Ministry Issues Guidelines to Procure Power from Battery Energy Storage Systems

The Ministry of Power has issued guidelines to procure and utilize battery energy storage systems (BESS) as part of the generation, transmission, and distribution assets, along with ancillary services. The guidelines aim to facilitate the growth of the battery storage sector and help establish a uniform framework for all the stakeholders.

These guidelines are being issued under the provisions of Section 63 of the Electricity Act for procuring energy from BESS through competitive bidding, from grid-connected projects to be set up on a “Build-Own-Operate” or “Build-Own-Operate-Transfer” basis.

Battery storage plays a significant role in solving the intermittent nature of renewable energy. The guidelines are framed to support India in its goal of installing 500 GW of non-fossil energy. The investments in the energy storage sector have also been on the rise globally, with the total corporate funding at $17 billion in 2021 alone, according to Mercom Capital Group’s 2021 Funding and M&A Report for Storage, Grid, & Efficiency.

The battery storage projects with ancillary services will help establish an independent ecosystem. Recognizing the need for such services, the Central Electricity Regulatory Commission (CERC), in its Ancillary Services Regulations, 2021, made provisions to allow for energy storage and demand response resources to provide ancillary services.

Ancillary services have been an integral part of the electricity ecosystem worldwide. The basic frequency and voltage control services are embedded in the electricity supply system. To enable these essential services, specific support services known as ancillary services are required to complement reliable and efficient grid operation. Ancillary services are required to maintain load-generation balance, voltage and reactive power support, and generation and transmission reserves.

The guidelines outline the bidding process for the storage projects to be commissioned across the country.

Bidding Guidelines

As per the guidelines, the earnest money deposit (EMD) must not be more than 2% of the estimated capital cost of the battery storage project. The performance bank guarantee (PBG) is set at 5% of the project cost. MNRE reduced the PBG amount to 3% for all renewable projects in a recent notification.

The minimum term of the battery energy storage purchase agreement (BESPA) period is eight years from the scheduled commissioning date (SCD) or the date of full commissioning of the project, whichever is later – considering the prevailing life cycle of battery systems being used without replacement. BESPA should be signed within 30 days after issuing the letter of award.

Intra-state BESS projects should have a minimum individual project size of 1 MW and above, with a suitable energy rating based on the application at one site with a minimum bid capacity of 1 MW.

Inter-state BESS projects should have a minimum individual project capacity of 50 MW and above with a suitable energy rating based on the application at one site with a minimum bid capacity of 50 MW at the minimum voltage level.

As per the guidelines, the procurer could accept part commissioning of the project if the minimum capacity for acceptance of first part commissioning will be 50% of project capacity or 50 MW, whichever is lower. For ISTS-connected projects, the minimum commissioning capacity for the first phase will be 50 MW. The total number of installments in which a project can be commissioned should not exceed three phases.

In case of project capacity up to 250 MW, the maximum timeline for commissioning projects without any liquidated damages will be 18 months from the effective date of the BESPA. While, for a project with more than 250 MW capacity, the SCD will be 24 months after the effective date of the BESPA.

The BESS Developer (BESSD) will be free to replenish the battery capacity from time to time during the BESPA duration at their cost and expense to meet the performance criteria. However, the procurer will be obligated to buy power only within the performance range as specified in the BESPA and at the charges applicable as per the existing agreements.

As per the guidelines, the BESS developer can attain the financial closure within the date, which is 12 months from signing the BESPA.

The project should be designed for inter-connection with intra (InSTS) or inter-state transmission system (ISTS) substation, either directly or through a pooling substation where other projects also inter-connect before the InSTS or ISTS substation through a transmission.

Depending on the implementation arrangements and design of the evacuation system, the capital costs of the transmission lines and substations before the InSTS or ISTS substation may either be directly paid by the BESSD or paid by the renewable energy park developer or another implementation agency and claimed from the BESSD as directly attributed or apportioned and recovered in total or as payments over the years.

The guidelines state that in cases where the procurer does not specify the project site, the responsibility of getting connectivity and grid access to the transmission system will lie with the developer. The bidding agency may provide a list of substations from which the bidders may choose the delivery points in a particular tender.

Suppose the successful bidder is a single company or a consortium. In that case, they should ensure that its shareholding in the project company executing the BESPA should not be below 51% at any time before the commercial operation date.

As per a recent NITI Aayog report, India’s annual battery market could surpass $15 billion (~₹1.12 trillion) by 2030, and the battery demand is expected to rise to 260 GWh in the ‘accelerated scenario’ by 2030.