Bihar’s Maiden Large-Scale Solar Auction Hits Roadblock of Tariff Adoption

In a recent development, the Bihar Electricity Regulatory Commission (BERC) has once again dismissed the petition without granting further time for the tariff negotiation for a 250 MW solar project.

In September, the state commission had rejected another petition that requested the adoption of a tariff of ₹3.45 ($0.049)/kWh and the regulatory approval for the procurement of 250 MW of solar power.

In June 2019, BREDA had invited bids for setting up 250 MW of grid-connected ground-mounted solar projects in the state.

The petition was filed by the Power Management Cell (PMC) and Bihar State Power (Holding) Company Ltd on behalf of the North Bihar Power Distribution Company Limited (NBPDCL) and South Bihar Power Distribution Company Limited (SBPDCL).



The petition was filed before the BERC for seeking the review and modification of tariff adoption and regulatory approval for the procurement of 250 MW of solar power from grid-connected projects to be set up in the state on a long-term basis.

Background

On behalf of the state distribution companies (DISCOMs), Bihar Renewable Energy Development Agency (BREDA) had floated a tender for 250 MW of solar power projects to be set up in the state, but there was no ceiling tariff proposed for the bid.

The two bidders—Sukhbir Agro Energy Limited and Avaada Energy Limited—participated in the tender and offered a tariff of ₹3.58 (~$0.50) and ₹3.60 (~$0.05)/kWh for a capacity of 50 MW and 200 MW respectively. However, the tariff was negotiated to ₹3.45 (~$0.48)/kWh, and accordingly, a petition was filed to the Commission for the adoption of the negotiated tariff.

The commission found that the tendering agency—BREDA—had deviated from the model guidelines of the government of India for the procurement of grid-connected solar projects while issuing the tender but did not obtain prior approval of the commission for the deviation.

The commission did not approve the negotiated tariff of ₹3.45 (~$0.48)/kWh and directed BREDA to renegotiate the tariff range between ₹3.05 (~$0.04) to ₹3.15 (0.04)/ kWh.

Due to the failure in negotiating the tariff, BREDA and the petitioner were advised to cancel the instant bid process and start a new tender keeping the benchmark tariff in the mentioned range.

However, instead of complying with the commission’s order, BREDA and the petitioners filed for an instant review petition citing several reasons:

  • The benefit of ₹0.15 ($0.0021) /kWh in tariff towards safeguard duty to be allowed in case of a “change in law” in the future.
  • The capacity utilization factor (CUF) data has been sourced from the Central Electricity Regulatory Commission’s (CERC) website for the calculation of solar generation in Bihar. Therefore, the Commission should consider the low CUF factor while making decisions on the adoption of quoted tariffs by the bidders.
  • The neighboring states of Uttar Pradesh and Assam floated tender for tariff-based competitive bidding for the development of grid-connected solar projects in which they have kept the ceiling tariff higher than the range set by the commission.

This being the first solar tender for Bihar, the petitioner also requested the commission to look at factors like the requirement for RPO fulfillment, the paucity of land parcels, and limited solar potential of the state.

Bihar’s electricity distribution companies are operating under stress to meet their renewable purchase obligation (RPO). In April 2019, DISCOMs in the state were penalized for not being able to meet RPO targets.

Keeping this in mind, the petitioner requested that the threshold limit set by the Commission be revised to ₹3.25 (~$0.045)/kWh so that they can renegotiate with the successful bidder, or they should be allowed to go for a fresh tender keeping ₹3.25 (~$0.045)/kWh as the ceiling tariff.

However, the petition stood rejected by the state commission, which stated that the examples of other states like Uttar Pradesh and Assam, as described in the petition, cannot be taken as proper examples for reviewing and appraising the tariff set for solar projects in Bihar.

The state of Bihar is way behind when it comes to solar development. According to Mercom India’s Solar Project Tracker, the state currently has only 110 MW of large-scale solar projects in operation.

According to Section 63 of the Electricity Act 2003, authorities such as the state electricity regulatory commissions (SERCs) are expected to adopt tariffs that have been discovered through a transparent bidding process. This procedure of tariff approval was mostly a formality that was complied on time so that developers could start the construction of power projects. But that has not been the case anymore.

Image credit: Invenergy