The Andhra Pradesh Electricity Regulatory Commission (APERC) has approved the battery energy storage sale agreements (BESSAs) and the associated battery energy storage purchase agreements (BESPAs) to procure 500 MW/1,000 MWh of battery energy storage capacity by the state’s distribution companies (DISCOMs).

The Commission also adopted the tariffs resulting from a competitive bidding process for a 12-year contract period.

However, APERC rejected NHPC’s proposed trading margin of ₹0.07 (~$0.0007)/kWh, directing that the margin be capped at 0.5% of the monthly capacity charges, as permitted under the Ministry of Power’s guidelines.

Background

The petition was filed by Eastern Power Distribution Company of Andhra Pradesh (APEPDCL), Southern Power Distribution Company of Andhra Pradesh (APSPDCL), and Andhra Pradesh Central Power Distribution Corporation (APCPDCL), seeking approval to procure 500 MW/1,000 MWh of battery storage capacity.

The battery storage project is part of the Government of India’s program that offers viability gap funding (VGF) of up to 30% of the capital cost or ₹2.7 million (~$29,138)/MWh, aimed at promoting energy storage to facilitate the integration of renewable energy.

The tender was floated in February last year.

NHPC conducted the e-reverse auction in June 2025. The selected developers were

• Patel Infrastructure for 225 MW/450 MWh at the Jammalamadugu substation with a tariff of ₹208,000 (~$2,244.76)/MW per month.
• ACME Solar Holdings for 50 MW/100 MWh at the Kuppam substation with a tariff of ₹210,000 (~$2,266.34)/MW per month.
• ACME Solar Holdings for 225 MW/450 MWh at the Ghani substation with a tariff of ₹222,000 (~$2,395.85)/MW per month.

Concerns were raised by several stakeholders regarding tariff levels, transparency in the bidding process, the 12-year contract duration, and the ₹0.07 (~$0.0007)/kWh trading margin proposed for NHPC.

NHPC and ACME Solar stated that the tariffs were determined through a transparent, competitive bidding process compliant with the Ministry of Power guidelines and that battery storage is essential for integrating renewable energy and managing peak demand.

They emphasized that the discovered tariffs aligned with the prevailing market rates. The tender evaluation committee rigorously analysed the e-reverse auction price bids, benchmarking them against current market rates, and was satisfied with the validity of the respective L1 (lowest) tariffs.

NHPC argued that the ₹0.07 (~$0.0007)/kWh trading margin is uniformly applied across its renewable energy and battery storage projects and is compliant with the Ministry of Power’s guidelines.

Commission’s Analysis

APERC observed that Andhra Pradesh has a large renewable energy base, which creates grid management challenges due to the intermittency of solar and wind power. The Commission noted that solar generation peaks during the day when demand is lower, while demand surges in the evening, creating the so-called ‘duck curve’ problem.

The Commission stated that battery energy storage systems are critical for storing surplus renewable energy and releasing it during peak demand periods, thereby improving grid stability and reducing reliance on expensive short-term market purchases.

It added that by eliminating the distribution companies’ reliance on spot-market pricing during peak hours and preventing the curtailment of renewable energy, battery storage aligns with prevailing market economics and directly safeguards consumers’ financial interests.

The Commission rejected claims that the procurement process lacked transparency, noting that the bidding was conducted transparently, with 17 companies participating, and that it was followed by a competitive reverse auction.

APERC noted that the projects secure VGF of up to 30% of the capital cost or ₹2.7 million (~$29,138)/MWh. It held that the DISCOMs were warned that failing to sign the BESSA would result in NHPC withdrawing the VGF allocation. If the DISCOMs scrap this tender to pursue lower CAPEX in 2026, they will likely lose the 30% of the central subsidy.

However, APERC found that NHPC’s proposed ₹0.07 (~$0.0007)/kWh trading margin was unjustified, as the battery storage arrangement is primarily a capacity-based service rather than energy trading.

It added that as this is a standalone battery storage project procured purely on a capacity basis, applying the ₹0.07 (~$0.0007)/kWh margin would result in an exorbitant and unjustified administrative fee compared to the 0.5% capacity option.

The Commission ruled that the margin should instead be limited to 0.5% of the capacity charges, which better reflects the administrative role performed by NHPC.

Recently, APERC issued a draft framework for resource adequacy planning to ensure that electricity demand in the state is met reliably while maintaining an optimal mix of generation resources.

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