MNRE Prepares New Guidelines for Off-Grid Solar Power Projects

The Ministry of New and Renewable Energy (MNRE) has issued draft guidelines for the implementation of off-grid solar power projects under RESCO (renewable energy service company) mode.

RESCO model is a zero-investment model in which the consumer pays only for the electricity generated, while the solar system is owned by the developer.

The draft guidelines come on the heels of the MNRE’s decision to extend the third phase of the off-grid and decentralized solar PV applications program until March 31, 2021. In the order, it was stated that under the extended program, off-grid solar power projects would be installed only under RESCO mode for which the Ministry will be issuing separate guidelines.

Under the phase III of “Off-grid and Decentralized Solar PV Applications” program of MNRE, off-grid solar power projects of individual sizes up to 25 kW can be installed in areas where grid power has not reached or is not reliable.

Such projects are mainly aimed at providing electricity to government schools, hostels, panchayats, police stations, and other public service institutions. The off-grid and decentralized solar PV applications program phase III was launched by the MNRE on August 07, 2018, and was slated to be valid for financial years 2018-19 and 2019-20.

Comments on these draft regulations and draft model power purchase agreement (PPA) can be sent by May 25, 2020.

The proposed draft states that since the beneficiaries for off-grid solar power projects are public service institutions, there could be difficulty in arranging the beneficiary share upfront. Further, the draft states that after the guarantee period is over, continuing of operation and maintenance (O&M) of the project could be an issue due to the financial or technical constraints on the side of the beneficiary.

Under the off-grid program, the MNRE had suggested the design aspects for both systems—isolated off-grid and grid-connected.

For grid-connected system, the draft proposes:

  • Off-grid solar PV system to be designed only for essential load
  • Maximum Power Point Tracking (MPPT) hybrid inverter should be used
  • Provision to be made for feeding surplus power to the grid through net metering
  • Remote Monitoring System should be deployed with the system

Further, the MNRE proposed that under the RESCO model, the vendor will install and operate the solar project of capacity up to 10 kW for at least ten years and 15 years for projects with a capacity above 10 kW. After completion of its time, the project will be handed over to the beneficiary in operating condition.

It has also proposed that the MNRE’s central financial assistance (CFA) will be available on the benchmark cost. The MNRE’s benchmark cost includes the cost of the complete system, transportation of material at site, installation, commissioning, insurance, and annual maintenance charges (AMC) for five years.

Under the upfront payment of CFA, 90% of the benchmark cost will be paid after the successful commissioning of the project.

On the payment of CFA in installments, 50% of the CFA may be released at the time of commissioning and the remaining 50% at the end of five years, or during the time of replacement of batteries, whichever is later. This option will be available for projects up to 10 kW capacity.

“This will ensure the smooth operation of the project for the contract period of 10 years,” the guidelines stated.

For projects of capacity over 10 kW and up to 25 kW having a 15-year contract, the CFA will be released in three installments. 50% of the fund will be released at the time of commissioning; 25% at the end of five years or the first replacement of batteries, while the remaining 25% of CFA will be released at the end of 10 years or during the time of second replacement of batteries.

Further, the draft suggests that the RESCO company will be selected through open competitive bidding to be conducted by the implementing agency.

Regarding the tariff estimation, the guidelines suggest that a representative system of 4 kW has been considered for the estimation of the tariff. In areas such as in the northeast region where the solar radiation is low, the daily minimum guaranteed solar power would be 10 kW. If tubular-gel-batteries having a life of four to five years are used or are required to be replaced, then the developer can arrange a loan @12% for the investment in the project.

If the subsidy is paid upfront, then the levelized tariff will be ₹5.96 (~$0.08)/kWh. If 50% of the subsidy is paid upfront and the balance 50% is paid after the completion of five years, then the levelized tariff will be ₹9.55 (~$0.13)/kWh.

In case of the power purchase agreement, the draft states that if the power producer fails to supply the daily minimum guaranteed power or power required by the beneficiary, then the developer will be liable to pay the penalty for the shortfall at the rate specified in the PPA. The penalty could be twice the rate at which power is supplied to the beneficiary, the draft suggests.

The draft also states that the project should be installed and commissioned by the successful RESCO within three months from being awarded by the implementing agency. If the reasons for the delay is beyond the control of RESCO, then an extension of a maximum of three months can be provided.

Further, the guidelines suggest that the systems under the program should meet the technical specifications and construction standards as specified by the Bureau of Indian Standards (BIS) and MNRE.

Under the third phase of its off-grid solar, the government had set a target to install 118 MW of solar power capacity by March 31, 2020, as reported previously by Mercom.


Image credit: Partonez / CC BY-SA