Shortfall in Supply of Bundled Renewable Power to Attract Penalty of 400%

The Ministry of Power (MoP) has amended its guidelines for tariff-based competitive bidding for power procurement from round-the-clock (RTC) power projects to allow them to be bundled with any non-renewable source of energy rather than just coal-based thermal projects.

As per the amendments, to tackle the issues like intermittency in power generation from renewable energy projects, limited power supply hours, and the low capacity utilization of transmission infrastructure, renewable energy projects can be bundled with “firm power” from any other source or storage to provide round-the-clock power to distribution companies (DISCOMs).

“Firm Power” refers to thermal, hydro, or any other non-renewable source of power, including power from energy storage systems. They include generating systems or projects that have already been partly or fully commissioned before bids are issued or are under construction when bids are issued. They must have spare generation capacity, which can supply RTC power in the long-term.

Spare capacity refers to the excess power that a generating system may produce outside committed or contracted limits under a power purchase agreement (PPA). This power must be available for augmenting the proposed renewable power under the guidelines.

Under the revised guidelines, generators can complement or balance their renewable power supply using power from any other non-renewable power source. There can only be one non-renewable fuel source. The source and the committed supply capacity from these sources cannot be changed for the PPA duration. Power generators are not allowed to tie up with more than one bidder for the same spare capacity.

Generators supplying renewable RTC power bundled with any other power source must commit and maintain at least 85% of the capacity available annually and during peak hours. The peak hours will be declared by the regional load despatch center (RLDC) as per the relevant Central Electricity Regulatory Commission (CERC). Previously, the peak hours were to be specified by the procurer in the bidding documents beforehand.

In case of a shortfall from the specified 85% minimum capacity, generators are liable to pay the procurer a penalty of 400% of the cost of power they fell short of. This will be computed based on the applicable tariff during the year. Earlier, the amount of penalty was 25% of the cost of the shortfall. This was to be calculated at the maximum indexed composite tariff payable during the year.

The penalty of 400% also applies to the shortfall in renewable energy if it is lower than what was quoted at the time of bidding. Earlier, a penalty of 25% was applicable if the shortfall was below 51% of the total power quoted in a contract year.

Previously, bidders were allowed to quote a single composite tariff for RTC renewable energy bundled with thermal energy. As per the revised guidelines, the quoted tariff must now comprise four components – a fixed component for the renewable power and non-renewable power, and a variable component for the non-renewable component (scalable for fuel) and non-renewable power (scalable for transportation).

The fixed components must be quoted every year for the tenure of the PPA. The variable components must be quoted on the scheduled date of commissioning. Following this, the levelized tariff will be computed as per CERC escalation indices depending on the type of fuel being used and the discount factor, which will be specified in the bidding document.

The minimum capacity a bidder can quote remained at 250 MW to enable economies of scale, but since bidders are not allowed to tie up with more than one non-renewable source of power, the guidelines removed the provision allowing bidders to place quotes for less than 250 MW of projects. However, in the case of north-eastern states, special category states, and projects outside renewable energy parks, smaller capacities can be quoted subject to the availability of land and transmission facilities. This must be specified beforehand in the bidding documents.

The MoP also revised the timeline for attaining financial closure of RTC projects by generators. Projects that are 1 GW and below must be closed within 18 months from the date of execution of the PPA. For projects larger than 1 GW, this limit was set at 24 months. Previously, projects that are 500 MW and below were to be closed within one year, projects between 500 MW and 1 GW were to be closed in 18 months, while projects over 1 GW were given two years to achieve financial closure.

In terms of project commissioning and the commencement of power supply, projects smaller than 1 GW are now allowed two years, while projects over 1 GW must be commissioned and start supplying power within 30 months. Previously, projects that are 500 MW and below were allowed 18 months, projects between 500 MW and 1 GW were allowed two years, while projects over 1 GW were allowed 30 months.

The regulations regarding deviation settlement mechanism, generation compensation in case of off-take constraints due to grid unavailability, and reduced off-take have also been amended.

In July, The Ministry of Power issued RTC power procurement guidelines from grid-connected renewable projects complemented with power from thermal power projects.

Shortly afterward, the Solar Energy Corporation of India amended its tender for 5 GW of RTC power to comply with these guidelines. Bidders were allowed to submit a single bid offering a minimum amount of 250 MW capacity and a maximum of 5 GW. The range was 500 MW to 5 GW earlier.

In January this year, MNRE had came up with a draft plan to supply RTC power from renewable (solar, wind, and hydro) projects, which will be complemented with power from thermal projects.


Image credit: Brian Turner, CC BY 2.0 via Wikimedia Commons