Not the Right Time to Implement Flexibility in Power Generation, Says MERC

The state is currently preparing its deviation and settlement mechanism


In response to a petition filed by Maharashtra State Power Generation Company Ltd. (MSPGCL), the Maharashtra Energy Regulatory Commission (MERC) has issued an order which states that it is not the right time to introduce changes in the proposed frameworks like final balancing and settlement mechanism (FBSM) and deviation settlement mechanism (DSM) for implementing flexibility in generation.

However, the commission has directed Maharashtra State Load Despatch Center (MSLDC) to keep appropriate provisions in DSM and related procedures so that such moves can be introduced efficiently without causing major changes in the prevailing systems later.


The petition talked about three main issues:

  • Approve the proposed procurement of power from a solar horticulture project proposed as a pilot project
  • Approve the proposed modalities for flexibility in generation and scheduling of thermal power stations to reduce emissions through optimal utilization of solar power generation
  • Issue necessary guidelines for operationalization of such flexibility in generation and scheduling of thermal power stations to reduce emissions

MSPGCL had filed a petition seeking the removal of difficulties in procuring solar power under the mechanism of “Flexibility in Generation and Scheduling of Thermal Power Stations to Reduce Emissions” issued on April 5, 2018, by the Ministry of Power.

MSPGCL has a conventional power generation capacity of 13,427 MW comprising of various coal and gas-based thermal units and hydro generation units spread across Maharashtra. MSPGCL entered into a power purchase agreement (PPA) with MSEDCL on April 1, 2009, for the sale of 100% power from these conventional power generation capacities.

In 2016, the Ministry of Power (MoP) had issued the concept of flexible utilization of coal, which allows the use of coal within the basket of the thermal generator in an optimal manner. As per the MoP’s notification,  generation companies are allowed to source renewable power from any source at any location, either self-generated or procured from outside, and use it optimally to meet its obligation of supplying scheduled power from its thermal power station to the contracted DISCOM.

The notification stated, “The generating company should have the flexibility of using its thermal power or renewable power to meet its scheduled generation from the specific thermal generating station. This flexibility will provide the power generators an opportunity to optimally utilize generation from renewable sources and help in reducing emissions.”

Keeping in line with this concept, MSPGCL is planning to install a horticulture solar pilot project at Paras TPS through public-private partnership (PPP) and optimally utilize the power to fulfill its commitment to MSEDCL from thermal power generation plants under their approved PPA.

For the pilot project, MSPGCL is adopting the concept of a land neutral solar project, which is an innovative concept that is being adopted worldwide to optimize land utilization.

Earlier, MSPGCL had decided to install a 250 MW thermal power project on 286 acres of land that it had purchased. But things didn’t materialize, and the land remained unutilized. Now, MSPGCL is planning to use the land for the pilot project.

The petition added that MSPGCL had floated an Expression of Interest (EOI) and selected three bidders for executing the project. Each developer will be allocated 10 MW capacity each, and the tariff for the pilot project was discovered to be ₹2.71 ($0.03)/kWh.

MSPGCL had also mentioned in the petition that bidders for the 30 MW project at Paras have also offered to share 30% of such revenue, which will result in gains to MSPGCL, and the same will be shared with MSEDCL as per the provisions of the mechanism.

However, for finding out the feasibility of the proposed flexible usage of solar power, MSPGCL is not factoring such sharing of revenue. Any reduction in the solar tariff will further confirm the feasibility of such flexible usage. “As per the MoP mechanism, the gains to generators due to such flexible usage of solar power against the thermal power are anyhow to be shared with the beneficiary,” the petition adds.

In its petition, MSPGCL has stipulated that renewable power would be supplied at variable rates of the generating station, and there is no impact on the fixed cost due to this mechanism.

MSLDC, in its submission, has proposed changes to be made in the existing framework adding that it will lose the opportunity of procuring cheaper power through competitive bidding.

However, the commission has remarked that it finds such contentions “without any logic.” The commission is of the view that this mechanism does not restrict MSEDCL from procuring additional renewable power through competitive bidding. This mechanism only allows replacing existing conventional power with renewable power at variable rates of conventional power.

Further, MSPGCL has agreed to share 50% benefit, if accrued, due to this program with MSEDCL, the commission noted. Also, the commission has suggested that as solar power is being scheduled in place of thermal energy, MSPGCL has to arrange the balancing power to cope with variation in solar generation, and MSEDCL would not have any financial implication because of it.

On MSEDCL’s contention that it can secure solar energy at a lower rate, the commission opined that though this possibility cannot be ruled out, the recent proposals of MSEDCL through competitive bidding do not fully support this contention. The commission, therefore, stated that it doesn’t find merit in the argument of MSEDCL on this issue.

Moreover, the commission notes that for the implementation of this program, some changes are required to be made in the procedures laid down under FBSM.  Currently, as the preparation for the implementation of DSM is at an advanced stage, making changes in the scheduling process for accommodating the flexibility in a generation may affect the process of implementing DSM.

“Once DSM is implemented and all stakeholders get acquainted with it, the commission may introduce the changes for implementing the scheme for flexibility in generation,” the commission’s order has stated.

Meanwhile, MSPGCL and Maharashtra State Electricity Distribution Co. Ltd (MSEDCL) have decided to jointly file a petition for the adoption of tariffs for the energy generated from an agro shed-based solar PV project.

Last month, MERC had directed MSLDC to amend its forecasting and scheduling procedure in line with the rules and principles of the commission within two weeks. The commission also asked MSLDC to undertake stakeholders’ consultation for the draft amendment and submit the amended procedure after considering the stakeholders’ comments for approval within 45 days.

In March 2019, Mercom had reported that MERC had exempted renewable energy qualified coordinating agencies for meter reading, data collection, and communication from pay scheduling and forecasting charges. However, the initial corpus that QCAs must deposit remained unchanged.