The Maharashtra Electricity Regulatory Commission (MERC) has approved a tariff of  ₹2.90 (~$0.04)/kWh for the long-term procurement of 350 MW of solar power by Maharashtra State Electricity Distribution Company Limited (MSEDCL).

The MSEDCL had filed a petition with the Commission seeking for it to approve the tariff for the long-term (25 years) procurement of power from 350 MW of grid-connected intrastate solar projects (Phase-V) to help it meet its renewable purchase obligations (RPO). The tender was initially floated in December 2019. The tender was undersubscribed, with only 350 MW of bids received against 500 MW tendered.

The distribution company (DISCOM) said that it was short of its RPO targets by 3,486 million units (MU) until FY 2018-19 when the target was only 3.5%. Considering the steep increase in RPO targets to 12.5% for 2024-25, it sought to meet the new target through this tender.

Of the 500 MW that was tendered, bids were received only for 350 MW with a quoted tariff of ₹2.90 (~$0.04)/kWh from two bidders – Tata Power Renewable Energy Limited (100 MW) and Avaada Energy Private Limited (250 MW).

The Commission noted that the MSEDCL was transparent in conducting the competitive bidding process. However, it pointed out that the decision to not conduct a reverse auction was made at the MSEDCL’s discretion even though it only received bids for 350 MW of the tendered 500 MW.

It approved the tariff stating that the discovered rate of ₹2.90 (~$0.04)/kWh was within the acceptable range for solar projects in the state given current market conditions and that it was in line with Section 63 of the Electricity Act (EA).

The MERC also noted that it believed that the tender was undersubscribed because it was limited by the fact that it was only for intrastate projects. It further added that an interstate tender could have attracted more bidders and created competition among bidders in an e-reverse auction.

Additionally, the Commission also directed that the solar power procured from these projects should be eligible for the fulfillment of the MSEDCL’s solar RPO targets for the respective periods.

Previously, the MERC approved tariffs of ₹2.89 (~$0.040)/kWh and ₹2.90 (~$0.040)/kWh and allowed the procurement of 500 MW of solar power on a long-term basis so the state DISCOM can meet its RPO targets. Under Phase-IV of the intra-state solar program, MSEDCL had issued a tender for the long-term procurement of power from 500 MW of solar projects with a ceiling tariff of ₹2.90 (~$0.04)/kWh. In the auction that followed, Juniper Green won 150 MW of solar projects at a tariff

of ₹2.89 ($0.0407)/kWh followed by Maharashtra State Power Generation Company Limited, which won 350 MW at ₹2.90 ($0.0409)/kW.

The state has been behind on its RPO compliance and recently filed a petition before the MERC against its new RPO regulations, asking it to not levy penalty on non-compliance of standalone annual targets and cumulative targets of RPO until 2022-23. In October 2019, MERC had issued a draft policy announcing its RPO from 2020 to 2025, in which the solar RPO targets proposed started at 4.5%, going up to 13.5% over the next five years. MSEDCL had suggested revisions stating that the solar RPO target of 13.5% by 2024-25 was quite stiff and that despite efforts, it would not be able to achieve them. A total solar capacity of 12,500 MW would be required by 2024-25 to achieve the target while its current contracted solar capacity stands at 4,200 MW.