The Central Electricity Regulatory Commission (CERC) has approved tariffs ranging from 2.43 (~$0.0259)/kWh to ₹2.47 (~$0.0263)/kWh discovered by NHPC for its 1,670 MW interstate transmission system (ISTS)-connected solar power projects (Tranche IX).

The total capacity comprises 1,170 MW under base allocation and 500 MW under the greenshoe option.

Background

In October 2024, NHPC floated a tender for 1,200 MW of ISTS-connected solar projects. Eight bidders participated, and tariffs discovered ranged from ₹2.43 (~$0.0259)/kWh to ₹2.47 (~$0.0263)/kWh.

Capacity was initially allocated across multiple developers, including Teerth Gopicon, Hanur Solar Power, ReNew Solar Power, Avaada Energy, and Bharat Petroleum Corporation.

Bharat Petroleum Corporation was subsequently disqualified because its quoted capacity of 30 MW was below the minimum threshold of 50 MW, reducing the base allocation to 1,170 MW.

NHPC also exercised a greenshoe option to allocate additional capacity at the lowest discovered tariff. Under this mechanism, an additional 1,000 MW was allocated to willing bidders, primarily Hanur and ReNew, both of whom agreed to take 2.43 (~$0.0259)/kWh.

In its submissions, NHPC stated that the bidding process was conducted transparently and in line with the Ministry of Power guidelines. It submitted conformity certificates from the bid evaluation committee confirming that the process adhered to the request for selection documents and that the discovered prices were reasonable.

NHPC also contended that the tariffs discovered were competitive with recent solar tenders approved by the Commission, which ranged from ₹2.52 (~$0.0269)/kWh to ₹3.05 (~$0.0325)/kWh.

On the greenshoe option, NHPC submitted that while the bidding guidelines do not explicitly provide for such a mechanism, they do not prohibit it. It relied on provisions in the request for selection and on discussions with the Ministry of New and Renewable Energy, which allowed flexibility in determining the bid size. It also stated that allocating additional capacity at the lowest tariff improved efficiency, economy, and competition in public procurement.

NHPC explained that the delay in filing the petition arose because it was unable to tie up the entire awarded capacity within the timeline, and requested condonation of the delay.

Commission’s Analysis

The Commission found that NHPC had followed the prescribed process, including public notification, technical and financial evaluation, and reverse auction. It relied on conformity certificates and evaluation committee findings confirming that the bidding process was conducted properly and that the selected prices were reasonable.

On tariff reasonability, the Commission observed that the discovered tariffs were lower than those adopted in comparable recent cases, reinforcing their competitiveness.

The key issue before the Commission was the use of the greenshoe option. It noted that while the guidelines do not explicitly prohibit additional capacity allocation, they also do not define or formally recognise the greenshoe mechanism. This lack of clarity raised concerns about transparency, consistency, and equal treatment of bidders.

The Commission observed that continued use of a mechanism not expressly recognized in the guidelines may be viewed as inconsistent with the framework of Section 63, which emphasises transparency and fair competition in tariff-based procurement.

At the same time, the Commission acknowledged that the additional capacity allocated under the greenshoe option was of a similar nature and governed by the same terms as the base capacity. It therefore allowed part of the additional allocation but reduced its scale to ensure consistency with the original bidding structure.

The Commission condoned the delay in filing the petition but reiterated that intermediary procurers must adhere strictly to the timelines prescribed in the guidelines in future cases.

In its final directions, the Commission emphasised the need for regulatory clarity on the greenshoe mechanism and directed implementing agencies to seek formal guidance from the Ministry of Power.

It noted that such clarification would help ensure uniform application, safeguard competitive neutrality, and provide certainty to stakeholders in future bidding processes.

On the issue of trading margin, CERC reiterated that NHPC’s role as an intermediary is limited to facilitation rather than active trading, and that any trading margin must align with regulatory norms and be capped as per guidelines.

It added that the trading margin should be mutually agreed upon by the trading licensee and the seller.

CERC observed that if the distribution licensees agree to a trading margin of ₹0.07 (~$0.0007)/kWh, aligning with the trading licence regulations.

However, in case of failure by NHPC to provide an escrow arrangement or an irrevocable revolving letter of credit to the wind-solar hybrid power generators, the trading margin should be limited to ₹0.02 (~$0.0002)/kWh.

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