The Central Electricity Regulatory Commission (CERC) has rejected Solar Energy Corporation of India’s (SECI) petition to adopt tariffs for its 500 MW/1,000 MWh Standalone Battery Energy Storage Systems (BESS) pilot projects.

Although the bidding process was deemed transparent and compliant with guidelines, the Commission found the proposed tariffs misaligned with prevailing market conditions due to significant delays in project agreements and falling battery costs.

It said the tariffs, if approved, would have unfairly benefited developers at the expense of public interest and consumer welfare.

It clarified that price reductions after bidding are not grounds for rejecting discovered tariffs. However, the delays in this case led to significant changes in market dynamics, warranting a reassessment.

The Commission observed that subsequent bids for similar projects in 2024 revealed significantly lower tariffs, reflecting reduced battery costs and improved competitiveness. For example, tariffs for similar BESS projects dropped to ₹372,978 (~$4,347)/MW/month compared to ₹1.08 million (~$12,588) discovered in SECI’s 2022 bidding.

Background

The case revolved around SECI’s project to implement a 500 MW/1000 MWh standalone BESS on a pilot basis. SECI issued the tender in April 2022, followed by the e-reverse auction in August. JSW Renew Energy Five (JSWREFL) emerged as the winning bidder in the e-reverse auction at a tariff of ₹1.08 million (~$12,588)/MW/month.

Letter of Award (LoA) was issued to JSWREFL in January 2023 and in June the Battery Energy Storage Sale Agreement (BESSA) was executed with Gujarat Urja Vikas Nigam (GUVNL).

The project allocation included 300 MW tied to SECI for distribution to end-users and 200 MW reserved as merchant capacity for JSWREFL.

Despite these developments, delays occurred in signing the Battery Energy Storage Purchase Agreement (BESPA), prompting SECI to file this petition. SECI also requested approval for a 0.5% trading margin on applicable tariffs and an additional ₹0.07 (~$0.00082)/kWh margin for grid ancillary services.

SECI asserted that the tariffs were determined transparently and adhered to government guidelines. It explained delays in agreement execution as procedural and mutually agreed upon by stakeholders. JSWREFL and GUVNL supported the extensions and agreed to the tariffs and trading margins. The National Load Despatch Centre raised initial concerns but eventually agreed to the terms for utilizing the allocated capacity.

Commission’s Analysis

The Commission confirmed that the bidding process complied with government guidelines. It noted that the LoA was issued with a delay of 145 days after the e-reverse auction took place. Subsequently, the BESSA with GUVNL was signed 160 days after the issuance of the LoA, and the BESPA for 150 MW with JSWREFL was executed 245 days after the BESSA.

The delays allowed developers to benefit from falling battery costs, potentially resulting in undue advantages at the expense of public interest and consumer welfare. The Commission emphasized its responsibility to balance developer interests with consumer protection.

Considering these observations, CERC rejected SECI’s prayer for tariff adoption, citing misalignment with prevailing market conditions due to delays. SECI’s prayer for trading margins was also denied.

The petition was disposed of, with the Commission urging SECI to adhere to timelines in future projects to avoid similar issues.

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