Open Access Route: Delhi Metro starts procuring power from Rewa Solar Park

Delhi Metro starts procuring power from Rewa Solar Park

By Khushboo Goyal

On April 18, 2019, the Delhi Metro Rail Corporation (DMRC) started procuring solar power from the Rewa Ultra Mega Solar Park in Madhya Pradesh. Through this landmark deal, DMRC has become the first commercial consumer of its scale and size to procure solar power through the open access route from another state. In this article, Renewable Watch presents DMRC’s green initiatives, the specifics of the open access deal, the implementation challenges and stakeholder perspectives…

DMRC’s solar portfolio

Owing to its large-scale operations and vast network, huge amount of energy is consumed by DMRC. For instance, it consumed 1,100 MU of energy in 2018-19 and currently pays a special tariff of Rs 6.80 per unit to Delhi discoms for its power consumption. This entails significant power cost, which is increasing year-on-year due to the rise in grid tariffs as well as further expansion of the metro network. In order to reduce its operational expenses, DMRC uses solar power extensively through many rooftop solar projects deployed on its depots, metro stations, parking spaces, or other buildings and workshops. As of May 2019, 28 MWp of solar capacity has been commissioned under the Renewable Energy Service Company (RESCO) mode for DMRC, while 7-8 MW of projects are under execution. The rooftop solar projects deployed for DMRC account for a total of 30 MUs of energy.

Power purchase arrangement

DMRC realised quite early that the power generated by rooftop solar projects would be insufficient compared to its growing energy requirements. Thus, DMRC decided to opt for open access power procurement, to further increase its solar power penetration and reduce the carbon footprint. To this end, DMRC along with the Ministry of New and Renewable Energy (MNRE) met Madhya Pradesh power department officials to conceptualise a suitable procurement mechanism with the ovision of energy banking. This resulted in DMRC signing a PPA to source power from the Rewa Solar Park in 2017. Under this agreement, DMRC would only be sourcing about 99 MW of power from the 750 MW solar park, while the remaining would be sold to state discoms for better project bankability. The arrangement is based on DMRC’s energy requirements. Under this, DMRC will procure 345 MUs of energy per annum from the solar park.

This open access arrangement is quite complex with the power generated at Rewa, Madhya Pradesh being first fed into the western region grid. From here, it is taken to the central transmission utility, Power Grid Corporation of India Limited, which sends it to the northern region grid. The power then enters the Delhi Transco Limited’s (DTL) area. DMRC is connected to DTL points at 66 kV and 220 kV levels. Despite being connected at the transmission level, all the metering and billing arrangements fall under the Delhi discom’s jurisdiction, since DMRC is not a distribution licensee. Thus, multiple clearances are involved in making this open access arrangement work.

Challenges and outlook

Discoms are increasingly becoming reluctant to let go of their premium paying commercial customers like DMRC. Thus, with open access projects, a variety of charges have come into the picture. At the time of conception, DMRC had expected a tariff of Rs 4 per unit from this project. However, soon after signing of the PPA, the waiver of charges on interstate transmission system (ISTS) was limited to renewable purchase obligation (RPO) fulfilment of discoms. Thus, while intra-state transmission charges are exempted in Delhi, DMRC has to pay charges for interstate transmission, cross-subsidy surcharges and transmission losses. After incorporating these charges, DMRC expects the tariff to be in the range of Rs 4.50-Rs 5 per unit of energy, even though the discovered tariff during bidding at Rewa was just Rs 2.97 per unit. Thus, if these open access charges are reduced, the ultimate benefit would be passed on to the end consumer, as the metro fares for commuters would decrease.

Another challenge for DMRC is the policy and regulatory uncertainty in India’s power sector. Open access charges might increase any time without warning and DMRC would be liable to pay these charges as per the PPA terms. For instance, since the signing of the PPA, three major policy changes have occurred – the introduction of ISTS charges, goods and services tax, and safeguard duties on solar imports –  which have impacted solar power tariffs. Summing up, while this power procurement arrangement brings some optimism regarding open access projects in India, it also highlights the number of barriers that DMRC has had to cross before it could source power from the solar park. Other consumers may not be able to address these issues and many such open access projects could remain stranded in the future.