Solar Developers Can Install DC Capacity Higher than the Project’s Contracted AC Capacity

The Ministry of New and Renewable Energy (MNRE) has issued an advisory that clarifies that as long as a solar PV project is in accordance with the contracted alternating current (AC) capacity and meets the range of energy supply based on its capacity utilization factor (CUF) requirements, its design and installation on the direct current (DC) side should be left to the developer.

So, solar developers can install additional DC capacity, which can be higher than the contracted AC capacity.

Speaking on this latest development, a leading solar developer said, “It’s a welcome move. It will solve many problems. The state of Telangana had also started asking questions about the installation of DC capacity after the commissioning date. Now, it’s very clear that it is up to the developers to develop DC capacity as long as they maintain the contractual AC capacity to the grid. This letter would put to rest all such questions regarding the installation of DC capacity.”

This latest announcement comes in the wake of the recent development in which the MNRE said that it had received representations from various solar developers that a few states have raised concerns around the installation of additional DC capacity, above the contracted AC capacity, with the objective of meeting the committed CUF in their power purchase agreements (PPAs) or power supply agreements (PSAs).



Moreover, the state governments feel that the installation of such additional capacity serves as a medium for additional revenue generation for the developers, and such additional DC capacity cannot be allowed.

The ministry observed that under the present bidding practice, the procurer invites bids from solar power developers for setting up solar projects of a certain capacity. The capacity won by the successful bidder on the signing of the PPA becomes the “contracted capacity,” which is the capacity (MW) in AC terms, allocated for the supply by that bidder.

Now, the ministry has further noted that along with the ‘contracted capacity,’ the PPA also provides for a range of energy supply based on the CUF of the project. While the procurer is not obligated to buy energy beyond this range, the developer is liable for penal charges for the supply of energy less than the minimum committed energy or minimum committed CUF.

Therefore, the PPAs define the relationship between the solar developers and the procurer in terms of AC capacity, and range of energy supply based on the CUF, with the procurement obligation within this range.

The ministry added that in line with this, the requirement of designing and installation of additional DC panels might arise from the contractual need to supply the committed energy and does not cast any obligation on the procurer to buy generation over the contracted energy range.

Speaking on the matter, Union Power Minister R.K. Singh said, “Ensuring ease of doing business for the bonafide producers and developers is of paramount importance to the country. We are committed to providing a hassle-free path to the developers of renewable energy, which could help India to achieve energy security in the future, along with a cleaner and sustainable environment.”

Making things clear, the ministry has clarified that even if the installed DC capacity in a solar PV power project exceeds the value of the contracted AC capacity, it is not a violation of the PPA or PSA, as long as the AC capacity of the project corresponds with the contracted AC capacity and at no point, the power scheduled from the solar project is in excess of the contracted AC capacity.

The document further notes that setting up generation capacity is an unlicensed activity, and therefore, any person is entitled to set up any capacity which he desires and sell power.

Speaking to Mercom, a spokesperson from Hero Future Energies, said, “The clarification issued by the MNRE is technically correct, and it is on expected lines. It has already been in practice for some time, and it is going to help solar developers. It gives developers the freedom to develop DC capacity as long as they adhere to the contracted AC capacity.”

A senior executive at ENGIE said, “It’s a good move, and it lays down the marker clearly. The point is that we have not faced any such issues, and I’m not sure what was it that triggered such a response from the MNRE. But it’s a good move, and it makes it clear in no uncertain terms that developers have the freedom to develop DC capacity, which can be higher than the contracted AC capacity.”

Recently, the MNRE issued amendments to its guidelines for the competitive bidding process. This latest move seems to be an attempt on the part of the government to provide relief to solar energy developers in the country by tackling issues such as payment security mechanism, curtailment of power, land acquisition, timely tariff adoption, among others.

Last month, the MNRE had also issued its draft guidelines for the tariff-based competitive bidding process for the procurement of power from grid-connected wind-solar hybrid projects. The guidelines aim to provide a framework for a bidding process for the procurement of hybrid wind-solar projects.