Guidelines for Tariff-Based Competitive Bidding Process for Procurement of Power from Grid-Connected Wind Solar Hybrid Projects

Introduction

The Ministry of Power recently issued the “Guidelines for Tariff-Based Competitive Bidding Process for Procurement of Power from Grid-Connected Wind Solar Hybrid Projects” on August 21, 2023.[1] These guidelines are promulgated under Section 63 of the Electricity Act of 2003, which promotes competition and transparent tariff determination via competitive bidding. These guidelines recognize the synergies between solar and wind energy and thus, emphasize the significance of hybrid projects for improving grid stability, reducing variability, and promoting efficient transmission facilities and land use. With a determined focus on promoting renewable energy, meeting Renewable Purchase Obligations (RPO), and ensuring fairness, these guidelines establish a comprehensive framework that not only favors consumers but also promotes investments, thereby laying a solid foundation for India’s sustainable energy future.

Main Points of the Guideline

Applicability and Definitions

The guidelines focus on the competitive procurement of long-term electricity from Hybrid Power Projects. These projects require a proposal capacity of greater than 10 MW for intra-state transmission and 50 MW for inter-state transmission, with a minimum of 33% of the capacity coming from solar or wind. The guidelines allow for combined or independent solar/wind projects and propose energy storage to stabilize output. They bind Procurers, Authorised Representatives, and Intermediary Procurers, thereby encouraging the fulfillment of Renewable Purchase Obligations. Transitioning from previous guidelines, alignment with extant bid documents is described. The definitions clarify the roles of all entities bound by the guidelines and also introduce the concept of Hybrid Power Generators and the Scheduled Commencement of Supply Date (“SCSD”).

Bid Preparation, Project Readiness, and Bid Structure

The guidelines require the Procurer to create bid documents per the specified conditions, with government approval required for any deviations. The RfS may establish additional project milestones and reporting demands, transferring to the Hybrid Power Generator (HPG) the responsibility for obtaining clearances and permits. Bids will be invited in units of Power Capacity (MW), with a minimum and possibly maximum capacity for a bidder. Tariff in Rs./kWh is the main parameter for bids, and allocation employs a Bucket-filling method with a predefined “Range” of the Least Quoted Tariff Bidder’s lowest quoted tariff. A single purchaser could receive up to 50% of the total capacity, and reverse auctions may be employed.

Power Purchase Agreements

The PPA period is typically 20 years from SCSD but can extend to 25 years, with developers permitted to operate after the PPA expires. The PPA, will be issued along with the RfS and includes provisions regarding power quantum, recompense for deviations in generation, and offtake constraints. Mechanisms for payment security, Change in Law provisions, Force Majeure clauses, and Generation Compensation for decreased offtake due to grid unavailability are outlined. The Event of Default section outlines the consequences for delays in supply commencement, inability to maintain minimum Capacity Utilisation Factor (CUF), and other instances of non-compliance, such as termination and damages that equal 24 months or the remainder of the PPA term.

Bidding Process, Evaluation, and Timeline

The bidding procedure consists of a two-stage e-bidding procedure – a technical bid followed by a financial bid, with the possibility of an e-reverse auction. The RfS is issued by the Procurer or Intermediary Procurer and outlines the proposal requirements and evaluation criteria. Additionally, developers with existing capacity are entitled to participate. The document clarifies evaluation committees, proposal submission, eligibility requirements, and Earnest Money Deposit (EMD) forfeiture.

Indicative Timeline for Bidding Process:

• Publication of the RfS document, agreement drafts, and PSA (if applicable)
• Bid clarification, conferences, the opening of online Data Room, and RfS revision,
• RfS Bid Submission (22 days)
• Evaluation of technical proposals (64 days)
• Evaluation of financial bids and e-Reverse Auction (99 days)
• Letter of Award (LoA) Issuance (110 days)
• Signing of PPA and PSA (if applicable) (140 days)

Contract Award, Shareholding, and Commencement of Supply

The PPA will be signed with the successful bidder, or a Special Purpose Vehicle (SPV) founded by the successful bidder. A committee will evaluate proposals, ensuring compliance and transparency. Following the bidding procedure, the successful bidder’s name and price will be made public. The SCSD may be extended if the Appropriate Commission fails to adopt tariffs within the specified timeframe. Letters of undertaking and bank guarantees are required for EMD and Performance Bank Guarantee. The successful bidder is required to maintain a minimum stake in the undertaking. There are specified timelines for the start of supply, and delays can result in penalties or contract termination based on the SCSD and capacity start-up.

Other Provisions

The Generator is responsible for acquiring Transmission Connectivity to the ISTS network under the GNA regulations, at their own expense. Metering Points for measuring energy will be located on the low-voltage side of the CTU/STU substation. State Nodal Agencies will assist in the approval and sanctioning of projects. Continuous monitoring and reporting of wind, solar, and electrical data will be undertaken. Deviation from these Guidelines requires government authorization. Disputes concerning tariff determination and other issues will be resolved by the CERC or through arbitration. The Ministry of Power is authorized to clarify or alter the Guidelines. ISTS fees and losses are compliant with existing regulations.

Conclusion

These procurement guidelines for the Hybrid Power Projects emphasize a meticulous bidding procedure. Transparency and effectiveness are ensured by the emphasis on technical and financial criteria, bank guarantees, and adherence to deadlines. State Nodal Agencies are responsible for expediting prerequisite approvals. Mechanisms for continuous monitoring and reporting will bolster performance evaluation. Although deviations are subject to scrutiny, dispute resolution mechanisms provide clarity. In the end, these recommendations constitute an extensive framework for promoting sustainable and effective hybrid energy solutions.

[1] https://powermin.gov.in/sites/default/files/webform/notices/Guidelines_for_TBCB_Process_for_Procurement_of_Power_from_Grid_Connected_Wind_Solar_Hybrid_Projects.pdf.