The Kerala State Electricity Regulatory Commission (KSERC) has approved the Kerala State Electricity Board (KSEBL)’s proposal to set up a 125 MW/500 MWh battery energy storage system (BESS) at four substations.

The BESS will be set up at Sreekantapuram (40 MW/160 MWh), Mulleria (15 MW/60 MWh), Areacode (30 MW/120 MWh), and Pothencode (40 MW/160 MWh).

The project will be implemented through tariff-based competitive bidding with Central Public Sector Undertaking (CPSU) Viability Gap Funding (VGF) from the Ministry of Power.

The Commission approved tariffs ranging from ₹434,000 (~$4,970)/MW/month to ₹457,000 (~$5,234)/MW/month. It also approved a trading margin of ₹0.07 (~$0.0008)/kWh.

Background

Kerala’s renewable energy capacity reached approximately 1,500 MW by 2025, including 1,264 MW of solar power, creating surplus electricity during solar hours and shortages during evening peaks.

The MoP issued operational guidelines and sanctioned CPSU VGF allocations of 2,000 MWh to NTPC, 1,500 MWh to NHPC, and 1,500 MWh to SJVN. It capped VGF at 30% or ₹2.7 million (~$30,920)/MWh.

KSEBL requested a 375 MW/1,500MWh allocation from NHPC in November 2024, which was restricted to 125 MW/500 MWh in December due to demand. The final sites identified were Sreekantapuram (40 MW/160 MWh), Mulleria (15 MW/60 MWh), Areacode (30 MW/120 MWh), and Pothencode (40 MW/160 MWh).

NHPC, acting as the BESS implementing agency, conducted a tariff-based competitive bidding process. Post-negotiation, Tata Power Renewable Energy reduced its bid from ₹456,000 (~$5,222)/MW/month to ₹452,000 (~$5,174).

The discovered capacity tariffs were ₹434,000 (~$4,970)/MW/month for Sreekantapuram (NTPC Green Energy), ₹438,000 (~$5,020)/MW/month for Mulleria (Opera Energy), ₹456,000 (~$5,222)/MW/month for Areacode (Tata Power Renewable Energy), negotiated down to ₹452,000 (~$5,174), and ₹457,000 (~$5,234)/MW/month for Pothencode (NTPC Green Energy).

The MoP set July 16, , as the deadline for signing the battery energy storage purchase agreement (BESPA). KSEBL and NHPC executed the battery energy storage sale agreement (BESSA) on July 16, 2025.

KSEBL argued that the project would store low-cost solar power, reduce expensive peak-hour purchases, and require no upfront capital investment since payments start only after the commercial operation date.

The VGF of ₹1.35 billion (~$15.46 million) is expected to reduce the levelized cost of storage below benchmark rates.

NHPC maintained that the bidding followed MoP guidelines without deviations and that rate variations arose from site-specific balance of plant (BoP) requirements.

Commission’s Analysis

KSERC found the bidding process compliant with MoP’s guidelines and adopted the tariffs.

It directed KSEBL to submit details of the charging power source and tariffs within two months and to include per-unit storage cost estimates in future petitions.

The Commission ratified the project implementation at Sreekantapuram, Mulleria), Areacode , and Pothencode substations. It also approved the BESSA signed between NHPC and KSEBL and a trading margin of ₹0.07 (~$0.0008)/kWh.

KSERC added a caveat that this approval is not a precedent and that KSEBL must negotiate lower margins in future procurements. It noted that the approved ₹0.07 (~$0.0008)/kWh trading margin is higher than the ₹0.04 (~$0.00046)/kWh ceiling under VGF guidelines, but permitted it only for this project as it was agreed in the BESSA.

While approving the tariffs, KSERC flagged critical gaps. It noted that KSEBL had not identified the firm source and tariff for charging power over the 12-year term, which is necessary to determine the per-unit cost of discharged energy. The Commission directed KSEBL to submit this information within two months.

Recently, KSERC approved a tariff of ₹441,000 (~$5,053)/MW/month for KSEB’s 125 MW/500 MWh BESS project at the Mylatti substation in Kasargod.

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