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New norms for solar power bids to enhance transparency: MNRE

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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



  1. The Ministry of New & Renewable Energy (MNRE) had issued the new guidelines for tariff based competitive bidding process for procuring solar power
  2. 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.


Salient features

  1. Generation compensation for offtake constraints for reducing offtake risks
  2. The ‘must-run’ status for solar projects has been stressed upon.
  3. 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.
  4. 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.
  5. 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. 
  6. It also provides for change in law provision to provide clarity and certainty to generators, procurers, and investors/lenders. 
  7. 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.
  8. The norms provide that generators are free to repower their plants.


  1. New Guidelines for Tariff Based Competitive Bidding Process to reduce risk, enhance transparency and increase affordability of Solar Power
  2. It will also provide standardisation and uniformity in processes and a risk-sharing framework between various stakeholders involved in the solar PV power procurement
  3. This will also help reduce off-taker risk and encourage investments, enhance bankability of the Projects and improve profitability for the investors
  4. The guidelines also streamline the provision for project preparedness to expedite and facilitate the setting up of projects.
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