Moody’s India Hails New Bidding Guidelines

• The new bidding guidelines introduced by MNRE are a positive development for the Indian solar power sector
• Moody's ICRA expects that these steps will help in addressing off-take risks for PV projects
• With new guidelines in place, grid curtailment risk has also been covered to some extent
• Moody's suggests if state governments can cover for payment delays in some situations, it will help improve bankability of such projects as in the case of Rewa Solar Park
• The new guidelines apply only for new projects

A commentary from the Indian chapter of credit ratings agency Moody's appreciates the new bidding guidelines for solar power projects introduced by the Government of India. It terms it as a positive for the sector.

 Moody's Investors Service Company ICRA's commentary follows its previous comments about adverse impact of DISCOMs forcing renewable energy developers to renegotiate PPAs (see Moody's Warns About Retroactive Cuts In India). 

 Recently, the Ministry of New and Renewable Energy (MNRE) launched guidelines to ensure transparency and uniformity for power procured from competitive bidding PV projects (see MNRE Issues New Guidelines For PV Projects).

 ICRA says the guidelines address some of the key concerns for the sector that helps in mitigating off-take and grid curtailment risk to some extent. It suggests state governments to cover for payment delays to independent power producers, as was the case in the Rewa Solar Park bid (see 750 MW 'Ultra-Mega' Solar Project In India). ICRA believes if this measure is included in all PPAs signed directly by state discoms it will help improve bankability of PPA documents.

 Grid curtailment of quickly growing solar and wind power capacities – despite enjoying a must-run status in India – is now occurring on a regular basis, like in the states of Tamil Nadu and Rajasthan (see Tamil Nadu Rejects 'Must-Run' Status For Solar). Under the new guidelines, generators will be eligible for compensation in case of off-take constraints owing to some reasons as delay in commissioning of transmission infrastructure, grid unavailability and grid back-down. This too is a favorable policy for solar power producers, according to ICRA.

 Nevertheless, the guidelines will only be applicable to new projects. Existing projects will continue to battle these issues as and when they arise. Some states are resorting to other measures to bully renewable energy generators, like in the case of Madhya Pradesh where SkyPower's PPAs were junked over delay in project commissioning.

 In Rajasthan, renewable energy projects under the Renewable Energy Certificate (REC) mechanism were recently suspended with immediate effect by the Rajasthan Renewable Energy Corporation Limited (RRECL) (see RE Projects Approval Suspended In Rajasthan).