Uttar Pradesh Regulator Sets Tariff for a Biomass Project (1)

The Uttar Pradesh Electricity Regulatory Commission (UPERC), in a recent order, set a tariff of ₹5.56 (~$0.076)/kWh to procure power from a 12.5 MW biomass project from the date of commissioning to March 31, 2021. The tariff will be ₹4.81 (~$0.066)/kWh from April 01, 2021, until the tenure of the amended power purchase agreement (PPA).

The Commission directed the Uttar Pradesh Power Corporation Limited (UPPCL) to procure power for their future requirements through a competitive bidding process subject to any deviation approved by the Commission.

UPPCL had filed a petition with the Commission seeking directions that it was not required to initiate a fresh bidding process to procure biomass-based power and the determination of tariff payable to Gallant Ispat on a stand-alone basis.

Background


The Commission, in its earlier order, dated March 15, 2018, had approved the bidding documents for procuring biomass-based power by UPPCL on a long-term basis to meet its non-solar renewable purchase obligation (RPO). The tender was floated with a ceiling tariff of ₹6.46 (~$0.089)/kWh. Superior Industries and Gallant Ispat participated in the bidding process.

The final bids were opened on April 23, 2019, and Superior Industries emerged as the lowest bidder quoting a tariff of ₹6.45 (~$0.088)/kWh for 3.5 MW of projects and Gallant Ispat quoted a tariff of ₹6.46 (~$0.089)/kWh to develop 12.5 MW. However, UPPCL canceled the bidding process given non-competitive tariffs, and bidders were informed.

Subsequently, Gallant signed an amended PPA with UPPCL according to which the first-year tariff of the project was ₹5.56 (~$0.076)/kWh, and the total levelized tariff for 12 years would be ₹6.19 (~$0.084)/kWh. Gallant Ispat commenced the supply of biomass power to UPPPCL on November 02, 2018.

In its order dated January 31, 2019, the Commission directed UPPCL to conclude the bidding process at the earliest. It said that it was unfair to agree bilaterally at a mutually agreed tariff and later cancel the bid. UPPCL reinitiated the bidding process with a ceiling tariff of ₹4.81/kWh and the term of the PPA as 12 years. Subsequently, UPPCL informed the Commission about abandoning the second bidding process because of a lack of participation from the bidders.

Later, Gallant filed a petition seeking payments towards the cost of energy supplied at the rate of ₹5.56 (~$0.076)/kWh in line with the amended PPA. UPPCL also filed a petition seeking direction about the tariff to be paid for power supply during the period. The Commission approved the amended PPA with the condition that the tariff from the date of commissioning should remain fixed at ₹5.56 (~$0.076)/kWh until the discovery of the L1 tariff for biomass power through the bidding process.

Commission’s Analysis

The Commission observed that UPPCL, having fulfilled its RPO obligations for the FY 2019-20 and FY 2020-21 and having laid down the road map for fulfilling its RPO obligations until 2029-30 by way of solar, wind, and hydropower tie-ups, was not interested in buying biomass-power any more.

However, the amended PPA held that the tariff from the date of commissioning should remain fixed at ₹5.56/kWh until the discovery of the L1 tariff through the bidding process and the same would be applied prospectively.

The Commission noted that the tied power in the non-solar category until FY 20023-24 was in surplus ranging from 2.5% to 4.7%. The Commission said that there were three options with UPPCL. The first was to conduct a bidding process with a ceiling tariff equal to UPPCL’s average power purchase rate plus the renewable energy certificate floor price. Second, the tariff specified in the ‘Captive and Renewable Energy Generation Projects (CRE) Regulations, 2019,’ which called for a tariff of ₹7.54 (~$0.103)/kWh for the FY 2019-20 for biomass projects commissioned in 2018-19. The third option was to exercise their rights as per applicable provisions of the amended PPA.

The Commission prescribed that the ceiling tariff based on the average power purchase cost and the floor price of REC may be offered to the project on a stand-alone basis, without the need of the UPPCL to conduct a competitive bidding process to determine the L1 price, which came to ₹4.68 (~$0.064)/kWh. Further, given the last bid was conducted at the ceiling tariff of ₹4.81 (~$0.066)/kWh, the Commission prescribed the tariff of ₹4.81 (~$0.066)/kWh prospectively from April 01, 2021. The Commission fixed the tariff of ₹5.56 (~$0.076)/kWh from the date of commissioning of the project until March 31, 2021.

Recently, UPERC extended the duration of the PPA signed between a bagasse-based power generator and UPPCL for a 14 MW project. The time frame was set for ten years, from January 2021 to December 2030.

Earlier, UPERC had adopted the levelized tariff of ₹4.53 (~$0.062)/kWh for the purchase of 20 MW (+/-25%) of bagasse-based power. The Commission had also approved the PPAs signed between the sugar mills – participants in a tendering process initiated in March 2020 – and UPPCL.

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