Tariff Disputes Threaten to Stall 970 MW of Solar Projects in Karnataka

The Kerala State Electricity Regulatory Commission (KSERC) has approved the petition filed by the Kerala State Electricity Board (KSEB) seeking its nod for 200 MW of solar photovoltaic (PV) projects to be developed in Kerala on Independent Power Producer (IPP) mode.

KSEB had sought the approval as it wants to procure solar to meet its Renewable Purchase Obligation (RPO).

KSEB had proposed the following deviations from the bidding guidelines issued by the Ministry of Power:

  • To set the minimum capacity as 1 MW instead of 5 MW.
  • Regarding land acquisition, KSEB wanted the 12-month period to begin after the issuance of Letter of Award (LoA) instead of the date of Power Purchase Agreement (PPA).
  • Ceiling tariff for the projects to be ₹3.50 (~0.04952)/kWh.
  • To introduce a review option: After a period of 15 years from the commercial operating date (COD) of the project, the minimum capacity utilization factor (CUF) to be reviewed based on past performance and be brought down up to 14 percent to take care of panel degradation.
  • No payment security mechanism.
  • The solar power generator has to attain the financial closure within 12 months from the date of issuance of Letter of Acceptance instead of the date of execution of the PPA.
  • The project to be commissioned within a period of 21 months from the date of Letter of Acceptance instead of the date of execution of the PPA.

While examining the petition and submissions made by KSEB, the KSERC opined, “It is a fact that KSEB is far short of achieving the fixed solar RPO targets. As an obligated entity, KSEB has to meet the RPO targets either by its own generation or by procuring solar power from the sources within or outside the state. Hence, KSEB can take steps to procure power from solar projects within the state or outside.”

Keeping in mind the scarcity of land in Kerala, the commission approved the minimum capacity for 1 MW for the solar project at a single location. KSERC also approved setting ₹3.50 (~0.04952)/kWh as the tariff ceiling for solar tender by KSEB. The commission also approved a panel degradation rate of 0.5 percent/annum over the contracted CUF specified in the bid documents, limiting the range of CUF after 15 years between 14.8 percent to 17.58 percent.

KSERC declined KSEB’s proposal to revise period of land acquisition, financial closure, and the commissioning schedule. Instead, it ordered KSEB to follow the Ministry of Power guidelines in these matters. The commission ordered the KSEB to provide at least one mode of payment security mechanism prescribed in the standard bidding guidelines for procurement of 200 MW solar PV.

In February 2018, KSERC approved ₹3.90 (~$0.062)/kWh as the interim tariff for the electricity supplied from the 50 MW Kasargod Solar Park set up in Ambalathara village of Kasargod district.

After a long gap, states have now been securing approval from their respective regulatory commissions to issue tenders for procuring solar. Recently, the Tamil Nadu Generation and Distribution Corporation (TANGEDCO) tendered 500 MW of grid-connected solar photovoltaic (PV) projects. The bid-submission deadline is December 27, 2018.

Saumy Prateek Saumy is a senior staff reporter with MercomIndia.com covering business and energy news since 2016. Prior to Mercom, Saumy was a copy editor at Thomson Reuters. Saumy earned his Bachelors Degree in Journalism & Mass Communication from the Manipal Institute of Communication at Manipal University. More articles from Saumy Prateek.