempted from paying banking charges and electricity duty for a period of 10 years. In case the commissioning is delayed beyond 30 days due for reasons beyond the developer’s control, electricity duty shall be exempted on a case-to-case basis.
d) All solar power plants shall be treated as industry under the schemes administered by Jharkhand Industrial and Investment Promotion Policy, 2021 of Department of Industries and incentives available to industrial units shall be available to the solar power plant developers.
e) State Load Dispatch Center may ensure must run status of solar plants.
f) If robotic method is used for cleaning solar panels, which uses low water technology, some incentives or subsidies may be provided by the government.
g) Rooftop consumers shall be subsidized as per the guidelines of Ministry of New and Renewable Energy and Jharkhand State Solar Rooftop Policy, 2018.
8. Manufacturing: The Policy, with an intent to promote solar manufacturing facilities, enumerates the following incentives applicable to new manufacturing facilities and equipment, ancillaries related to solar power projects:
a) Priority allotment of Government land in solar parks on a long-term lease basis.
b) Electricity duty shall be waived for the new manufacturing facilities and ancillaries of the Solar Power Projects for a period of 5 years.
c) 100% exemption/reimbursement on stamp duty.
d) Net SGST reimbursement to solar energy equipment manufacturers.
e) 100% reimbursement of custom duty on input required for manufacturing the solar modules and battery storage for a period of 5 years.
f) Any other incentives provided in the prevailing Jharkhand Industrial and Investment Promotion Policy, 2016 of Department of Industries.
9) Power Purchase: The Policy stipulates that the procurement price for solar developers shall be based on competitive bidding process or feed-in tariff-based procurement. JREDA in consultation with the DISCOM and other relevant departments shall adopt a draft PPA. Some of the pertinent terms of the Draft PPA, as provided under the Policy has been set out below:
a) The PPA shall contain provisions pertaining to capacity of the project and the applicable tariff, including provisions for late payment surcharge and rebate for timely payment.
b) The project is installed under the applicable metering guidelines of the JSERC and the terms of the PPA for a period defined in the PPA.
c) The terms pertaining to tariff, PPA term, capacity and other conditions specified in the bidding document shall not be changed.
d) Payment security mechanism in form of revolving and irrevocable letter of credit will be provided under the PPA to ensure payment to developers.
e) Indexation at the rate of 1% for a period of 25% may be indicated as part of bidding documents in an event where the price discovered is higher than the procuring DISCOM’s average power procurement cost in the given year.
f) Compensation will be provided to generator for constrained off take if the reason for it is transmission constraint, grid unavailability, or back down.
Further expanding on the terms of the Policy above, the Policy also details the various project categories and the process to set up the projects under each category, specific restrictions or allowances on the capacity allowed to set up under each category, the role of various departments, business models that can be adopted, tariff fixation method etc.
Please find attached a copy of the Policy.
This update has been contributed by Rachika A. Sahay (Partner) and Siddhant Satapathy (Associate).
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