Mains Paper 3:Economy ] Infrastructure: Energy, Ports, Roads, Airports, Railways, etc.
From UPSC perspective, the following things are important:
Prelims level: Not much
Mains level: New guidelines for procuring solar power
- The Ministry of New & Renewable Energy (MNRE) had issued the new guidelines for tariff based competitive bidding process for procuring solar power
- The guidelines have been issued under the provisions of Section 63 of the Electricity Act, 2003 for long term procurement from grid-connected Solar PV Power Projects of 5 MW and above, through competitive bidding.
- Generation compensation for offtake constraints for reducing offtake risks
- The ‘must-run’ status for solar projects has been stressed upon.
- Besides, to ensure lower tariffs, minimum PPA (power purchase agreement) tenure has been kept at 25 years. Moreover unilateral termination or amendment of PPA is not allowed.
- Provides for termination compensation to increase bankability of projects by securing the investment by the generator and the lenders against any arbitrary termination of PPA.
- The risk of generator’s revenue getting blocked due to delayed payment/non-payment by the procurers has been addressed through provision of Payment Security Mechanism through instruments like Letter of Credit (LC), Payment Security Fund and State Guarantee.
- It also provides for change in law provision to provide clarity and certainty to generators, procurers, and investors/lenders.
- The penalties have been rationalised so as to reduce the overall cost to the generator, while at the same time, ensuring compliance with the Commissioning Schedule/Scheme Guidelines.
- The norms provide that generators are free to repower their plants.
- New Guidelines for Tariff Based Competitive Bidding Process to reduce risk, enhance transparency and increase affordability of Solar Power
- It will also provide standardisation and uniformity in processes and a risk-sharing framework between various stakeholders involved in the solar PV power procurement
- This will also help reduce off-taker risk and encourage investments, enhance bankability of the Projects and improve profitability for the investors
- The guidelines also streamline the provision for project preparedness to expedite and facilitate the setting up of projects.