Gujarat Removes Generic Tariff for Wind Projects, Only Competitive Bidding Allowed

For projects below 25 MW, the weighted average of the latest tariff discovered through a competitive bidding process will be taken

May 12, 2020

/ Wind

The Gujarat Electricity Regulatory Commission (GERC) has announced the tariff framework for the procurement of wind power by distribution licensees. The Commission has decided that the tariff for all wind projects in the state will be determined through competitive bidding, doing away with the practice of generic tariffs.

The Commission had issued the previous generic tariff order in 2016, and the control period of the order expired on March 31, 2019. Later, the Commission published a discussion paper detailing the proposed tariff framework for the prospective period as well as the intervening period.

In February 2020, Mercom reported that the GERC had invited public opinions on a draft paper discussing issues while determining tariffs for procuring power from wind projects.

The Commission had proposed that the tariff determination for all prospective wind power projects will be based on the rates discovered through competitive bidding, and discontinue the practice of determining the generic tariff.

To determine the tariff of wind projects below the threshold limit of eligibility for participating in the competitive bidding, the weighted average of the latest tariff discovered through a competitive bidding process will be taken.

The threshold limit for such projects is 25 MW. The Commission said that it does not find merit in determining the tariff for such projects, for which the benchmark capital cost, benchmark financing cost, benchmark O&M (operation & maintenance) cost will have to be first determined. So, to reduce the cost of regulation and to give sufficient clarity to investors investing in such projects, the Commission has decided to consider the competitive bidding approach.

The Commission has also decided that the new control period of the tariff framework will be effective from April 30, 2020, to March 31, 2022.

All the wind power projects using new wind turbine generators installed and commissioned for which power purchase agreements (PPAs) would be signed during the new control period will be eligible to sell power to distribution licensees of Gujarat at the tariff approved and adopted by the Commission under the new tariff framework.

It also clarified that the contention that the fall in competitively discovered prices only reflects the price competition and is not related to technology upgrades or reduced production cost is not relevant. “The very objective of the competition is to discover the most competitive price, and if investors can set up projects at a lower cost and hence, bid lower tariffs, it is beneficial to the end consumer,” GERC added.

Transmission and other charges related to wind projects

The wheeling of electricity generated from the wind energy generators within the state will be allowed on the payment of transmission charges and losses applicable to an open access consumer. This will apply for wheeling of power to consumption sites of 66 kV voltage level and above.

In case the power injection is at 66 kV or above, and power withdrawal is at 11 kV, wheeling should be allowed on payment of transmission charges and losses and 50% of wheeling charges and 50% of distribution losses.

The Commission has also added that wind project owners, who wish to wheel electricity to more than one location, will have to pay ₹0.05 (~$ 0.001)/kWh on the energy fed into the grid to the concerned distribution licensee. Transmission and wheeling charges and losses will also be applicable.

Regarding the third-party sale, wheeling of power for the third party will also be allowed on the payment of transmission and wheeling charges and losses applicable to open access consumers.

Further, the Commission has mentioned that the set-off of wheeled energy at the recipient unit should be carried out in the 15-minute time block.

Also, if the distribution company purchases power as per the tariff framework approved by the Commission, then the Clean Development Mechanism (CDM) benefits will be shared on the net proceeds.

The net proceeds to the power producer will start from 100% in the first year after commissioning, which will be reduced by 10% every year until the sharing becomes 50-50 between the power producer and the power procurer in the sixth year. After this, the sharing of CDM benefits will remain equal until the time the benefit accrues.

The Commission has also decided to continue the practice of the settlement of excess generation after set-off during one billing cycle in case of captive wind power projects in the state. However, those captive wind energy generators which are not registered under the renewable energy certificates (RECs) are eligible for a one-month banking facility for electricity generated during the same calendar month.

“The settlement should be on the basis of peak and normal hours. Generators are eligible to utilize the same during the billing cycle (one month) in proportion to the energy generated during peak and normal hours,” states the Commission.

However, the GERC has stated that the banking facility will not be available for third-party sale of wind energy, and set off will be done in the 15-minute time block with open access consumers’ consumption.

According to the Commission, if wind projects avail open access for captive use or third-party sale but do not opt for REC, then the surplus power after set-off will be purchased by the concerned DISOCM at the rate of ₹1.75 (~$0.02)/kWh.

But, if the wind project avails open access for captive use or third party sale and opts for REC, then the surplus power after set-off will be purchased by the DISCOM at the rate of ₹1.50 (~$0.02)/ kWh.

Earlier, the GERC approved a tariff of ₹2.80 ($0.039)/kWh for 202.6 MW of power from grid-connected wind power projects in Gujarat.

In December 2019, the Gujarat Electricity Regulatory Commission approved a petition filed by Gujarat Urja Vikas Nigam Limited to determine tariffs to procure surplus power from wind projects set up for captive use or third-party sale availing open access in the state.