The Ministry of Power has introduced new guidelines for tariff-based competitive bidding for grid-connected solar power projects, aiming for transparency, fair procurement, and competitive prices.

The amended guidelines include bid capacity limits, timeline changes, power procurement, and penalties for delay, among others.

They aim to stabilize and derisk the renewable energy sector by establishing a framework for long-term solar power transactions between states.

Here are the key changes in the guidelines

Applicability

The guidelines will apply to all upcoming solar power projects, with or without energy storage. The earlier guidelines did not include any provisions related to energy storage.

PPA Period

The power purchase agreement (PPA) is set at 20 years from the scheduled commissioning date. However, it may be extended up to 25 years if the procurer grants an extension due to circumstances beyond the generator’s control.

Under the previous dispensation, the PPA period was 25 years from the scheduled commissioning date.

Bid Structure

Bidders will be allocated the power capacity they offered only if their tariff offers fall within 2-5% of the lowest bidder’s tariff. The earlier guidelines did not specify this range for other bidders’ offers in relation to the lowest (L1) tariff.

Under the new guidelines, a maximum of 50% of the total capacity specified in the request for selection (RfS) can be allocated to a single bidder. Previously, there were no restrictions on the capacity allotted to a single bidder.

Bidders now have the flexibility to offer a portion of the total power to be procured. For projects connected to the inter-state transmission system, the minimum bid capacity is 50 MW. The minimum bid capacity may be set at 10 MW for STU-connected projects.

The earlier guidelines had set the minimum bid package at 50 MW for all projects.

Bidding Timeline

The new indicative timetable for the bidding process is as follows:

If there are any changes in the RfS document, additional time must be given to bidders. Under normal circumstances, the bidding process should be completed in around 110 days.

The earlier guidelines did not specify separate timeframes for the evaluation of technical bids and the evaluation of financial bids with the e-reverse auction.

Power procurement

If the power supply falls below the minimum capacity utilization factor (CUF), the generator will be required to pay a penalty of one and a half times the PPA tariff for the energy shortfall.

As per the earlier guidelines, the penalty amount was determined under the terms of the PPA and was designed to offset potential costs associated with low generation and supply of power. The penalty is subject to a minimum of 25% of the cost of the energy shortfall, calculated at the PPA tariff.

If the energy available exceeds the maximum CUF specified, the generator can sell it to other entities, but the procurer will have the first right of refusal. If the procurer purchases the excess generation, they can do so at the PPA tariff.

Under the earlier guidelines, the procurer purchased the excess power at 75% of the PPA tariff.

Power Supply Commencement

The commencement of the supply schedule for power projects is as follows:

• For projects up to 1,000 MW capacity, the power supply must begin within 24 months of signing the PPA.
• For projects above 1,000 MW capacity, the power supply must begin within 30 months of signing the PPA.

Under the earlier guidelines, projects specified to be set up in a solar park were required to be commissioned within 15 months from the date of PPA execution, while projects not specified to be set up in a solar park had a commissioning period of 18 months from the date of PPA execution.

Penalties for delays

In case of a delay in the commencement of power supply beyond six months from the scheduled commissioning date, the contracted capacity will be reduced to the project capacity that has already started supplying power within the scheduled commissioning date plus six months. The PPA for the remaining contracted capacity that has not started supplying power will be terminated.

The generator will also be banned from participating in bids issued by any procurer or intermediary procurer for one year for the first default, not less than two years, and not more than three years for subsequent defaults.

The earlier guidelines did not include provisions for debarment of the generator in case of a delay in the commencement of the power supply.

The Ministry recently issued new guidelines for the tariff-based competitive bidding process for procurement power from grid-connected wind power projects.

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