Solar Developers to Compensate GRIDCO for Shortfall in Energy Generation

The Odisha Electricity Regulatory Commission (OERC) recently directed eight solar developers and the Grid Corporation of Odisha (GRIDCO) to amend the power purchase agreements (PPAs) signed for the supply of solar power.

It said that if GRIDCO paid any penalty for not meeting its renewable purchase obligation (RPO) targets, the developer should compensate GRIDCO equally. The compensation should be proportional to the shortfall in solar energy generation during the contract year. It asked the parties to incorporate the clause in the PPAs.

The Commission said that GRIDCO should explain to the solar developers the advantages of the energy billing center (EBC) meter reading instead of the joint meter reading (JMR) and amend the PPAs.

GRIDCO had filed a petition seeking amendments to the PPAs executed with eight solar project developers for projects of 1 MW each commissioned in the state under the ‘Rooftop PV and Small Solar Power Generation Program.’


Background

GRIDCO had executed PPAs with eight developers on August 21, 2010, to procure solar power of 1 MW capacity each under the ‘Rooftop PV and Small Solar Power Generation Program.’ The Ministry of New and Renewable Energy (MNRE) had determined a tariff of ₹18.52 (~$0.25)/kWh. GRIDCO paid the tariff to all the eight solar developers from the financial year (FY) 2011-12.

Later, the Commission ruled that the billing for solar developers was to be made based on the JMR data instead of the state energy accounting statement.

The transmission agency discussed the matter with the state load dispatch center (SLDC), EBC, and the distribution companies (DISCOMS). It was opined that it would be difficult to account for the energy for eight solar developers considering that the manual JMR data could not be processed through the billing software.

GRIDCO said it was being reimbursed based on the CERC generic tariff of ₹17.91 (~$0.24)/kWh while paying the solar developers ₹18.52 (~$0.25)/kWh.  Considering the difference, it levied a penalty of ₹0.61 (~$0.008)/kWh from FY 2013-14 on solar developers generating less than 1.2 million units over a financial year.

It requested the Commission to include a penalty clause for the shortfall in generation at ₹0.61 (~$0.008)/kWh in the PPAs. GRIDCO approached the developers to amend the existing PPAs to include the penalty provision, but the developers refused.

One of the developers, Rajratna Energy Holdings, said that the Commission had already decided the issue through its orders, declaring that the PPAs cannot be amended without the necessary consent of the parties involved.

Another developer MGM Green Energy submitted that they had no objection if the EBC reading was adopted in place of the JMR to raise the energy bills.

A third developer said that in the absence of adequate data, the Commission had determined the tariff for the 1 MW projects, assuming uniform insolation throughout the state with a capacity utilization factor (CUF) of 18.5%. As per GRIDCO’s submission, the actual CUF achieved was less than 15%. Therefore, the developers were incurring heavy losses due to lesser generation and should be compensated rather than penalized.

Commission’s analysis

The Commission observed that solar power was now available at a much cheaper rate than ₹18.52 (~$0.25)/kWh determined. In case of supply of less power by the developers, it was a loss to the developers and not to GRIDCO.

The state regulator added that compensation to GRIDCO for the shortfall in generation by the developers was justified when it paid the penalty for not meeting the RPO target for any contract year. The developer should compensate GRIDCO equal to the penalty paid in such a case.

The Commission, therefore, directed the parties to incorporate the compensation provision in the PPAs and submit the amended PPAs for its approval.

In October this year, OERC approved the standard and supplementary power sale agreement (PSA) executed between the Solar Energy Corporation of India and GRIDCO. The PSAs were for the 500 MW solar projects under the manufacturing-linked and interstate transmission system (ISTS)-connected solar program (Tranche- I).

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