The Ministry of Power has issued an order stating that no interstate transmission charges and losses will be levied on solar and wind power projects commissioned up to March 31, 2022.
The waiver will apply to the solar and wind projects for the entire duration of their Power Purchase Agreements (PPAs), which would be 25 years.
The announcement effectively extends the existing Inter-State Transmission System (ISTS) charge waiver for solar projects beyond its previous expiration date of December 31, 2019. It likewise extends an existing exemption for wind projects that had been set to expire on March 31, 2019.
“Extension of ISTS waiver for solar and wind until 2022 gives the sector much needed visibility and encourages project development in resource rich areas without additional cost. The move should enable states to procure solar at competitive rates as it is challenging to match a low bid in a high solar insolation states compared to a low one,” said Raj Prabhu, CEO of Mercom Capital Group.
To avail the benefit of the waiver, the solar and the wind projects must have these prerequisites:
- The solar and wind projects must have been awarded through competitive bidding.
- There should be proper Power Purchase Agreements (PPAs) executed for the sale of such generation capacity to the Distribution Companies (DISCOMs) and other entities for the compliance with their Renewable Purchase Obligations (RPOs).
The most significant factor of this order is that now the government has allowed for the waiver of the charges for the long-term purchase of power by entities other than the state-run distribution companies.
Considering the uncertainties swirling around the solar sector this news comes as a welcome development.
With the recent milestone of 20 GW of cumulative solar installations, the government does not want the pace of installation to slow down in the country and this policy will be an added incentive for the project developers.
Renewable energy capacity additions continue to gain momentum in India and accounts for 19.4 percent of India’s capacity mix, according to data compiled by Mercom India Research.