The Ministry of Power has issued the draft tariff-based competitive bidding guidelines to procure stored energy from existing, under-construction, or new Pumped Storage Projects (PSP).

Stakeholders can submit comments and suggestions by September 6, 2024.

Procurement Mode

Mode 1: Procurement from a PSP developed on a site identified by the procurer

The procurer may establish the project at a site specified in the bidding documents. If the government or a government entity owns the site, the project must be developed on a Build Own Operate Transfer (BOOT) basis for 25 to 40 years, as specified in the Request for Selection (RfS), to ensure equitable use across generations.

Under the BOOT model, the project will be transferred to an entity identified by the state government at a predetermined amount at the end of the agreement term, as specified in the RfS.

The procurer must prepare a Detailed Project Report (DPR) along with the bid. To minimize project risk, the procurer must establish a Special Purpose Vehicle (SPV) to handle all pre-feasibility activities, including securing environmental, forest, land clearances, and other statutory requirements.

This SPV will be a wholly owned subsidiary of the procurer, with a minimum share capital of ₹100,000 (~$1,192), established under the Companies Act. The SPV will be transferred to the successful bidder at a cost that includes the par value of the shares and the expenses incurred by the procurer in operating the SPV, which will be pre-specified in the RfS.

Mode 2: Procurement from a PSP developed on a site identified by the bidder or already commissioned

In this mode, the procurer will procure from a PSP developed on a site either self-identified by the bidder or from an already commissioned PSP. Development may occur on a Finance Own Operate (FOO) basis for 15 to 25 years, as specified in the RfS. PSP developers may identify potential sites for construction or offer storage from existing projects.

Before beginning construction, the PSP developer must secure statutory clearances, including those under Section 8 of the Electricity Act and environmental, forest, and land clearances.

The procurer will not be liable for any delays in obtaining these clearances. Selected bidders must submit the approved DPR before signing the Power Purchase Agreement (PPA).

Indicative Timelines

Bidding Parameters

Minimum Bid Capacity:

• For ISTS-connected projects, the minimum bid capacity is 50 MW.
• For InSTS-connected projects, the minimum bid capacity is 10 MW.
• Depending on land and transmission availability for projects in North-Eastern States, Special Category States, and other InSTS-connected projects, a smaller minimum capacity may be allowed.

Technical Eligibility Criteria

Applicants must show experience in developing infrastructure projects over the past five years. Detailed requirements will be outlined in the RfS.

The minimum aggregate capital expenditure for all qualifying projects undertaken in the last ten years must meet a threshold specified in the RfS.

The minimum capital expenditure per qualifying project must meet the minimum capital expenditure defined in the RfS.

Financial Eligibility Criteria

Net worth/assets under management or investible funds must be at least 20% of the estimated capital cost of the PSP for the financial year in which bids are issued.

Earnest Money Deposit (EMD)

The EMD must be at least 2% of the estimated capital cost for the contracted capacity of the new PSP. It will be released within 15 days of issuing the Letter of Award (LoA) to non-selected bidders.

Performance Bank Guarantee (PBG)

The PBG must be at least 5% of the estimated capital cost for the contracted capacity of the new PSP.

Contract Award

The procurer and the successful bidder/project company or SPV will sign the PPA. If an intermediary procurer is involved, it will sign the PPA with the developers and a Power Sale Agreement (PSA) with the end procurer. The PSA will ensure back-to-back contracting of stored energy/storage capacity.

The PPA should be signed ideally immediately after the PSA. The awarded capacity will be canceled if the PPA is not signed within six months of the LoA or if an agreed extension is not agreed upon. Further actions will be specified in the Bid document if the cumulative capacity eligible for PPAs is less than awarded.

The procurer must publicly disclose successful bidder(s) and their quoted tariff/charges on their website for at least 30 days. Tariff adoption must be sought from the appropriate Commission within 15 days of tariff discovery. The Commission should decide within 60 days of application or 120 days from the PPA’s effective date. If not, the procurer must grant an extension equal to the delay.

Additional Provisions

Transmission Connectivity

The developer is responsible for obtaining Transmission Connectivity to the ISTS network under GNA regulation at their own cost.

Force Majeure

The developer must notify the procurer of force majeure within 15 days of its occurrence. The procurer will respond within 15 days.

Financial Closure

The financial closure period is within 12 months, with extension charges of ₹1,000 (~$12)/MW per day of delay.

Minimum Part Capacity for Commissioning

The minimum capacity for part commissioning is 50% of the project capacity or 50 MW, whichever is lower.

Compensation for off-take constraints

If the procurer is unable to procure the energy storage capacity or power scheduled by the developer due to transmission constraints or grid security issues, the following compensation provisions will apply:

Under the tolling tariff model, the period of reduced off-take will be considered available for payment to the developer if the annual availability falls below the normative level specified in the RfS. However, the total availability after this adjustment will not exceed the normative availability.

Under the composite tariff model, if the annual energy supplied is less than the contracted amount specified in the RfS, the following measures will be implemented:

• The procurer will pay for the reduced energy at a rate specified in the RfS but not exceeding 60% of the composite tariff outlined in the PPA.
• The developer must offer any unused capacity or energy under the Late Payment Surcharge (LPS) Rules provisions.
• Profits earned from the sale of un-requisitioned energy or capacity will be shared per the LPS Rules.

In November, the Coal Ministry identified 20 abandoned mines to evaluate their feasibility for setting up PSPs and leveraging the economic advantages of land banks.

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