Bigger Play

New MNRE guidelines to give distributed solar projects a leg-up

In December 2019, the Ministry of New and Renewable Energy (MNRE) came out with guidelines for decentralised solar plants. To be implemented by discoms across the country, the guidelines aim to provide a facilitative framework for the development of decentralised solar power plants near distribution substations in the country and the fulfilment of discoms’ solar RPOs. Being available during the daytime, solar power is well suited for agricultural loads, which are primarily day loads. The power provided to the agricultural sector by discoms is either free or highly subsidised. Further, the transmission and distribution losses associated with rural feeders, which average around 30 per cent, add to the cost burden of discoms. However, these can be minimised if solar power is generated locally and fed into the substation.

Key highlights

The new guidelines will apply to discoms procuring solar power from decentralised solar power plants of more than 2 MW capacity and connected to distribution substations of 33/11 kV, 66/11 kV, and 110/11 kV. According to the guidelines, discoms will decide the power capacities associated with substations, which may depend on the average energy or load requirement during the day as well as factors such as technical feasibility. Apart from substation-wise capacity, discoms may also decide the capacity of individual solar plants to be set up and the radius within which they would be located. The solar power generated will be purchased by discoms at a tariff determined by the respective state electricity regulatory commissions or discovered through competitive bidding. Further, the discoms will provide connectivity at substation feeders and ensure a “must-run” status by keeping the feeders “on” during the daytime. They can also encourage decentralised solar plants to sell power through open access, as per applicable rules and regulations. The selection of project developers that can connect to substations would be as per the extant rules and regulations.

The plants will be developed following the request for selection and bidding process. The guidelines state that discoms or any agency authorised by the discoms will invite bids for the development of solar power plants on a build-own-operate basis. The discoms can also allow power trading agencies to act as intermediate procurers to float bids for setting up plants and selling power to discoms or other open access customers on a mutually agreed trading margin, which should not exceed Re 0.07 per kW.

In case land and connectivity are being provided by a discom, then the selected bidder will have to commission the solar power plant within nine months from the date of issuance of the letter of award (LoA). In other cases, the commissioning will have to be done within 12 months of the issuance of the LoA.  In addition, the solar power generator is expected to provide bank guarantees such as an earnest money deposit of Rs 100,000 per MW and performance bank guarantee of Rs 500,000 per MW within 30 days from the date of issue of the LoA to the discom.

The power purchase agreement (PPA) will be for a period of 25 years from the date of commissioning. The discom will be obliged to buy the entire power from the solar power generator as stated in the PPA. The power generator is required to achieve a minimum capacity utilisation factor of 15 per cent on an annual basis during the PPA period. Upon failing to meet this, the solar power developer will be liable to pay the compensation to the discom. However, this could be relaxed in case of non-availability of the grid and force majeure events.


Decentralised solar energy has been making steady progress under the Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) scheme. Component A of the scheme is aimed at setting up 10,000 MW of decentralised grid-connected renewable energy power plants. These power plants can also be put up on cultivable land, on stilts, where crops can be grown below solar panels. There are around 40,000 substations of 33/11 kV in rural areas. In addition, there are 66/11 kV and 110/11 kV substations that can act as anchor points for connecting small solar power generating plants. The MNRE guidelines will thus help in harnessing the potential of decentralised solar power across the states, especially in rural areas.

By Meghaa Gangahar


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