The Ministry of Power (MoP) has provided a detailed framework for procurement of electricity from renewable energy (RE) plants by thermal and hydro power generators.
The objective is to promote bundling of cheaper RE with costlier thermal power to augment Renewable Purchase Obligations (RPO). It is also aimed at providing flexibility for scheduling of thermal and hydro plants that will help in proper grid management and avoid risk of power failures.
The guidelines are being issued under Section 63 of the Electricity Act, 2003 for long-term procurement from grid-connected RE plants having individual capacity of 5 megawatt (MW) and above through competitive bidding.
Bidding process
Under this policy, RE procurement can be initiated by the procurer (thermal and hydro power generators). This would be done by inviting RE generators to participate in the bidding process for installation of RE plant.
The project can be set up either at the site specified by the procurer or at the site selected by the bidder.
However, in the case of solar park-related projects, the bidding process is to be first intimated to the Solar Power Park Developer (SPPD). Subsequently, the SPPD would provide necessary details regarding land and infrastructure and make the same accessible to the bidder.
Bid structure
The bid would be designed for a minimum size of 50 MW against which the bidder has to quote for the entire package. Nevertheless, the procurer can fix the maximum capacity that can be allocated to a single bidder based on economies of scale, land availability, expected competition and development of market.
The bids can be invited either in power capacity (MW) or energy quantity (kWh or million units) terms.
The evaluation criterion would be tariff-based bidding in the form of:
(a) Fixed tariff in INR/kWh for the term of power purchase agreement (PPA)
(b) Escalating tariff in INR/kWh with an annual escalation fixed rate and the number of years from which such fixed escalation is to be provided.
Power purchase agreement
After the conclusion of the bidding process, the procurer would enter PPA with the successful bidder for a minimum period of 25 years from the Scheduled Commissioning Date (SCD), based on balance life of thermal/hydro plant.
The RE generator can operate their plants beyond the PPA tenure in case the arrangement with the land/infrastructure owning agencies, transmission system and system operators so provide.
Other important parameters
(a) Commissioning schedule: The projects shall be commissioned, within a period of 15 months from the date of execution of the PPA, for projects specified to be set up in solar park. For non-solar park projects, the timeline for commissioning is 18 months.
(b) Early commissioning: In cases of early part-commissioning, the procurer may purchase the generation till SCD, at 75% of the PPA tariff. However, in case the entire capacity is commissioned prior to SCD, the procurer may purchase the generation at PPA tariff.
(c) Compensation for off-take constraints: When a commissioned project is not able to supply electricity due to the absence of power evacuation/transmission infrastructure, then SCD for such projects may be revised to the 30th day subsequent to the availability of power evacuation infrastructure.
In case, the RE plant is asked to generate lower electricity than the planned schedule, then the bidder would be eligible for a minimum generation compensation as per below formula.
Minimum Generation Compensation =100% of [(Average Generation per hour during the month) × (number of back-down hours during the month) × PPA Tariff]
(d) Termination of PPA: In the case of a force majeure event, the PPA for RE procurement can be terminated after the completion of 180 days from the date of the force majeure notice.
In the bidding process, a minimum period of 22 days would be allowed between the issuance of tender documents and the last date of bid submission. Under normal circumstances, the bidding process is to be completed within 110 days.
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