Ministry of Power Issues Final Competitive Bidding Guidelines for Wind Projects

December 12, 2017


The Ministry of Power has issued the final competitive bidding guidelines for wind projects in India. The guidelines aim to provide a framework for the cost-effective procurement of wind power using a transparent bidding process.

The new rules come nearly eight months after the Ministry of New and Renewable Energy (MNRE) first issued its draft guidelines for wind power projects in early April. The comment period for that draft closed on April 21, 2017. The guideline is now finalized.

These guidelines will apply to intra-state wind projects of 5 MW and above at one site where the minimum bid capacity is 25 MW and inter-state wind projects of 10 MW and above at one site where minimum bid capacity is 50 MW.

An MNRE official told Mercom that the new guidelines come after an overwhelming number of participants in agency’s first two wind tenders promoted more states to go forward with their own wind tenders, creating a need for a universal set of guidelines.

“We have seen that in some states there has been an issue between the Indian Wind Energy Association (IWEA) and the tendering agencies as there was ambiguity surrounding guidelines to conduct the auction, this will take care of all that,” added the MNRE official.

Mercom previously reported that wind auctions in Tamil Nadu and Gujarat were placed on hold after IWEA filed petitions asking for a stay on the capacity tendered as there were no MNRE guidelines to base the auctions on.

Recently, the Solar Energy Corporation of India (SECI) tendered 2 GW of wind projects under the new guidelines.

Key Highlights

  • The developer will identify the land and submit the lease and agreement documents within seven months of execution of the power purchase agreement (PPA).
  • The developer will arrange for a no objection certificate, a forest clearance certificate, and a letter from the state transmission utility or central transmission utility confirming the technical feasibility of connectivity for the project.
  • A single bidder will be allowed to bid for a minimum wind project capacity of 25 MW with at least one, 5 MW project at each site for Intra-state projects.
  • For Inter-state projects, a bidder will be allowed to bid for a minimum wind project of 50 MW at one site.
  • The procurer can also specify the maximum capacity to be allotted to a single bidder, including the bidder’s affiliates. The maximum capacity for a single bidder or company or group of companies can be fixed by the procurer taking into consideration economies of scale, land availability, expected competition timeframe, and the market need.
  • Tariffs quoted by bidders must be within the bidding parameters. When there is a benchmark tariff, the bidder must quote below it.
  • The bidding can either be on a fixed tariff in ₹/kWh for 25 years or on an escalating tariff in ₹/kWh with a pre-defined annual escalation fixed in ₹/kWh for a specified number of years.
  • The procurer will have to disclose the applicable incentives in the RfS.
  • The PPA period for all projects will be 25 years from the date of scheduled commissioning.
  • The declared capacity utilization factor (CUF) should not be less than 22 percent over a year. In cases where a project supplies less energy than the minimum CUF, the wind power generator will be liable to pay to the procurer a fine for the energy availability shortfall.
  • If the power generated is more than the maximum CUF, then the generator is free to sell excess power to any other entity if the procurer refuses to buy the extra power generated.
  • Wind power projects have been accorded a must-run status and no commissioned wind power project can be asked to back down by a DISCOM or load dispatch center. In the event of a backdown, except for cases where a backdown is caused by grid issues, the wind power generator will be eligible for generation compensation from the procurer.
  • The distribution licensee (DISCOM) will provide payment security to the wind power generator through a revolving letter of credit that is equivalent to one month of average billing from the project under consideration and a payment security fund suitable to support payment for at least three months of billing of all the projects tied up with such a fund.
  • The procurer can also provide a state government guarantee to ensure that there is adequate security to the wind power generator, both in terms of the payment of energy charges and termination compensation.
  • Financial closure: The wind developer should attain financial closure within seven months from the execution of the PPA.
  • A project will only be considered for partial commissioning when a minimum of 50 percent of the project is complete. When a project is commissioned early, the procurer will have to purchase the power generated at 75 percent of the PPA tariff until the specified commissioning date arrives.
  • All wind power projects should be commissioned within 18 months of PPA execution.
  • The responsibility of getting transmission connectivity and access lies with the wind power generator and will be at the cost of wind power generator.

Time Table for Bid Process: In the bidding process, a minimum of 30 days will be allowed between RfS issuance and the last date of bid submission. Following evaluation of the bids, LoIs will be issued within 75 days from the issuance of the RfS document. PPA signing will be within 105 days from the zero date (RfS issue). In normal circumstances, the bidding process will be completed in a period of 120 days.

Mercom recently reported that the power sale agreement (PSA) for 1,000 MW of inter-state transmission system-connected wind projects was signed and the central government has been working with state governments to issue bids for about 8 GW of cumulative wind capacity this year, with these new guidelines applying to the remaining wind tenders.

The wind power tariff in India dropped below ₹3 (~$0.046)/kWh for the first time in June 2017 with the lowest winning bid of ₹2.64 (~$0.0413)/kWh quoted in the second, 1 GW wind auction conducted by SECI. With this auction result, the wind tariff is now just 8 percent off the lowest solar tariff of ₹2.44 (~$0.037)/kWh. The tariffs for wind and solar are now both below the average tariff for thermal power.

Mercom has previously published articles on the impact of reverse auctions on the wind sector.

According to MNRE, cumulative wind power installations reached 32.7 GW as of October 2017.

Image credit: By BKnight97 – Photograph taken via iPhone 4S, CC BY-SA 4.0