CERC Greenlights Solapur Renewable Energy Transmission Charges After Competitive Bidding

Posted On - 3 July, 2024 • By - King Stubb & Kasiva

Summary:

The Central Electricity Regulatory Commission (CERC) has issued a significant order approving the transmission charges for the Solapur Renewable Energy Project.[1] This project, located in the Solapur Special Economic Zone (SEZ) of Maharashtra, aims to facilitate the evacuation of power generated from renewable energy sources with a capacity of 1500 MW. The project will be implemented on a Build, Own, Operate, and Transfer (BOOT) basis. The approval of transmission charges follows a rigorous competitive bidding process, which is in line with the government’s push towards transparency and efficiency in the power sector.

Case Timeline:

  • 18.5.2023: The Ministry of Power, Government of India, officially appointed PFC Consulting Limited (PFCCL) as the Bid Process Coordinator (BPC) responsible for overseeing the competitive bidding process for the selection of a Transmission Service Provider (TSP) for the project.
  • 23.6.2023: A Global Invitation for Qualification was published, seeking eligible bidders to participate in the competitive bidding process. This marked the initiation of a transparent and competitive process to select the most suitable entity to develop and operate the transmission system for the project.
  • 22.12.2023: Technical bids from prospective bidders were opened, signifying a crucial step in the evaluation process. A Bid Evaluation Committee (BEC) meticulously assessed the technical capabilities and qualifications of the bidders to ensure they met the stringent requirements of the project.
  • 20.02.2024: The financial bids were opened, revealing the proposed transmission charges from each bidder. Torrent Power Limited emerged as the frontrunner, quoting the lowest transmission charges of Rs. 500 million per annum.
  • 21.02.2024: An e-Reverse Auction was conducted to further drive down the transmission charges. However, no bidders revised their initial quotes, solidifying Torrent Power Limited’s position as the successful bidder.
  • 26.02.2024: A Letter of Intent was issued to Torrent Power Limited, formally recognizing them as the selected TSP for the project. This signified the successful conclusion of the competitive bidding process and paved the way for the subsequent stages of project implementation.
  • 20.03.2024: Torrent Power Limited successfully acquired Solapur Transmission Limited (STL), the special purpose vehicle established to develop and operate the transmission system. This marked a significant milestone in the project’s timeline, bringing it closer to realization.
  • 31.05.2024: After careful consideration of all relevant factors, the CERC officially approved the transmission charges proposed by Torrent Power Limited. This approval, subject to STL obtaining the necessary transmission license, is a critical step in ensuring the financial viability and long-term sustainability of the project.

Issue Raised:

The fundamental issue raised in this petition was the determination of the transmission charges for the Solapur Renewable Energy Project. The petitioner, Solapur Transmission Limited (STL), sought the CERC’s approval to adopt the transmission charges that were discovered through a transparent and competitive bidding process conducted in accordance with Section 63 of the Electricity Act, 2003, and the associated guidelines issued by the Ministry of Power.

Appellant’s Arguments:

STL, in its petition, strongly advocated for the adoption of the transmission charges that were discovered through the competitive bidding process. They emphasized that this process was carried out in a fair, transparent, and competitive manner, strictly adhering to the established guidelines. STL argued that the quoted transmission charges were not only the lowest among all bidders but were also below the levelized tariff estimated as per CERC norms, thereby ensuring cost-effectiveness for consumers.

Respondent’s Arguments:

Despite being served a copy of the petition, none of the respondents filed any replies or counter-arguments. This indicates a lack of opposition to the adoption of the proposed transmission charges, further strengthening the petitioner’s case.

Order:

After a comprehensive evaluation of the petition, the submissions of the parties involved, and the documents on record, the CERC issued its order. It approved and adopted the single annual transmission charge of Rs. 500 million proposed by Torrent Power Limited, subject to the grant of a transmission license to STL. The CERC recognized that the entire bidding process, from the appointment of the BPC to the final selection of the successful bidder, was conducted in strict compliance with the relevant laws and guidelines. Furthermore, the CERC acknowledged the Bid Evaluation Committee’s certification, which affirmed the transparency and competitiveness of the bidding process and the acceptability of the quoted transmission charges.

Analysis:

The CERC’s decision to approve the transmission charges for the Solapur Renewable Energy Project is a significant development for the Indian power sector. It highlights the effectiveness of the competitive bidding process in ensuring fair and reasonable tariffs for transmission services. The adoption of the lowest quoted transmission charges not only benefits consumers but also promotes a level playing field for private sector participation in the development of transmission infrastructure. This decision aligns with the government’s broader vision of enhancing renewable energy integration and achieving energy security.

[1] https://cercind.gov.in/2024/orders/147-AT-2024.pdf