The Ministry of Power has introduced new guidelines for the procurement of storage capacity and stored energy from Pumped Storage Plants (PSPs) through a competitive bidding process. These guidelines are intended to support the country’s energy transition by ensuring grid stability and increasing the share of renewable energy sources. The guidelines aim to streamline the procurement process and establish a transparent framework for bidding, reducing risks for developers while ensuring affordability for consumers.
The guidelines apply to both new and existing PSPs, whether they are under construction or already operational. They provide a detailed definition of procurement models, including the Tolling Tariff Model and Composite Tariff Model. Under the Tolling Tariff Model, the procurer provides the storage energy and off-takes it at a later time, accounting for conversion losses. Meanwhile, in the Composite Tariff Model, the developer arranges for the input energy and supplies it under a contractual agreement.
Procurement is divided into two modes. Mode 1 involves PSPs developed on sites identified by the procurer, with projects typically following a Build-Own-Operate-Transfer (BOOT) model. These projects are developed for a specified period, ranging from 25 to 40 years, after which they are transferred back to an entity designated by the state government. To mitigate risks, the procurer is responsible for obtaining key clearances, such as environmental and land approvals, before the bidding process. Mode 2 involves PSPs developed on sites identified by bidders or already commissioned or under-development PSPs. These projects follow a Build-Own-Operate (BOO) model, lasting between 15 and 40 years. Here, the developers are responsible for obtaining all necessary clearances before construction begins.
The bidding process follows a two-part system, where technical bids are evaluated first, followed by financial bids. If necessary, an e-reverse auction is conducted to ensure competitiveness. A minimum of two bidders is required for a competitive process, though exceptions can be made with regulatory approval if there are fewer bidders after multiple attempts. The evaluation committee oversees the bidding process and ensures that selected tariffs align with market trends.
The guidelines also include strict financial and technical eligibility criteria for bidders. Financial requirements include a minimum net worth threshold and liquidity provisions to ensure project viability. Technical parameters such as power capacity, energy storage duration, and efficiency are defined in the bidding documents. Developers must also meet minimum performance standards, including availability percentages and operational efficiency.
For projects to begin operations, they must meet the Scheduled Commencement of Supply Date (SCSD), typically set at 48 to 66 months after signing the Power Purchase Agreement (PPA) for Mode 1 projects. Mode 2 projects follow a timeline set by the procurer. Early commissioning is permitted, and in cases of partial commissioning, payments are made on a pro-rata basis. If developers fail to meet availability commitments, penalties apply, ensuring accountability.
Transmission connectivity is another key component, with responsibilities clearly defined for procurers and developers. End procurers are responsible for supplying charging energy to the contracted PSP capacity and managing transmission beyond the metering point. The guidelines also address off-take constraints, ensuring developers receive compensation if procurers are unable to take scheduled power due to grid issues.
Financial closure for projects must be achieved within 12 months of signing the agreement. Any delays attract penalties, with extension charges levied on a per-MW basis. Developers also have the flexibility to sell surplus energy in the open market if it exceeds contracted limits.
To enhance transparency, the guidelines mandate that successful bidders and their tariffs be disclosed publicly. Additionally, dispute resolution mechanisms are outlined, with tariff-related disputes handled by regulatory commissions and other disputes addressed through a dedicated resolution committee or arbitration.
Overall, these guidelines are designed to accelerate the development of pumped storage projects in India by reducing uncertainties for investors while ensuring fair pricing and operational efficiency. By creating a structured approach to procurement, the government aims to integrate more renewable energy into the grid while maintaining system stability.
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