PPA of 15 years Among Key Changes Proposed in TBCB Norms By India’s Power Ministry

In Draft guidelines for Tariff based competitive bidding involving solar, wind, Hybrid, FDRE and Energy storage projects, India’s Ministry of Power has come out with a slew of proposed changes. The draft document has been released for feedback and suggestions, with a last day of submissions being 15 days from publishing of the guidelines, ie, by Nov 12 or before. The full document can be accessed here.

PPA Reduction Makes It to Proposal Stage

The headline proposal is of course the proposed reduction in PPA period for projects to 15 years, from the current 25 years.  However, it does allow the 25 years option as well, as long as it is clearly mentioned in the RFS. Worryingly for some older projects, the guidelines lay down that failure to meet defined CUF norms for a three period period can lead to annulment of the PPA, or a reduced obligation to buy subject to the developer paying 24 months lump sum damages equal to 24 months of the balance PPA period. Developers are also allowed to upgrade and modify equipment during the project period at their own risk.

 

Technical Criteria and Cybersecurity

Another interesting proposal is the proposed addition of obligation to establish GPS enabled Automatic Weather Station (AWS) to enable load despatch centres plan better. Along with this comes more obligations to complying with cybersecurity obligations as defined from time to time.

 

Sub Station Connectivity

Unlike present day bids where sub stations are identified after allotment of LOA, the proposed guidelines would like to see sub-stations identified beforehand here developers will connect their ISTS or InSTS projects. This move will no doubt help remove subsequent delays and disputes with transcos.

 

Relief on PBG, New Instrument 

While proposing release of Performance Bank Guarantees within 45 days of commencement of supply, the new guidelines also propose a new instrument, Insurance Surety Bonds, which would be paid unconditionally similar to a Bank Guarantee.

 

The proposed changes will surely attract some strong, conflicting feedback in our view, as many of the proposed changes put the onus on developers to get everything right, from identifying sub-stations to establishing AWS, following evolving cybersecurity norms etc. While the obvious issue would be if these guidelines load further costs and lead to some project inflation, headline changes proposed, like the PPA period are long overdue. The pace of change seen in technologies has been such that these changes needed to be made to avoid wastage of resources and loss of productivity. Repowering of both older wind, and solar projects now, could easily add another 10-15% to India’s total renewable capacity, without needing further land. Watch this space for further developments.