20 November 2020 | BRIDGE TO INDIA
The Ministry of Power has amended competitive bidding guidelines for procuring ‘round-the-clock’ (RTC) power by blending renewable power with power from other sources. Minimum share of renewable power remains at 51%. Main change pertains to relaxation in source of other power – bidders are free to procure non-renewable power from any source as against being restricted to only coal-fired power. There is also no longer any restriction for renewable and non-renewable plants to be in the same Regional Load Desptach Centre (RLDC) area. However, the bidders are required to specify only one non-renewable source together with share of non-renewable power as well as generating stations with uncontracted capacity upfront.
- Despite relaxation in power sourcing, thermal power seems like the obvious choice for blending with renewable power;
- Steep increase in penalties and requirement to match L1 tariff would be major source of irritation for developers;
- DISCOMs would be better served by procuring renewable and non-renewable power separately on their own;
There is no change in the minimum CUF or availability requirement of 85% annually as well as for four peak hours every day (as specified by the respective RLDC). But penalty for not fulfilling these requirements or providing specified renewable power output every year has been increased steeply from 25% to 400% of applicable tariff for the respective shortfall.
Projects up to 1,000 MW are required to achieve financial closure and COD within 18 and 24 months respectively (24 and 30 months respectively for projects greater than 1,000 MW). Bidders will be required to submit a four-part tariff bid – tariff for renewable power, fixed charges and variable charges for fuel and transportation costs for non-renewable power. Surprisingly, there is no separate component for non-renewable O&M costs. Projects would be allocated on the basis of weighted average levellised tariff, computed as per CERC guidelines. Winning bidders are required to match L1 tariff, which would be a source of irritation for the developers.
Overall, the changes are largely positive for developers. Despite relaxation in source of non-renewable power, thermal power would be the obvious choice both for availability of spare capacity and cost competitive reasons. Unfortunately, the scheme remains beyond scope of pure play renewable IPPs. Renewable power alone with storage would not be able to compete with conventional power. And a tie-up with an external entity is implausible as no developer would be able to assume third party risk over 25 years. That leaves only a handful of IPPs straddling both renewable and thermal power sectors – mainly NTPC, Adani, JSW and Sembcorp – potentially interested in the scheme.
From a DISCOM perspective, getting round-the-clock power with specified share of peak power and renewable power is desirable. But we maintain that they would be better off in procuring renewable and non-renewable power separately on their own. It is not clear why they need developers to supply blended power through a highly restrictive tender process.
SECI has already issued a 5,000 MW RTC tender. Bid submission date has been repeatedly extended due to various changes sought by developers. Revised guidelines should allow the tender to finally go ahead. Another extension is expected for incorporation of revised guidelines. Small number of potential bidders means that the tender is unlikely to attract competitive bids.