Sugar Factories with Bagasse-Based Cogeneration Can Install Rooftop Solar Systems

Sugar factories can consume electricity generated from such hybrid projects for their captive load and sell surplus electricity to the distribution licensee


The Maharashtra Electricity Regulatory Commission (MERC) recently ruled that sugar factories having bagasse-based cogeneration projects can install rooftop solar projects in their premises. There is no restriction on the solar project capacity.

The Commission asked the Cogeneration Association of India in coordination with the Maharashtra State Electricity Distribution Company Limited (MSEDCL) to create awareness among the farmers in the state about the benefits of solar generation under the available programs and encourage their participation.

The Cogeneration Association of India had filed a petition seeking clarifications and amendments to the ‘MERC (Grid Interactive Rooftop Renewable Energy Generating Systems) Regulations, 2019’ regarding installing rooftop solar systems in their premises.


The Association, in its appeal, said that a sugar mill requires electricity for the manufacturing process and pays demand charges to the distribution licensee throughout the year. Thus, such an entity is qualified as a consumer.

The Association added that under the provisions of the Electricity Act, 2003, such a consumer can enter into an agreement to sell electricity from its cogeneration facility to the distribution licensee and continue to be termed as consumers.

Also, the petitioner added that as per the ‘Rooftop RE Regulations, 2019,’ the said consumer would be an ‘eligible consumer’ when it uses or intends to use a renewable generating system of a capacity less than 1 MW located in its premises. Such systems can either be self-owned or owned by a third party.

MSEDCL, in its reply, said that sugar factories were consumers as well as generators. For the off-season period, they were consumers of MSEDCL, and for the season period, they were generators for MSEDCL.

Further, the Association added that if the actual purchase in FY 2020-21 was considered, then MSEDCL will need additional 1,000 MU units in FY 2021-22. MSEDCL would require another 380 MW of cogeneration capacity to cover the shortfall.

Commission’s analysis  

The Commission observed that sugar factories were consumers of distribution licensees. The factories with bagasse-based cogeneration plants export the additional electricity generated back to the grid during the crushing season and import electricity to meet its load requirement during the off-season.

The Commission added that for fulfilling the requirement of being an eligible consumer under the ‘Rooftop RE Regulations, 2019,’ it had to install a renewable energy generating system in its premises. Hence, the Commission noted that sugar factories with bagasse-based cogenerating projects proposing to install rooftop systems can be considered ‘eligible consumers.’

The state regulator added that such a proposal of installing rooftop solar systems in the premises of cogeneration sugar factories was a good initiative benefiting both, i.e., sugar factories and distribution licensees, and hence needed to be enabled.

Clarifying the methodology for installing solar projects, MERC added that in a hybrid project arrangement, sugar factories could continue to use energy generated by the hybrid project for self-consumption and inject surplus energy into the grid as per provisions of the energy purchase agreement (EPA).

Sugar factories having an EPA with MSEDCL for bagasse-based cogeneration plants can install solar PV projects in their premises. There is no restriction on the solar project capacity. Sugar Factories can maximize the utilization of available space within their premises for setting up solar projects. After commissioning the solar project, the plant will be treated as a hybrid project.

Sugar factories can consume electricity generated from such hybrid projects for their captive load and sell surplus electricity to the distribution licensee.

Also, the sugar factories and MSEDCL need to enter into an agreement to amend the existing EPA to include the capacity of the solar project to be commissioned and its tariff. The recently discovered lowest tariff by MSEDCL for similar size solar projects is to be considered.

Further, the Commission noted that based on the actual generation from each renewable energy source, the weighted average tariff for that month should be computed, and energy purchased during that month should be paid at the weighted average tariff.

The state regulator concluded that such distributed generation reduces distribution losses and avoids potential investment for strengthening the upstream network as the load will be met from local generation, and it needed to be encouraged.

Last January, MERC allowed MSEDCL to enter into a power purchase agreement (PPA) under the memorandum of understanding route with bagasse-based cogeneration projects at a tariff of ₹4.75 (~$0.065)/kWh for 20 years.

Subscribe to Mercom’s real-time Regulatory Updates to ensure you don’t miss any critical updates from the renewable industry.

Image: by Jonathan Wilkins, CC BY-SA 3.0 , via Wikimedia Commons