Ministry of New & Renewable Energy (MNRE) has
issued the Guidelines for Tariff Based
Competitive Bidding Process for Procurement of Power from Grid Connected Solar
PV Power Projects. The Government has notified these Guidelines on 3rd
August, 2017 (Link - http://mnre.gov.in/file-manager/UserFiles/Guidelines_for_Tariff_Based_Competitive_Bidding_Process.pdf
)
These Guidelines have been issued under the
provisions of Section 63 of the Electricity Act, 2003 for long term procurement
of electricity by the ‘Procurers’ [the distribution licensees, or the
Authorized Representative(s), or an Intermediary Procurer] from grid-connected
Solar PV Power Projects (‘Projects’), having size of 5 MW and above, through
competitive bidding.
Key Reform Initiatives as per these Guidelines are
as follows:
i.
Generation
Compensation for offtake constraints thereby reducing
offtake risks: The “Must-run”
status for solar projects has been stressed upon. Generation Compensation
provided for following off-take constraints:
a)
Back-down
-
Min. Compensation 50% of PPA
Tariff
b)
Grid unavailability
- Compensation
by way of Procurement of Excess Generation /
Outright Compensation
ii.
PPA:
To ensure lower tariffs, Minimum PPA tenure has been kept at 25 years.
Unilateral termination or amendment of PPA is not allowed.
iii.
Project
preparedness to expedite and facilitate setting up of projects:
Issues related to land, connectivity, clearances etc. and the extension in case
of delay, have been streamlined.
iv.
Event
of Default and the consequences thereof clearly defined to ensure optimal risk
sharing between Developer and Procurer. This has been done
by clearly defining the generator and procurer events of default, and
describing the consequences thereof.
v.
Termination
Compensation to increase bankability of projects by
securing the investment by the Generator and the lenders against any arbitrary
termination of PPA. Quantum and modality for termination compensation in case
of both generator default and procurer default has
been clearly defined.
vi.
Payment
Security Mechanism: Risk of generator’s revenue getting
blocked due to delayed payment / non- payment by the procurers has been
addressed through provision of Payment Security Mechanism through instruments
like Letter of Credit (LC), Payment Security Fund, State Guarantee, etc.
vii.
Change
in Law provision to provide clarity and certainty to generators, procurers, and
investors/lenders - Change in Law provision, effective from
the date of bid submission and covering any change in law/Tax rate which has a
direct effect on the Project (and not just taxes made applicable for supply of
power) has been provided.
viii.
Early
Commissioning & Part-Commissioning for expeditious completion of
projects - Early commissioning and part commissioning have not only
been allowed, but incentivised, by way of allowing
the PPA for a minimum 25 years from the Scheduled Commissioning Date.
ix.
Rationalisation
of Penalties: The penalties have been rationalised, so as to reduce the overall cost to the
Generator, while at the same time, ensuring compliance with the Commissioning
Schedule/Scheme Guidelines
x.
Repowering:
Generators
are free to repower their power plants. However, the procurer will be
obliged to buy power only within the CUF range in PPA.
xi.
Bid
structure and process: Bids have been allowed in both
Power (MW) and Energy (kWh) terms. Also, e-bidding has been emphasised
to improve transparency.
To summarise, new
guidelines for tariff based competitive bidding process for procurement
of solar power will help enhance transparency and fairness in the
procurement process, while protecting consumer interests through affordable
power. These guidelines will also provide standardisation
and uniformity in processes and a risk-sharing framework between
various stakeholders involved in the solar PV power procurement. This will help
in reducing off-taker risk and thereby encourage investments, enhance
bankability of the Projects and improve profitability for the
investors.
RM/