The Maharashtra Electricity Regulatory Commission (MERC) has approved the Maharashtra State Electricity Distribution Company’s (MSEDCL) petition to procure 250 MW/500 MWh battery storage capacity with an additional 500 MW/1,000 MWh greenshoe capacity at a tariff of ₹219,001 (~$2,560)/MW/month for 12 years.

The energy procured from these projects will contribute to MSEDCL’s energy storage obligation.

MSEDCL has been directed to execute the battery energy storage purchase agreement with the successful bidder within 30 days.

Background

MSEDCL filed a petition seeking the adoption of the tariff for procuring storage capacity to meet its energy storage obligation. The main objective behind this procurement was to address peak and off-peak energy demands through an efficient storage mechanism.

It emphasized the importance of battery storage in integrating renewable energy sources, particularly excess solar generation from decentralized projects under MSKVY 2.0. The petitioner highlighted that MSEDCL had already secured 4,074 MW of pump storage capacity, leaving a gap that could be addressed through battery storage solutions. The total estimated storage requirement for 2029-30 is 4,600 MW, and this procurement forms a crucial part of the strategy to meet that demand.

The competitive bidding process was initiated in August 2024, and 14 bidders participated. After several bidding rounds, Pace Digitek emerged as the lowest bidder, offering a monthly tariff of ₹219,001 (~$2,560)/MW. This was significantly lower than other recently discovered tariffs for similar projects across India.

MSEDCL justified this tariff by comparing it with these projects, demonstrating that it aligned with market conditions and presented a significant cost advantage.

Commission’s Analysis

The Commission found that the bidding process adhered to the guidelines set by the Ministry of Power and was conducted transparently via a two-stage competitive bidding system. The process allowed fair competition among bidders, with the lowest discovered tariff being duly considered.

Regarding the quantum of energy storage capacity, the Commission recognized MSEDCL’s need to integrate renewable energy sources efficiently. It acknowledged that the procurement was justified based on projected storage requirements and compliance with the state’s Energy Storage Obligation.

The proposed better storage would store excess solar energy during the day and discharge it during peak hours, reducing dependency on costly energy purchases. The total estimated savings from this project are ₹7.03 billion (~$82.22 million) over 12 years, with an estimated reduction in power purchase cost by ₹1.07 (~$0.013)/kWh.

The Commission compared the discovered tariff with similar tenders conducted nationwide. The rate was highly competitive and reasonable, especially given the benefits of reducing peak-hour power procurement costs.

Additionally, projects under this procurement will receive viability gap funding of up to 30% of the capital cost or ₹2.7 million (~$31,568)/MWh from the Ministry of Power, further justifying the approval.

Considering these facts, MERC ruled in favor of MSEDCL’s petition and approved the tariff for long-term procurement.

In January, the Commission rejected SECI’s petition to adopt a tariff of ₹1.08 million (~$12,588)/MW/month for its 500 MW/1,000 MWh battery energy storage system project as the tariff was significantly higher than the current tariffs.

Subscribe to Mercom’s real-time Regulatory Updates to ensure you don’t miss any critical updates from the renewable industry.