The Kerala State Electricity Regulatory Commission (KSERC) ordered that Kerala State Electricity Board Limited (KSEBL) begin the preliminary actions required for setting up a 6 MW solar project at Kerala Water Authority’s (KWA) land in Moongilmada, Palakkad, on a renewable energy service company (RESCO) basis.

The Commission also said that KSEBL can invite bids from developers for implementing the project under the Component C of Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM KUSUM) Program without fixing any upper ceiling tariff.

Background

The Ministry of New and Renewable Energy (MNRE) had allotted solarization of 2,000 agriculture pumps to KSEBL under Component C of the PM KUSUM Program for the financial year 2020-21.

KSEBL envisaged two implementation models, i.e., the capital expenditure (CAPEX) model, and the RESCO model, to implement the project. As per the guidelines, a distribution company can identify land near the substation of the agricultural feeders, get ownership of the land transferred or take it on a lease, provide connectivity at the distribution substation, and draw the evacuation system between the distribution substation and the solar project.

MNRE will provide a subsidy of 30% on the benchmark capital cost of ₹35 million (~$458,157) /MW or the tendered cost, whichever is lower under the Program.

To implement feeder level solarization utilizing 30% central financial assistance (CFA), KSEBL identified 36 acres of KWA’s land at Moongilmada, Palakkad, to install the ground-mounted solar project. KSEBL assessed that a 6 MW solar project could be installed on the land, and the power could be evacuated through the 33kV Vannamada substation, which is around 3.5 km away from the proposed site.

KSEBL prayed to the Commission to determine the upper ceiling tariff for procurement of power from the 6 MW project considering a maximum CFA of ₹10.5 million (~$137,425)/MW and including lease rent for 25 years to KWA, as part of the implementation of Component C of the KUSUM Program.

Commission Analysis

The Commission observed that the lease rent payable to KWA is a significant cost component affecting the tariff of the project. However, KSEBL and KWA have yet to agree on the lease rent. Thus, without the confirmation of lease rent, the Commission noted that it cannot make any attempt to determine the ceiling tariff for procuring the power from the project.

The Commission also noted that the power evacuation involves 3.5 km of 33 kV line from the project to KSEBL’s 33 kV substation. The Commission believes that since the strategic business unit of KSEBL is developing the power evacuation system, its cost will be part of the asset while determining the annual recurring revenue and expected revenue from charges while approving KSEBL’s truing-up petition. Hence, the cost of the power evacuation as part of implementing the project need not be factored in the tariff.

Considering all these aspects in detail, the Commission orders that KSEBL can invite bids for implementing the project without fixing an upper ceiling tariff. However, KSEBL should mention in the bid documents that the lease rent will be payable separately per the agreement reached between KSEBL and KWA. The same would be permitted as one of the components while determining the final tariff of this project. Hence, KSEBL can proceed with the project without losing the CFA available for the solarization of the agricultural feeders available under Component C of the PM KUSUM Program.

Once KSEBL selects the developer for implementing the project and the lease agreement for the identified land with KWA is signed, KSEBL can file a separate petition under Section 63 of the Electricity Act 2003 to adopt tariff for procuring power from the project.

Recently, KSERC approved a reduced tariff of ₹2.44 (~$0.033)/kWh proposed by KSEB to procure 110 MW of solar power from TP Saurya, a wholly-owned subsidiary of Tata Power.

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