The Kerala State Electricity Regulatory Commission (KSERC) has approved a tariff of ₹2.83 (~$0.04)/kWh to procure 200 MW of wind power.

While the tariff of ₹2.83 (~$0.04)/kWh would be applicable from the scheduled commissioning to the commissioning of the cumulative capacity, a pooled tariff of ₹2.82 (~$0.04)/kWh will be applicable from the full commissioning to the term of the agreement.

The power sale agreement (PSA) was signed between the Karnataka State Electricity Board (KSEB) and Solar Electricity Commission of India (SECI) in June 2019 and later amended on December 12, 019. In addition to the tariff, the intermediary procurer (SECI) will also charge a trading margin, which will be applicable above the tariff.

In its order, the Commission noted that ₹0.07 ($0.001)/kWh is the maximum ceiling on trading margin for short term transactions. However, in the present case, the PSA is for a long-term contract for 25 years.

The risks of scheduling and payment of long-term contracts are generally less when compared to short-term contracts, the state body underlined. Further, it noted that there is enough payment security mechanism in the PSA, including an unconditional, revolving, and irrevocable letter of credit, a state government guarantee and a payment security fund to support three months of payments. So, the payment risk of the present transaction is minimum, KSERC said.

“Considering these reasons, there is no rationale in claiming a trading margin of ₹0.07 ($0.0009)/kWh, which is the upper ceiling on trading margin provided for short-term contracts,” the order stated. The Commission has asked KSEB to negotiate with SECI to reduce the trading margin and to get its approval.

Background

As per the estimated electricity demand and the RPO targets, the Kerala state distribution companies must procure 925 MW of power from non-solar renewable energy sources by 2021-22.

“However, the existing non-solar capacity in the state is only about 273 MW,” stated the petition.

In November 2019, Mercom reported that KSERC, in response to a petition filed by KSEB for the approval of a PSA, had issued an order stating that the agreement must be modified to reflect the updated regulations by the Ministry of Power.

In its order from last year, the KSERC had cited a clause that needed revision before the PSA can be approved. The clause stated that KSEB would be liable to carry all the power transmission losses as determined by the appropriate commissions.

The amended agreement was submitted before the Commission in December 2019.

In a similar recent development, the Kerala Commission approved a levelized tariff of ₹4.23 (~$0.059)/kWh without the benefit of accelerated depreciation benefits for the electricity generated from a 1 MW wind power project installed by Kosamattom Finance Limited at Ramakkalmedu.

Wind installations were flat in India with 2.4 GW of wind power capacity added in the calendar year (CY) 2019, compared to 2.3 GW 2018. The cumulative wind power installations stood at 37.5 GW at the end of 2019, according to the data from government agencies, compiled by Mercom India Research.