- A new set of guidelines has been introduced in India for procurement of clean power from PV projects awarded through competitive bidding
- Minimum tenure of PPA has been fixed at 25 years; unilateral termination or amendment of PPA is not allowed under the new guidelines
- In the event of grid curtailment or grid unavailability with no fault of the developer, there is a provision for compensation
- Developers have been allowed to partly commission their projects or commission them earlier than the deadline and still have their PPAs running from the scheduled commissioning date
- There will be an intermediary procurer who will sign a power purchase agreement (PPA) with the generator and a power sale agreement (PSA) with the end procurer
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Trying to come to the rescue of PV project developers in India, the Ministry of Power has published new guidelines for procurement of electricity from solar PV plants awarded through competitive bidding. The idea is to facilitate transparency and fairness in procurement processes along with ensuring uniformity in processes.
These guidelines issued in August 2017 are applicable to grid connected solar PV power projects with a capacity of 5 MW and above awarded through competitive bidding.
PV project developers in India are harried a lot these days. Constantly decreasing solar tariffs are increasingly enticing electricity distribution companies (DISCOMs) to resist buying solar power on previously agreed tariffs. Some of them are reported to covertly demand from developers to revise tariffs or cancel the projects (see TANGEDCO Wants Retroactive Solar Tariff Cuts).
On the other hand, a current module shortage due to strong demand in China and the US, triggers module suppliers to negotiate contracts for their products as they hope to achieve higher prices (see Double Whammy For Project Developers In India). While module prices are market driven, the government is at least trying to address developers concerns regarding solar power supply to offtakers. Here are the most important topics of MNRE’s new guidelines:
- Now for any grid curtailment owing to power evacuation or transmission infrastructure not being ready, the developer will be allowed a generation compensation fixed at 50% of the PPA tariff. In case of grid unavailability, developers will be compensated.
- Bids will be designed in packages with a minimum size of 50 MW. Only special category states and union territories will be allowed to have smaller bid packages.
- Minimum tenure of PPAs has been fixed at 25 years. Unilateral termination or amendment of PPA is not allowed under the new guidelines.
- If the developers are able to commission the projects early or partly (at least 50%), they will be incentivized by allowing PPAs to kick in for a minimum of 25 years from the scheduled commissioning date.
- Between the power generator and power procurer, now there is a connecting link – the intermediary procurer. This intermediary procurer will sign power purchase agreements (PPA) with the generator and a power sale agreement (PSA) with the final offtaker.
- All solar power projects will need to be commissioned within 13 months from the date of PPA signing. Only those projects with 250 MW capacity or more, being developed outside of a solar park will have 15 months time to become operational.
- Financial closure will need to be secured by the generator within 7 months of PPA signing.
These guidelines aims to protect consumer interests by making power affordable. These would also establish a risk-sharing framework between various stakeholders in the PV power procurement process. The offtaker risk will be reduced. With these measures leading to enhancing project bankability, investors will feel encouraged to see profitability in these projects.
“These new auction guidelines are definitely an improvement over previous rules and are designed based on bidding guidelines set at the REWA auction, which were successful in bringing down tariffs,” said Mercom CEO Raj Prabhu. Adding, “However, if antidumping tariffs are imposed these new guidelines may not matter much in the short-term.”
MNRE’s detailed guidelines are available on its website. (For English text scroll down the document)