In an important development, the Odisha Electricity Regulatory Commission (OERC) has approved the procurement of 500 MW solar power by GRIDCO from the Solar Energy Corporation of India (SECI). The project is being developed under the interstate transmission system (ISTS)-connected solar projects linked with manufacturing program (Tranche-I). GRIDCO will be buying the power to fulfill its renewable purchase obligation (RPO) targets.

The Commission has directed the tariff to be capped at ₹2.61 (~$0.035)/kWh, including the trading margin of ₹0.07 (~$0.0009)/kWh as proposed by GRIDCO.

GRIDCO is instructed to submit the power sale agreement (PSA) signed with SECI for the Commission’s approval.

Background

In August 2020, SECI had offered 500 MW of solar power capacity at a tariff of ₹2.73 (~$0.037)/kWh, including the trading margin of ₹0.07 (~$0.0009)/kWh to be available by December 2022. It also offered an additional 250 MW solar capacity at ₹2.99 (~$0.041)/kWh, including the trading margin of ₹0.07 (~$0.0009)/kWh.

Later, SECI proposed an additional 1,500 MW solar power at ₹2.73 (~$0.037)/kWh and 250 MW solar power at ₹2.99 (~$0.041)/kWh to be availed from 2023 to 2025.

SECI’s manufacturing-linked solar auction in January 2020 saw a tariff of ₹2.92 (~$0.04)/kWh for 4 GW of projects. Later, under the greenshoe option, another 8 GW of solar projects were auctioned to be developed at the same tariff. Adani Green Energy won the bid to create 8 GW of solar projects at ₹2.92 (~$0.04)/kWh and Azure Power also won 4 GW at the same tariff. With a high tariff and a large capacity of 12 GW, SECI has been finding it challenging to sell power to DISCOMs even with pooling this tariff with others discovered during the first half of 2020.

GRIDCO, in its submission, said that with a total solar tied-up capacity of 1,014 MW and a non-solar capacity of 479.15 MW, it would be able to meet the RPO target for FY 2021-22. But it had considered procuring 500 MW of solar power from SECI to address the immediate RPO shortfall and a projected increase in the state power consumption from FY 2022-23. GRIDCO is also preparing for the likely upward revision of the RPO target, compensate for non-solar projects that are yet to be commissioned, and no new solar projects in the pipeline for the next two years.

GRIDCO had further requested the state’s four distribution companies (DISCOMs) to convey their consent for procuring 500 MW solar power at ₹2.73 (~$0.037)/kWh, including the trading margin of ₹0.07 (~$0.0009)/kWh for 25 years from the commercial operation date.

After receiving a letter from GRIDCO for procurement of 500 MW solar power, SECI offered a revised tariff for the additional solar capacity of 1,500 MW at ₹2.69 (~$0.036)/kWh, including a trading margin of ₹0.07 (~$0.0009)/kWh, which was further reduced to ₹2.61 (~$0.035)/kWh. Accordingly, the tariff for the agreed capacity of 500 MW was agreed to be ₹2.61 (~$0.035)/kWh.

GRIDCO, in its submission, argued that with basic customs duty (BCD) being imposed, the solar tariff was expected to increase by 24%. SECI, however, clarified that this 500 MW solar power would be commissioned before March 31, 2022, and hence not be impacted by BCD. Later, SECI submitted a standard draft PSA that GRIDCO had executed in earlier cases and requested the DISCOM to sign the same.

The respondent – Tata Power Central Odisha Distribution Limited (TPCODL) – argued that according to the aggregate revenue requirement of GRIDCO for FY 2021-22, there was 7,068 MU of surplus energy in the state. Given the demand of 28,222 MU, the surplus energy is 25%. Considering the energy from the proposed solar project to the extent of 1204 MU, the surplus energy would only increase, which would impact the consumers’ tariff. Moreover, other available options like purchasing renewable energy certificates and green energy trading needed to be evaluated. TPCODL noted that the entire requirement of RPO need not be tied up through long-term contracts.

GRIDCO made it clear that the projected annual generation for FY 2022-23 was 1,722 MU from solar capacity, whereas the requirement would be 1,852 MU, i.e., a shortfall of around 130 MU. Further, with the non-availability of adequate non-solar capacity inside and outside the state, GRIDCO was expected to meet the shortfall in non-solar RPO through additional solar capacity. The 500 MW solar capacity would offer about 832 MU annually, and it would help in meeting the RPO targets.

Commission’s analysis

The Commission observed that GRIDCO had not submitted the draft PSA with its application; instead, it had submitted the model PSA of SECI where some of the statistics like generation of minimum energy in MU for ten years, and the same for the subsequent 15 years, and set tariff were missing.

The Commission further observed that the solar RPO was likely to increase soon, and the 500 MW solar power was being made available to GRIDCO from SECI at a lower price. Furthermore, the power would be delivered through SECI at the set tariff at the periphery of Odisha, without levying any interstate transmission charges and losses. Also, as the 500 MW solar power will be commissioned before March 31, 2022, the BCD will not be applicable for procuring such power by GRIDCO.

Taking cognizance of all these facts, the Commission approved the procurement of 500 MW solar power by GRIDCO from SECI at ₹2.61 (~$0.035)/kWh.

In April this year, the Kerala State Electricity Regulatory Commission directed SECI to finalize the draft PSA for 300 MW of solar at ₹2.44 (~$0.032)/kWh and forward it to the Kerala State Electricity Board (KSEB).

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