The Maharashtra Electricity Regulatory Commission (MERC) has approved the energy purchase agreement (EPA) for wind projects with expired EPAs. The agreements were signed between Maharashtra State Electricity Distribution Company Limited (MSEDCL) and Maharashtra Energy Development Agency (MEDA).

The Commission approved the procurement of power at ₹2.25 (~$0.03)/kWh for the Group I projects and ₹2.52 (~$0.034)/kWh for Group II and III projects. Group I, projects are those commissioned before December 27, 1999. Group II are the projects commissioned after December 27, 1999, to December 31, 2003, and Group III projects are those that are commissioned after April 1, 2003.

The Commission directed MEDA to deposit the revenue earned from the sale of electricity from these wind projects in a separate account. The amount will be used for operation and maintenance (O&M) related expenses for these projects. The balance amount will be used for setting up new demonstration projects. The Commission also noted that the wind power procured from these projects will be used to fulfill MSEDCL’s non-solar renewable purchase obligation (RPO) targets for the respective periods.

Background

MSEDCL had filed a petition in May this year seeking approval for long-term procurement of wind power from MEDA’s projects whose energy purchase agreements with MSEDCL had expired for meeting non-solar RPO targets. The state DISCOM had requested the Commission to approve wind power procurement at a fixed tariff of ₹2.52 (~$0.034)/kWh for the wind projects.

MEDA had installed five demonstration wind power projects in Sindhudurg, Satara, Sangli, and Amravati districts of Maharashtra.

The first three wind projects were commissioned before December 27, 1999, and come under Group I projects per MERC’s wind project tariff order. These projects’ EPA tenure was 20 years, and it expired in July 2014, July 2016, and April 2018, respectively. The last two projects were commissioned between April 01, 2003, and March 31, 2010, and come under Group III projects. The EPA tenure for these projects was 13 years, and the said EPAs expired in June 2016 and September 2018, respectively.

Through its letter dated October 31, 2019, MEDA requested MSEDCL to sign EPA for these five projects at ₹2.52 (~0.034)/kWh; the rate offered to all wind projects after the expiry of their PPA.

In its order dated April 09, 2019, the Commission had ruled that the ceiling rate should not be more than the rates approved for the short-term procurement of wind energy at ₹2.52 (~$0.034)/kWh for wind projects for Groups II to IV and ₹2.25 (~$0.03)/kWh for Group I projects.

In its submission, MEDA said that wind turbine generators under Group I and II projects were based on old technology, and the generation from these projects was low. Considering this and the expenses incurred on O&M activities, a tariff of ₹2.52 (~$0.034)/kWh was required for the projects’ financial viability. Hence, it requested the Commission to approve the rate of ₹2.52 (~$0.034)/kWh for all demonstration projects of MEDA under Group I, II, and III.

In its analysis, the Commission noted that the projects involved were not commercial and developed by MSEDCL to promote wind energy. The Commission said that it would not be proper to ask MEDA to participate in competitive bidding for selling the energy generated from such demonstrative projects. Hence, as an exceptional case, the Commission said that it would allow extended EPA for these five demonstrative projects based on a memorandum of understanding.

However, the Commission pointed out that such approval of MoU-based EPA is subject to the condition that MEDA will deposit revenue earned from the sale of electricity from these wind projects in a separate account.

Also, the Commission said that both parties had not agreed on the tariff rate for Group-I projects. The Commission noted that EPAs for projects under Group I have a 20 years tenure, whereas Group -II, III, and IV projects have the EPA of 13 years.

Therefore, the tariff for these projects post expiry of the EPA could not be the same. Consequently, it cannot allow MEDA’s request to allow a tariff of ₹2.52 (~$0.034)/kWh for all five wind projects. Accordingly, the Commission approved wind power procurement from MEDA’s demonstrative projects at ₹2.25 (~$0.03)/kWh for Group-I projects and ₹2.52 (~$0.034)/kWh for Group-II and III projects.

In its conclusion, the Commission said that MEDA should explore possibilities of setting up new demonstrative projects to build investors’ confidence. It directed MEDA to submit a detailed report on its plan to set up new demonstrative projects within a year.

Meanwhile, MSEDCL issued a request for selection to procure 200 MW of wind energy from intra-state wind power projects with expired or soon-to-be expired EPAs.