The Ministry of Power (MoP) has issued guidelines for competitive procurement of renewable power by thermal and hydropower generators under the Generation Flexibility Program.

The program intends to allow flexibility in the generation and scheduling of thermal and hydropower stations by bundling renewable energy and storage.

The guidelines aim to promote competitive procurement of renewable energy by thermal and hydropower generators to reduce emissions. They seek to standardize processes and provide a risk-sharing framework among stakeholders involved in renewable power procurement under the Flexibility Program. The goal is to encourage investments and ensure enhanced bankability of projects and profitability for investors.

Applicability

These guidelines are issued under Section 63 of the Electricity Act, 2003, for long-term electricity procurement from grid-connected renewable power projects having an individual size of 5 MW and above through competitive bidding.

Bid structure

Bids will be designed in terms of a package. The minimum size of a package should be 50 MW to have economies of scale. The bidder has to quote for an entire package. The procurer can also specify the maximum capacity allotted to a single bidder, including its affiliates, keeping in mind factors such as economies of scale, land availability, expected competition, and the need to develop the market.

The procurer may select either a fixed tariff in ₹/kWh for the term of a power purchase agreement (PPA) or escalating tariff in ₹/kWh with pre-defined annual escalations in ₹/kWh.

PPA

The guidelines recognize that PPA tenures influence the tariff and the period over which the investment is returned to the renewable developer. The PPA tenure should be not less than twenty-five years from the date of the scheduled commissioning date (SCD) based on the balance life of the thermal or hydropower project.

Renewable power generators are free to operate their projects after the expiry of the PPA term in case the arrangements with the land and infrastructure owning agencies, transmission utilities, and system operators provide for it. If the project site is specified by the procurer to be located either in a solar park or otherwise, the responsibility of the procurers to arrange for the land will be limited to the PPA tenure.

Generation Compensation

If there is a backdown, the renewable generator is eligible to receive a compensation of 100% of the average generation per hour during the month × number of back down hours during the month × PPA tariff.

Bidding process

Procurers can call for bids to adopt a single-stage bidding process through e-bidding. Procurers may adopt an e-reverse auction if they so desire.

In the case of a solar park-specific project, the procurer will give intimation about the initiation of the bidding process to the solar park developer. The developer then has to engage actively in the bidding process by providing the land and infrastructure-related details and making the same available in centralized data rooms accessible to bidders.

Guarantees

The earnest money deposit (EMD) set by the procurer should not be more than 2% of the estimated capital cost of the renewable power project. The EMD must be submitted along with the response to the request for selection in the form of a bank guarantee or a letter of undertaking.

The performance guarantee to be determined by the procurer should not be more than 4% of the project cost in the case of the site specified by the procurer and 5% if the renewable power generator selects the site.

Financial Closure

Renewable power generators must attain financial closure in terms of the PPA within nine months from the PPA’s execution for projects to be set up in solar parks. Projects outside solar parks should achieve financial closure within twelve months.

Share structure

The shareholding of the successful bidder in the project company executing the PPA must not be less than 51% at any time before one year from the commercial operation date (COD). The successful bidder must ensure that its promoters do not cede control of the bidding company until one year from the COD.

Commissioning

Projects must be commissioned within fifteen months from the PPA’s execution for projects in solar parks. Non-solar park projects must be commissioned within eighteen months.

Part commissioning of the project will be accepted by the procurer on the condition that the minimum capacity for acceptance of first and subsequent parts commissioning will be 50 MW. In the case of early part-commissioning until SCD, the procurer may purchase the generation until SCD at 75% of the PPA tariff. However, if the entire capacity is commissioned before SCD, the procurer may purchase the generation at a PPA tariff.

Transmission connectivity

Renewable power projects must be designed for interconnection with a pooling substation where other projects also interconnect before the transmission utility substation or directly with the substation through a dedicated transmission line at the appropriate voltage level.

In November last year, MoP had outlined a detailed mechanism allowing the bundling of thermal and hydropower projects with standalone renewable energy projects or renewable energy projects with battery storage systems either through setting up renewable energy generation capacities themselves or through developers by inviting bids.

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