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MNRE addresses solar power developers bidding guideline concerns: ICRA

V Rishi Kumar Hyderabad | Updated on November 18, 2019 Published on November 18, 2019

The Ministry of New and Renewable Energy (MNRE) has recently notified amendments to the guidelines for award of solar power projects through tariff based competitive bidding process, relaxing the timeline for land acquisition. This is in line with the commissioning timeline (15 months for projects in solar parks and 18 months for projects outside solar parks) from 12 months earlier.

The amended guidelines state that the tariff adoption must be approved by the appropriate regulatory commission within 60 days of submission. If the commission does not decide on the tariffs within this period, the tariff is deemed to be approved. Any delay in adoption of tariff beyond 60 days would also lead to corresponding extension in scheduled commissioning date, according to ICRA.

Sabyasachi Majumdar, Group Head, Corporate ratings, ICRA Ltd, said, “These amendments propose to address the emerging issues for solar power developers, amid the under-subscription of solar power bids by the developers. This is reflected from decline in the tendering of solar power capacity to 7 GW in 9M CY2019 from 9.8 GW in 9M CY2018.”

The delays in securing approval for tariff adoption from the regulators was creating uncertainty for some of the under-construction projects. There have been instances where few state discoms were not honouring the terms of the power sale agreements signed with intermediate procurers citing the non-adoption of the tariffs by the concerned regulatory commission.

“Further, the other amendments such as increasing the penalty rate for grid backdowns from 50 per cent of the quoted tariff to 100 per cent of the quoted tariff and written instructions with justification for imposing grid curtailment are positive for the developers,” he said.

The renewable power developers were significantly affected by the instances of grid backdown witnessed in few states in the recent past, wherein the wind and solar power projects were asked to backdown through oral instructions. In this context, the amended guidelines state that backdown cannot be ordered without written instructions and that the justification for such curtailment must be made public by the concerned load dispatch centre.

In addition, the amended guidelines provide a mechanism for collecting upfront payments from solar power generators and additional risk premium on per unit basis from end procurer (if the end procurer is not covered by the tri-partite agreement between RBI, central government and state government and is not providing the state government guarantee as payment security), which will be used to build the payment security fund to meet exigencies in case of any delays in payment delays from end procurers.

The amendments also provide clarify on bundling of tariffs from multiple bids by intermediate procurers, force majeure events, termination payments in case of force majeure events and definition of debt due and adjusted equity under termination payments.

Published on November 18, 2019
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