Regulator Allows Buying Wind Energy from Projects with Expired Agreements

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Maharashtra Electricity Regulatory Commission (MERC) has allowed Maharashtra State Electricity Distribution Company (MSEDCL) to procure 18.36 MW wind power at ₹2.65 (~$0.032)/kWh for 12 years from wind generators with expired energy purchase agreements (EPA).

The wind power procured from these projects will be eligible for the fulfillment of MSEDCL’s non-solar renewable purchase obligation (RPO) for the entire period.

Background

MERC had granted permission to MSEDCL to procure 18.36 MW of wind power through competitive bidding from generators whose EPAs with MSEDCL had expired.

MSEDCL was directed to set a ceiling rate that did not exceed the rates approved for short-term procurement of wind energy, which is currently set at ₹2.52 (~$0.031)/kWh.

MSEDCL tried to procure wind power through five tenders with a ceiling tariff of ₹2.52 (~$0.031)/kWh but was only able to contract 89.25 MW.

To procure more power, MSEDCL set a revised ceiling tariff of ₹2.65 (~$0.032)/kWh for the procurement of 500 MW of wind power from wind generators with expired EPAs and obtained approval from MERC to enter into a 12-year power purchase agreement with successful bidders.

MERC also allowed MSEDCL to use this power towards fulfilling its non-solar RPO targets.

MSEDCL received bids from eight qualified bidders for a total capacity of 21.61 MW and chose to award contracts for 18.36 MW of wind power at ₹2.65 (~$0.032)/kWh for 12 years.

MSEDCL narrated the sequence of events of the tendering process and emphasized that the discovered tariff of ₹2.65 (~$0.032)/kWh is competitive and reflective of market conditions. Accordingly, MSEDCL requested the Commission to adopt the tariff.

Commission Analysis

The Commission had reiterated that MSEDCL is responsible for determining the ceiling tariff for the procurement of wind power from generators with expired EPAs. The Commission has also stated that it will consider the competitiveness of this tariff at the time of adoption.

The Commission noted that wind generators did not respond to MSEDCL’s repeated bids at tariff of ₹2.52 (~$0.031)/kWh. Under such circumstances, the Commission considered the tariff of ₹2.65 (~$0.032)/kWh discovered through the competitive bidding process to be reflective of market trends.

The MERC also noted that the 12-year duration of the power purchase agreement has been determined based on the 25-year useful life of the wind turbine, and the expired EPA period of 13 years.

The Commission also allowed MSEDCL to use the wind power procured from these projects to fulfill its non-solar RPO for the entire period.

Last year, MERC granted its approval to MSEDCL to procure 157.9 MW on a long-term basis from wind generators at tariff discovered through a competitive bidding process.

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