The Kerala State Electricity Regulatory Commission (KSERC) has approved a tariff of ₹441,000 (~$5,053)/MW/month for Kerala State Electricity Board‘s (KSEB) 125 MW/500 MWh battery energy storage system (BESS) project at the Mylatti substation in Kasargod.

The Commission adopted the discovered tariff quoted by JSW Neo Energy and approved a trading margin of ₹0.07 (~$0.0008)/kWh to be paid to the Solar Energy Corporation of India (SECI).

The Commission also sanctioned the battery energy storage sale agreement (BESSA) signed between the Solar Energy Corporation (SECI) and KSEB. The trading margin must explicitly include the cost of providing payment security to the developer.

Background

KSEB submitted two petitions for in-principle approval of the BESS project, and for tariff adoption and approval of the trading margin and agreements. The project is intended to mitigate grid instability caused by increasing renewable energy penetration, especially solar, and to address peak power demands.

KSEB proposed implementing the project using a tariff-based competitive bidding process, with financial backing from the Ministry of Power under the viability gap funding (VGF) program.

SECI was appointed as the intermediary procurer and bidding agency. The bid process led to the selection of JSW Neo Energy as the lowest bidder. Subsequently, SECI signed the battery energy storage purchase agreement (BESPA).

KSEB emphasized that the project would be implemented without any upfront capital investment and would help reduce dependency on expensive peak-time power purchases. The energy stored would be discharged during peak hours, thus enhancing internal power handling capacity and contributing to the state’s green energy goals.

SECI detailed the transparent bidding process, including the receipt of seven bids, technical evaluation, and the e-reverse auction that finalized the L1 tariff. It asserted that the trading margin of ₹0.07 (~$0.0008)/kWh was under the operational guidelines of the VGF program and consistent with previous regulatory provisions.

JSW Neo Energy stated their commitment to completing the project within the stipulated 18 months, aiming for even earlier commissioning.

During hearings, the Commission sought clarifications on undefined terms like the average power purchase cost (APPC), incentives related to battery degradation, round-trip efficiency (RtE) calculations, and the scope of the trading margin. These were addressed in subsequent submissions by KSEB and SECI.

Commission’s Analysis

The Commission acknowledged the importance of BESS infrastructure in supporting renewable energy integration, especially in regions like Kasargod that experience grid fluctuations and lack connectivity to the interstate transmission system.

The state regulator scrutinized the entire bidding process and confirmed its conformity with the approved guidelines. It reviewed bid evaluation reports, technical assessments, and SECI’s certification of procedural compliance.

While the trading margin of ₹0.07 (~$0.0008)/kWh was approved, the Commission flagged concerns over its magnitude, considering SECI’s limited involvement post-contract award. Nonetheless, it acknowledged that the trading margin was within permissible limits, and it was mutually agreed upon in the BESSA.

The Commission directed SECI and KSEB to explicitly state in the agreement that the trading margin includes the cost of providing payment security. This was to prevent any future disputes regarding hidden costs or misinterpretations.

The regulator mandated several amendments and sought clarifications in the agreements. The term APPC was to be defined explicitly as the weighted average cost of power purchased by KSEB. A precise methodology for measuring RtE was required, especially in cases where charging and discharging occurred on different days. The incentive program for lower-than-expected battery degradation was confirmed and validated.

KSEB was also directed to negotiate lower trading margins in future BESS procurements to ensure cost-efficiency.

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