The Kerala State Electricity Regulatory Commission (KSERC) has approved a power sale agreement between the Kerala State Electricity Board (KSEBL) and the Solar Energy Corporation of India (SECI) for procuring 500 MW of solar power.

The agreement aims to secure renewable energy with a dedicated supply of 250 MW for peak hours under the inter-state transmission system (ISTS) Tranche XV program.

The Commission approved the sale agreement despite its concerns regarding the increased estimated power costs at Kerala’s periphery.

Background

KSEBL filed a petition on October 23, 2024, seeking approval for a power sale agreement signed with SECI on September 12. The project is part of SECI’s ISTS Tranche XV program to procure firm and dispatchable renewable energy with energy storage systems.

The sale agreement involved procuring firm and dispatchable renewable energy, including a peak power supply during evening hours. KSEBL would receive energy at a tariff of ₹3.42 (~$0.04)/kWh, including SECI’s trading margin of ₹0.07 (~$0.001)/kWh. It also included a flexible scheduling option that allows KSEBL to adjust the supply based on daily peak demand requirements.

KSEBL agreed to procure 500 MW of this capacity for 25 years, including power for peak evening hours to provide firm and dispatchable power, optimize power procurement costs, and meet its renewable energy and storage obligations.

SECI floated a tender for 1,200 MW of solar power integrated with energy storage systems in line with the Ministry of Power’s guidelines dated June 9, 2023. SECI selected developers to supply the solar capacity at tariffs between ₹3.41 (~$0.0394)/kWh and ₹3.42 (~$0.0395)/kWh, with a trade margin of ₹0.07(~$0.001)/kWh.

However, ISTS charges and losses were expected to add ₹0.46 (~$0.005)/kWh to the tariff, bringing the total cost to between ₹3.94 (~$0.04555)/kWh and ₹3.95 (~$0.0456)/kWh at Kerala’s periphery.

The distribution company (DISCOM) submitted that the agreement aligns with Kerala’s renewable purchase obligations and supports its sustainability goals. The 25-year power sale agreement would offer reliable green energy and support industrial and commercial consumers’ renewable energy demand.

SECI said that KSEBL would bear the ISTS charges and losses per Central Electricity Regulatory Commission regulations.

Commission’s Analysis

The Commission analyzed the project’s financial and operational implications. The estimated cost of power at Kerala’s periphery, accounting for ISTS charges and losses, was calculated at ₹3.94 (~$0.04555)/kWh to ₹3.95 (~$0.0456)/kWh.

The Commission noted that the tender followed the guidelines issued by the Ministry of Power. It also acknowledged the importance of renewable energy procurement for Kerala to meet its renewable purchase and storage power obligations.

It expressed concerns regarding the increased estimated power costs at Kerala’s periphery but approved the power sale agreement considering its regulatory compliance, the importance of renewable energy, and the operational and financial implications of the agreement.

The Commission also noted that the projects’ transmission charges would reduce to ₹0.31 (~$0.004)/kWh, lowering the power cost to ₹3.79 (~$0.0438)/kWh to ₹3.80 (~$0.0439)/kWh if they were commissioned by June 30, 2026, instead of September 27.

Last year, the Appellate Tribunal for Electricity annulled an order of the KSERC that it overstepped its jurisdiction by intervening in a dispute related to generating and selling electricity across multiple states.

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