The Gujarat Electricity Regulatory Commission (GERC), in a recent order, ruled that seawater desalination programs could set up solar projects with a maximum capacity of 400% of their contract demand with the distribution licensee to meet their energy requirement.

However, the Commission rejected the relief sought by the petitioners for relaxation in banking facility, cross-subsidy surcharge, and additional surcharge.

Kutch Sea Water Desalination, Bhavnagar Desalination, Dwarka Sea Water Desalination, and Gir Somnath Desalination had filed a petition for the review of the earlier order passed by the Commission regarding the tariff framework to procure power by distribution licensees, from solar projects and other commercial entities in Gujarat.

Background

The four petitioners are special purpose vehicles (SPVs) of the Shapoorji Pallonji Group and Aquatech Systems. The objective of these SPVs is to design, build, operate, and transfer programs to deliver the desalination projects to Gujarat Water Infrastructure and implement the desalination project.

The government of Gujarat issued a policy for ‘Desalination Projects within Integrated Power Generation Units in the State of Gujarat’. The said resolution aims at reducing the cost of water desalination by utilizing renewable energy for such an energy-intensive process.

The Commission, in its order dated May 8, 2020, passed an order determining the tariff of solar projects by the distribution licensee and other commercial issues associated with it during the control period.

The petitioners argued that the Commission had not considered the government regulations dated May 15, 2019, and July 19, 2019, concerning the desalination projects to be set up through Narmada, Water Sources, Water Supply, and Kalpsar Department, wherein the ceiling norms concerning the capacity of the wind and solar projects were relaxed and allowed up to 400% of the contract demand.

The Paschim Gujarat Vij Company Limited (PGVCL) had filed its written reply contending that the Commission had held that the maximum capacity should be 50% of the contracted load for captive use. However, micro, small and medium enterprises were allowed to set up solar projects of any capacity irrespective of their approved load, and if relaxations were to be considered, the conditions mentioned in the government regulations should be incorporated so far as relaxation in capacity up to 400% was concerned.

Commission’s analysis

The Commission noted there was no mention of the desalination project set up by the solar project developer in the order dated May 8, 2020. The said notification stated that in the desalination projects set up through Narmada, Water Resources, Water Supply, and the Kalpsar Department of Gujarat, the ceiling of the installed capacity of wind or solar projects relaxed and allowed up to 400% of the contract demand with distribution licensee.

The Commission noted that the review of the order on the issue of the capacity of desalination projects up to 400% of the contract demand with distribution licensee was a valid one and should be accepted.

The Commission observed that it had already been discussed and given due consideration regarding banking facility, cross-subsidy surcharge, and the additional surcharge for solar projects.

“It was pertinent to note that while making special provisions for desalination projects, the Government had also not considered it fit to give any additional relaxation regarding banking, cross-subsidy surcharge, and additional surcharge,” the Commission added.

Considering all the facts, the Commission stated that the seawater desalination projects were eligible to set up solar projects with a maximum capacity of 400% of their contract demand with the distribution licensee to meet their energy requirement for the desalination plant. Also, the Commission rejected the relief sought by the petitioners for relaxation in banking facility, cross-subsidy surcharge, and additional surcharge.

In June this year, GERC approved the amendments sought by the Gujarat Urja Vikas Nigam Limited to the earlier order passed by the Commission for tariff framework to procure power by distribution companies. The amendments addressed several issues such as energy accounting, captive projects, cross-subsidy surcharge, wheeling charge, and additional surcharge, among others.

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