MNRE Clarifies Renewables Fixed Charges Calculation for Payment Security Mechanism

Memorandum clarifies how to calculate for power during its non-dispatch


The Ministry of New and Renewable Energy (MNRE) has issued a clarification regarding fixed charges in the newly issued payment security mechanism regulations. The ministry has stated that in the case of solar, wind, and small hydro projects, the fixed charge will be the tariff at which power is purchased by the distribution company (DISCOM).

It has also clarified on how energy will be charged during the non-dispatch of power. The energy generated during the non-dispatch period will be calculated based on capacity utilization factor as declared by the generators in the power purchase agreements, and for projects having more than one year of operation, the power not dispatched will be calculated based on pro-rated actual energy generated in the last 12 months.

Recently, Minister for Power R. K. Singh had announced that it would be mandatory for DISCOMs to open and maintain adequate Letters of Credit (LC) as the payment security mechanism under power purchase agreements.

Later, the  Ministry of Power issued procedural guidelines for the scheduling of power to distribution companies in case of non-maintenance of the line of credit under the payment security mechanism. According to these guidelines, power will be scheduled for dispatch after a written communication is provided to the load despatch center that the letter of credit for the power to be supplied has been opened. The communication must specify the duration of supply. This communication will be provided by the DISCOM and confirmed by the power generator.

The Ministry of Power has provided that the letter of credit can be opened according to the terms of the PPA. If the DISCOM wishes, it can open a letter of credit for a shorter duration, say for a week or fortnight. In such a scenario, the DISCOM must communicate the development to LDC, which will schedule the power.

Image credit: Greenko