The concept of round-the-clock (RTC) supply has received much-needed policy attention in light of the issues of intermittency of renewable energy generation and low capacity utilisation of the existing transmission systems. Power utilities are obligated to procure renewables and also account for the power demand-supply mismatches that might occur due to the erratic generation patterns of renewable power, which can threaten grid stability. Acknowledging all these challenges in the transition to clean energy, the Ministry of Power issued the “Guidelines for Tariff-based Competitive Bidding Process for Procurement of RTC Power from Grid-connected Renewable Energy Power Projects, complemented with Power from Coal-based Thermal Power Projects” in July 2020. They have been amended four times since then, with the latest amendment coming out in August 2022.
The primary objective for issuing such guidelines by the government was to ensure supply of RTC power to discoms by bundling renewable energy with storage and other sources of energy including thermal power. This would help in streamlined procurement of various energy sources in a cost-competitive manner. These guidelines are expected to provide a framework for an intermediary procurer as an aggregator or trader for the long-term sale and purchase of power through interstate or intra-state transmission systems.
Several innovative tenders have been announced, such as those for solar-wind hybrid power and peak power supply before the RTC guidelines were issued. In fact, an RTC power tender for only renewable energy was issued in 2019 and the RTC Tranche 2 tender for renewables blended with thermal power was issued in March 2020 before the actual guidelines came out. However, these guidelines have given the much-needed confidence to investors.
The initial guidelines
According to the first set of guidelines, issued in July 2020, if the availability of the project was less than 85 per cent on an annual basis or during the peak hours for reasons attributable to RTC power generators, then the generator would be obligated to pay a penalty to the procurer for such shortfall in availability. The penalty was 25 per cent of the cost of the energy shortfall, calculated at the maximum indexed composite tariff payable during the year.
Further, the initial guidelines mandated that at least 51 per cent of the energy generated by the developer annually should come from renewables and the balance from thermal sources. The generator could use storage to ensure the required minimum annual availability of 85 per cent. If the mandatory 51 per cent of the total energy was not from renewables, then the developer had to pay a penalty of 25 per cent of the maximum indexed composite tariff payable during the year for each unit of shortfall. If there is shortfall in both availability of 85 per cent and 51 per cent renewable energy, only the maximum of the two penalties will be considered.
In addition, the PPA period should be at least 25 years from the scheduled commencement-of-supply date. The PPA can also be fixed for a longer period, such as 35 years, but the duration of the PPA must be stated upfront in the PPA document. If the agreements with the land- and infrastructure-owning agencies, the relevant transmission utilities and the system operators allow it, then the generators would be free to operate their plants after the PPA period.
For bid submission, a bidder was required to submit a bid for a portion of the total amount to be procured by the procurer. To achieve economies of scale and to consider the suitability of coupling with the interstate transmission system, the bidder’s minimum quantum of power should be 250 MW. Since a bidder can partner with more than one thermal plant for his renewable energy project, thermal capacities less than 250 MW can be used. The bidder will be chosen based on the lowest quoted “composite tariff”. The bidder with the lowest composite tariff will be assigned the amount of power he has offered. These guidelines have helped in providing a transparent, fair and standardised procurement framework based on open competitive bidding with appropriate risk-sharing among various stakeholders.
These guidelines were subject to amendments and were revised in November 2020, February 2021 and February 2022, followed by the latest one in August 2022. According to the current amendment, the generator shall supply RTC renewable power, keeping at least 90 per cent availability annually. Further, this 90 per cent availability needs to be ensured on a monthly basis for at least 11 months in a year and also during peak hours. In addition, storage can be used for ensuring the required minimum annual and monthly availability of 90 per cent. Moreover, annually, a minimum 51 per cent of energy should be offered from renewable energy sources which can include storage. The charge for failing to meet the specified availability will be equal to the total tariff for the number of units not supplied. In the initial guidelines, the power generator was supposed to supply despatchable renewable energy complemented with thermal power, round the clock, keeping at least 85 per cent availability annually and at least 85 per cent availability during peak hours. But after the recent amendment, the availability criteria has been increased in a bid to move towards more firm RTC power.
The levellised tariff would now be determined using Central Electricity Regulatory Commission escalation indices for the type of fuel quoted by the bidder and the discount factor specified in the bidding document. The bidder must also specify how much energy the bidder wants to supply from renewable energy and non-renewable energy sources. The weighted average levellised tariff for per unit of RTC power supply shall be determined based on the duration of the PPA and the proportion of energy derived from renewable energy and non-renewable energy sources. The bids must be evaluated using the weighted average levellised tariff for per unit of RTC power supply. The procurer must issue a tender under which the bidder cites the first-year weighted average levellised tariff in “per kWh”. The quoted tariff should include four components – a fixed renewable component, a fixed non-renewable component, a variable component of non-renewable power that is escalated based on fuel prices, and a variable component of non-renewable power that is escalated based on transportation costs.
Also, for early commissioning of single components outside the PPA, a provision has been added. This is in the case of project components being located at multiple locations where one component is ready for injection of power into the grid, but the remaining components have not been commissioned. In this scenario, the generator will be allowed to commission such components depending on the decision of first, the end procurer, and then, the intermediary procurer to allow this.
According to the amendment, the PPA period will be for 25 years from the date of scheduled commissioning or the date of commissioning of the total project capacity, whichever is later. The PPA can also be set for a longer period such as for 35 years. Generators are free to operate their projects after the expiry of the PPA period in case the arrangements with the land- and infrastructure-owning agencies, the relevant transmission utilities and the system operators so provide.
The end procurer needs to give payment security to the intermediary procurer with a revolving letter of credit of an amount not less than one month’s average bill for the projects under consideration. If the end procurer is not eligible to be covered under the state government guarantee, then the tender must contain provisions for payment of an additional risk premium of Re 0.10 per kWh. This total amount must be added to both the letter of credit held by the end procurer and the payment security fund maintained by the intermediary procurer.
RTC power is looked upon as a major game changer for the power sector. The government’s policy support to promote its uptake is indeed commendable. Such policy advances will ensure that the fundamental issues of intermittency, lack of utilisation of transmission infrastructure and grid instability are resolved, thereby making the case for promoting renewables even more strong. These policy actions will give renewable energy developers the much-needed confidence to continue implementing hybrid and RTC power supply projects in the country.