Kerala DISCOM Seeks Regulatory Approval to Purchase Solar Power from SECI at ₹2.66/kWh

The Kerala State Electricity Regulatory Commission (KSERC) has directed the Kerala State Electricity Board Limited (KSEB) and the Solar Energy Corporation of India (SECI) to proceed with the procurement of 200 MW of solar power at the pooled tariff of ₹2.66 (~$0.036)/kWh.

In an interim order, KSERC said that the maximum pooled tariff for the solar energy supplied to KSEB should not exceed ₹2.66 (~$0.036)/kWh plus the trading margin. The regulator added that the power sale agreement (PSA) should be submitted for approval by January 5, 2021.

KSEB had sought approval for procurement of 200 MW solar energy from Inter-State Transmission System (ISTS) connected solar projects on a long-term basis to meet its renewable purchase obligation (RPO).

The next hearing will be held on January 27, 2021.


Background

SECI has adopted the practice of pooling the tariffs discovered in competitive bidding every six months. This is to ensure the availability of solar at a uniform rate to all the distribution companies (DISCOMs).

A pooled tariff is the weighted average of the tariff discovered in the competitive bidding process for a specific period. Some auctions like the manufacturing-linked solar project development resulted in a tariff of ₹2.92 (~$0.04)/kWh while the tariffs discovered in the 2 GW (Tranche IX) of ISTS-connected solar projects auction were in the ₹2.36 (~$0.0313)/kWh and ₹2.38 (~$0.0316)/kWh range.

Pooling tariffs realized in these two auctions with tariffs in the 1.2 GW auction ranging between ₹2.50 ($0.0348)/kWh and ₹2.51 ($0.035)/kWh, resulted in a pooled tariff of ₹2.66 (~$0.036)/kWh.

KSERC

SECI is now in the process of signing PSAs at this pooled tariff with state DISCOMs, KSEB being one of them.

SECI also pointed that though the indicative pooled tariff worked out to be ₹2.66 (~$0.036)/kWh, the actual tariff payable by the DISCOMs may vary because actual generation will differ based on projects under different tranches of the program. Other factors that could affect the tariff are an inadequate number of DISCOMs coming forward to procure energy, or power purchase agreements not fructify into a binding contract, and the date of the commercial operation of the projects being different under various programs.

Due to these reasons, SECI submitted that the maximum tariff would not exceed ₹2.92 (~$0.039)/kWh, while the minimum tariff would be ₹2.36 (~$0.032)/kWh.

It also said that negotiation was on with other DISCOMs for the sale of energy (6,200 MW).

SECI told KSERC that it would finalize the PSA through discussions with KSEB and incorporate the terms with modifications. After that, both sides would initiate the draft PSA and file it before the KSERC for approval.

Commission’s Analysis

KSERC noted that the maximum price of ₹2.92 (~$0.039)/kWh plus ₹0.07 (~$0.0009)/kWh totaling ₹2.99 (~$0.040)/kWh was high considering that in the latest bids tariff was as low as ₹2 (~$0.027)/kWh.

The regulator asked KSEB to submit the comments on the affidavit filed by SECI by January 05, 2021.

The Commission allowed KSEBL and SECI to proceed with the procurement of 200 MW of solar power but only under the condition that the tariff does not exceed ₹2.66 (~$0.036)/kWh plus a trading margin. The PSA would be effective only after the formal approval by the Commission to be decided in the hearing on January 27, 2021.

In a recent reverse e-auction auction by KSEB for 200 MW of solar projects, NTPC won 90 MW quoting a tariff of ₹2.97 (~$0.04)/kWh. Tata Power was awarded 110 MW of projects at the same tariff.

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