MNRE Drafts Guidelines and model PPA for Implementation of Off-Grid Solar Power Plants in RESCO Model

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Ministry of New and Renewable Energy (MNRE), the nodal Ministry of the Government of India has drafted guidelines and model PPA for Implementation of Off-Grid Solar Power Plants in the RESCO model under MNRE Programme – for comments of stakeholders.

Under the Phase III of Off-grid and Decentralized Solar PV Applications Programme of MNRE, off-grid solar power plants of individual size up to 25 kWp can be installed in areas where grid power has not reached or is not reliable. Such plants are mainly aimed at providing electricity to Government schools, hostels, panchayats, police stations, and other public service institutions.

Recently the Scheme has been extended up to 31.3.2021 and applicable only for North-eastern States for installation of off-grid solar PV plants through RESCO mode with Central financial assistance (CFA) of 90% of the benchmark cost of the system.

The order stated that “As the intended beneficiaries for off-grid solar power plants are public service institutions, there could be difficulty in arranging the beneficiary share in an upfront manner. Further, after the guarantee period is over, continuing of O&M of the plant is an issue due to the fund and technical constraints of the beneficiary. In order to effectively utilize the costly assets of the solar PV system, it has been decided that such a system should be operated through RESCO mode. These guidelines provide an implementation framework for the operation of off-grid solar PV systems through RESCO mode.”

With an objective to ensure proper repair and maintenance of the off-grid solar power plants to be installed under the Programme and promote efficiencies in operation, it has been decided to introduce a RESCO model for such systems. The plants would be eligible for CFA at 90% of the benchmark cost. This CFA provided by MNRE would reduce the financial burden to a significant level, which otherwise is very high in per-unit terms due to the smaller size of plants and investment in storage batteries. Under the program, off-grid solar power plants can be installed in areas where the grid power is not available and areas where grid power though available is not reliable.

Under the RESCO model, it is proposed that the vendor will install and operate the solar power plant of capacity up to 10 kWp for at least 10 years and solar PV plants of capacity above 10 kWp for at least 15 years. Solar power plants will be installed by the RESCO on a BOOT basis. After completion of this time period, the plant will be handed over to the beneficiary in operating condition. 

The draft stated that there could be two different financial models for operating a solar power plant depending upon payment of CFA: (i) Upfront payment of CFA: The MNRE CFA of 90% of the benchmark cost will be paid upfront after successful commissioning of the plant. (ii) Payment of CFA in installments: To enable the availability of funds at the time of replacement of batteries, the CFA may be released in installments. a. 50% of MNRE CFA at the time of commissioning and balance 50% CFA at the end of five years, or replacement of batteries, whichever is later. This option will be available for projects up to 10 kWp capacity. This will ensure the smooth operation of the plant for the complete period of contract of 10 years. b. For projects of capacity more than 10 kWp and up to 25 kWp having a 15 years contract, MNRE CFA will be released in three installments. 50% of MNRE CFA will be released at the time of commissioning; the second installment of 25% of CFA will be released at the end of five years, or the first replacement of batteries, whichever is later. Balance 25% of CFA will be released at the end of ten years, or second replacement of batteries, whichever is later. 

A representative system of 4 kWp has been considered for the estimation of the tariff. The average daily solar power generation per kWp of solar panels is considered 2.5 kWh as NE Region has lesser sunny days and low solar radiation levels. Therefore, the daily minimum guaranteed solar power would be 10 kWh. With battery back-up of 7.2 VAh per Wp total battery requirement would be 28.8 kWh. It is assumed tubular-gel batteries having a life of 4-5 years would be used and required to be replaced only once (at power producer’s cost) during the contract period of 10 years. MNRE benchmark cost has been considered for arriving at the total cost of the project. The developer will arrange a loan @ 12% for investment in the project. 

The case I: subsidy is paid upfront In this case the levelised tariff discovered is Rs. 5.96 per kWh (Annexure-I) Case II: 50% subsidy is paid upfront and balance 50% after completion of 5 years, In this case, the levelised tariff discovered is Rs. 9.55 per kWh (Annexure-II).

About the implementation of guidelines, the order stated that the Implementation Timelines Project shall be installed and commissioned by the successful RESCO within 3 months from placement of award by implementing agency. A maximum extension of 3 months can be provided to RESCO, provided the reasons for the delay are beyond the control of the RESCO. Any delay beyond 3 months will result in the cancellation of the award. 

It has been highlighted that only indigenously manufactured PV modules should be used in the Programme and The Power Producer shall give 10 days advance notice to conduct the testing of the Project and shall conduct testing of the Project in the presence of

Purchaser’s designated representative. The purchaser shall pay all amounts due hereunder within 30 days after the date of the receipt of the invoice.

In case payment of any invoice is delayed by the Purchaser beyond its due date, a late payment surcharge shall be payable by Purchaser to the Power Producer at the rate of 1.25% per month (“Late Payment Surcharge”) calculated on the amount of outstanding payment, calculated on a day to day basis for each day of the delay, compounded on monthly rates. Late Payment Surcharge shall be claimed by the Power Producer, through its subsequent invoice. 

It has been determined that If a Force Majeure Event shall have occurred that has affected the Power Producer’s performance of its obligations hereunder and that has continued for a continuous period of one hundred eighty (180) days, the Purchaser shall be entitled to terminate the Agreement and if such Force Majeure Event continues for further ninety (90) days period, the Agreement shall automatically terminate. Upon such termination for a Force Majeure Event, neither Party shall have any liability to the other (other than any such liabilities that have accrued prior to such termination).

The Parties agree and acknowledge that the Power Producer may intend to novate the Agreement to a party, and has the right to transfer any or all of its rights and obligations under this Agreement to a party or any other third party (“New Party”), with the consent of the Power Purchaser. The Power Purchaser shall not unreasonably withhold such consent. Upon Novation, the New Party shall automatically and without any further action be entitled to all the same rights and assume the same obligations, under this Agreement, as if it were originally a party to this Agreement. Further, the Purchaser hereby agrees and undertakes that, promptly upon receiving a request from the Power Producer, the Purchaser shall execute such further writings, deeds and/or agreements and take all such further actions as may be necessary for effecting or implementing the transfer of any or all of the Power Producer’s rights and/or obligations under this Agreement to the New Party. If the parties agree to do Novation then a separate Novation agreement shall be executed.

It has been stated in the order that The failure of the Power Producer or Purchaser to enforce any of the provisions of the Agreement, or the waiver thereof, shall not be construed as a general waiver or relinquishment on its part of any such provision in any other instance or of any other provision in any instance and If any dispute of any kind whatsoever arises between Purchaser and Power Producer in connection with or arising out of the contract including without prejudice to the generality of the foregoing, any question regarding the existence, validity or termination, the parties shall seek to resolve any such dispute or difference by mutual consent. If the parties fail to resolve such a dispute or difference by mutual consent, within 45 days of its arising, then the dispute shall be referred by either party by giving notice to the other party in writing of its intention to refer to arbitration as hereafter provided regarding the matter under dispute. No arbitration proceedings will commence unless such notice is given. 

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