Guidelines Issued for MNRE’s Program for Off-Grid Solar Projects Under RESCO Model

The program will be in effect until March 31, 2021, and is applicable only for north-eastern states

July 29, 2020


The Ministry of New and Renewable Energy (MNRE) has issued guidelines for off-grid solar power projects under the renewable energy service company (RESCO) model.

The ministry had issued the draft guidelines for the implementation of this order earlier in May.

Under the third phase of the program, off-grid solar power projects of up to 25 kW can be installed in areas where grid power has not reached or is not reliable. The program has now been extended to March 31, 2021.

The off-grid and decentralized solar PV applications program phase III was launched by the MNRE on August 07, 2018, and was slated to be valid for financial years 2018-19 and 2019-20.

The program is applicable only for north-eastern states for the installation of off-grid solar projects through the RESCO model with central financial assistance (CFA) of 90% of the benchmark cost.

This CFA provided by the MNRE would reduce the financial burden to a significant level, which otherwise results in high tariffs per unit due to the smaller size of projects and the requirement of storage batteries.

Under the RESCO model, the MNRE has proposed that the vendor would install and operate the solar power projects of capacity up to 10 kW for at least ten years and of capacity above 10 kW for at least 15 years.

These projects would be installed on a build-own-operate-transfer (BOOT) basis. The CFA of 90% of the benchmark cost will be paid upfront on the successful commissioning of the project.

The solar power project would be designed to supply daily minimum guaranteed energy (DMGE) to the beneficiary at the delivery point. The RESCO company selected through competitive bidding would install and operate the project to supply DMGE to the beneficiary organization at the discovered tariff. During periods of overcast, cloudy, or rainy conditions lasting continuously for three days or more, the requirement of DMGE should be reduced to 30% on a per-day basis from the third day onwards.

The MNRE noted that a bank guarantee would be released at the end of five years or at the time of replacement of batteries for projects up to 10 kW capacity. For a capacity of more than 10 kW and up to 25 kW, 40% of bank guarantee will be released at the end of five years or the first replacement of batteries. The balance 60% would be released at the end of ten years or second replacement of batteries, whichever is later.

Regarding the tariff estimation, the guidelines suggest that a representative system of 4 kW has been considered for the estimation of the tariff. The average daily solar power generation per kW of a solar panel has been considered 2.5 kWh as the north-eastern region has fewer sunny days and low solar radiation levels. Therefore, the daily minimum guaranteed solar power would be 10 kWh. With a battery back-up of 7.2 VAh/W, it would be 28.8 kWh.

As per the guidelines, the MNRE benchmark cost has been considered for arriving at the total cost of the project. The developer would arrange a loan at a rate of 12% for the project. In this case, the levelized tariff discovered is ₹5.96 (~$0.08)/kWh. The bidder may calculate the tariff based on the actual cost of finance, expected return on equity, O&M cost, working capital, depreciation, and site requirements.

According to the guidelines, the power producer and the power purchaser should sign a power purchase agreement (PPA). Power producers should be responsible for the design, installation, operation, and maintenance of the projects. The beneficiary would pay for the DMGE at the tariff decided through the bidding process every month.

The project should be installed and commissioned by a successful company within three months. A maximum extension of three months can be allowed, provided that the reasons for the delay are beyond the control of the RESCO.

All solar power projects sanctioned under the program will be provided with a remote monitoring system. The implementing agency would have to submit quarterly performance data of the solar power project to the MNRE.

Projects installed under the program should meet all the prescribed technical specifications and construction standards.

Off-grid renewable energy generation sources, coupled with new laws and codes for building construction, will help in ensuring energy efficiency and energy sufficiency in India.

Last year, the government had announced that a corpus of ₹29.37 billion (~$393.38 million) was provided for off-grid renewable energy generation sources in the past three consecutive budgets, beginning with the financial year (FY) 2016-17 and ending FY 2018-19.

Previously, Mercom had reported on how rooftop, off-grid, and decentralized solar are the fulcrum of electricity access for all Indians.