The Central Electricity Regulatory Commission (CERC) has allowed NHPC to adopt the usage charges of ₹2.45(~$0.029)/kWh under the competitive bidding process to procure  1,000 MW of solar power under the CPSU Phase II (Tranche III) program.

Background 

The Ministry of New and Renewable Energy (MNRE) notified the CPSU Phase II program to set up 12,000 MW grid-connected solar projects with Viability Gap Funding (VGF) at the modified cap on usage charges at ₹3.50-2.80(~$0.04-0.033)/kWh.

Coincident with modifying the cap on usage charges, MNRE declared Indian Renewable Energy Development Agency (IREDA) as the implementing agency instead of the Solar Energy Corporation of India.

IREDA issued a Request for Selection (RfS) for setting up 5,000 MW grid-connected solar PV projects under Tranche III in January 2021.

As per the RfS, the power generated from government power producers should be for self-use or use by government/ government entities directly or through the distribution licensees on payment of mutually agreed usage charges of not more than ₹2.20(~$0.02)/kWh.

The usage charges will exclude other third-party charges like wheeling and transmission charges and losses, point of connection charges and losses, cross-subsidy surcharges, and SLDC/RLDC Charges.

MNRE amended the program guidelines in May 2021, capping the usage charges at ₹2.45 (~$0.029)/kWh and revised the VGF to ₹5.5 million (~$65,512.82)/MW from ₹7million (~$83,379.95)/MW. The commissioning schedule for the project was also revised from 24 months to 30 months.

NHPC was declared a successful bidder through an e-reverse auction and was allocated solar projects with an aggregate capacity of 1,000 MW.

Further, the NHPC asked various states/DISCOMs to procure solar power. The DISCOMS of Telangana, West Bengal, and Punjab conveyed their consent to procure solar power in the long term.

NHPC entered into Power Usage Agreements with three state DISCOMs — Punjab, West Bengal, and Telangana- for solar power supply at ₹2.45 (~$0.029)/kWh.

NHPC requested IREDA to approach the Commission to approve the adoption of usage charges of ₹2.45 (~$0.029)/kWh agreed upon in the competitive bidding process with an additional maximum VGF of ₹4.5 million (~$53,603.69)/MW. However, IREDA refused the request and asked the procurer to approach the Commission instead.

Commission’s analysis

Citing Section 63 of the Electricity Act, 2003, the Commission stated that it could adopt the tariff determined in the bidding process, provided it has taken place transparently and according to the government’s guidelines.

The Commission said that in an earlier case, the mutually agreed usage charges were lower than the prevailing ceiling usage charges of ₹3.50 (~$0.04)/kWh. However, it allowed the prevailing ceiling usage charges, recognizing that the bid process had been conducted with VGF as a bid parameter.

The Commission noted that the usage charges under PUAs are equivalent to those prevailing after the bid process in the present case.

It noted that MNRE also increased maximum usage charges to ₹2.57 (~$0.03)/kWh for projects awarded under Tranche III due to increased GST rates for manufacturing renewable energy devices and parts.

The Commission allowed the adoption of the usage charges of ₹2.45 (~$0.029)/kWh by NHPC as they are equivalent to the ceiling usage charges prevailing during the bid process.

In March 2024, the Commission approved tariffs discovered through competitive bidding for NTPC’s procurement of 1,250 MW power from grid-connected solar power projects under the “Program for Flexibility in Generation and Scheduling of Thermal/Hydro Power Stations through Bundling with Renewable Energy and Storage Power.”

In February 2024, the regulator formulated the draft regulations to determine the tariff for renewable energy projects.