The Central Electricity Regulatory Commission (CERC) has adopted tariffs ranging from ₹3.09 (~$0.0342)/kWh to ₹3.10 (~$0.0343)/kWh, as determined through NHPC’s auction, to develop 1,200 MW interstate transmission system-connected solar power projects with energy storage systems.

However, while adopting the base capacity in full, the Commission partially curtailed the additional capacity sought under the greenshoe option, finding that allowing one bidder to receive a disproportionately higher allocation, even at the same tariff, could raise legitimate concerns about consistency and fairness under the competitive bidding framework.

The Commission also directed all renewable energy implementing agencies to seek formal clarification from the Ministry of Power on the greenshoe mechanism. It observed that a clear policy position would ensure uniformity across programs, safeguard competitive neutrality, and provide certainty to developers, procurers, and investors in future renewable energy auctions.

CERC said the clarification should also address the manner and specificity of Greenshoe allocations, including whether additional allocations should be limited to up to 50% of the originally allocated capacity, particularly when excess capacity arises due to non-acceptance by other bidders.

Background

NHPC issued a tender in September 2024 to set up 1,200 MW of solar projects, along with 600 MW of energy storage systems and 1,200 MWh of energy storage capacity.

The tender also included a greenshoe provision under which successful bidders could be allocated up to 1,200 MW of additional capacity at the same discovered tariff, subject to their willingness and eligibility.

Following financial bid opening and the e-reverse auction, six bidders emerged successful for the base capacity of 1,200 MW, quoting tariffs ranging from ₹3.09 (~$0.0342)/kWh to ₹3.10 (~$0.0343)/kWh. Letters of award were issued by NHPC in March 2025.

NHPC then approached the Commission seeking adoption of these tariffs, along with those for the additional 1,200 MW capacity awarded under the greenshoe option.

It is submitted that the greenshoe allocations were made strictly in accordance with the provisions of the request for selection, that only successful bidders at the lowest tariff were offered additional capacity, and that the same technical and commercial terms applied as in the base allocation.

Commission’s Analysis

After reviewing the bidding timeline, the tender documents, the evaluation process, and the conformity certificates submitted by NHPC, the Commission that the bidding process for 1,200 MW base capacity complied with the Ministry of Power’s bidding guidelines.

It noted that the tender was widely publicised, that the minimum competition requirements were met, and that the tariffs were discovered through an e-reverse auction among qualified bidders. On this basis, the Commission adopted the tariffs for the base capacity in full.

The more complex issue before the Commission concerned the greenshoe option. It observed that the bidding guidelines do not explicitly define or recognise a greenshoe option as a standard feature of tariff-based renewable energy bidding.

While the guidelines do permit enhancement of tendered capacity under the same bidding framework, they do not specify a detailed mechanism comparable to the greenshoe structure adopted by NHPC.

The Commission acknowledged that NHPC had incorporated the greenshoe provision transparently in the original tender and that bidders were aware of it at the time of bidding. However, it expressed concern that repeated and routine use of such a mechanism without explicit guideline backing could undermine the principles of transparency, equal treatment, and a level playing field.

In particular, the Commission scrutinised the allocation of unclaimed greenshoe capacity to NTPC Renewable Energy beyond the initial round of consent. It found that allowing one bidder to receive a disproportionately higher allocation, even at the same tariff, could raise legitimate concerns about consistency and fairness.

To balance tariff efficiency with regulatory discipline, the Commission restricted NTPC Renewable Energy’s greenshoe capacity to 300 MW, matching its base allocation, and capped its total capacity at 600 MW. This resulted in an overall approved Greenshoe capacity of 1,130 MW.

Regarding trading margin, CERC noted that for long-term contracts, the trading margin is to be mutually agreed and will be governed by the PSAs once executed. However, if NHPC does not provide the escrow arrangement or irrevocable revolving letter of credit prescribed under the Trading Licence Regulations, the trading margin would be subject to a ceiling of ₹0.02 (~$0.0002)/kWh.

On the greenshoe question, CERC directed NHPC to place executed power purchase and power sale agreements on record once tied up, or report if the awarded capacity does not fructify into contracts.

In a recent similar order, CERC did not allow NHPC to fully exercise the 1.2 GW greenshoe option, holding that allocating 750 MW to a single bidder raised transparency concerns.

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