News

Government issues guidelines for wind power procurement

The guidelines aim to enable the distribution licensees to procure wind power at competitive rates in a cost-effective manner.

New Delhi: Pursuing an ambitious renewable energy target, the National Democratic Alliance (NDA) government has now issued new guidelines to provide a framework for procurement of wind power through a transparent process of bidding including standardization of the process and defining of roles and responsibilities of various stakeholders.

The guidelines aim to “enable the Distribution Licensees to procure wind power at competitive rates in a cost effective manner,” said an official statement.

The guidelines are applicable for procurement of wind power from grid-connected wind power projects (WPP) of 5 MW and above at one site with minimum bid capacity of 25 MW for intra-state projects and individual size of 50 MW and above at one site with minimum bid capacity of 50 MW for inter-state projects.

India has an ambitious target of 175,000 megawatt (MW) of renewable power by 2022, of which 60,000 MW is targeted from wind power. India already has an installed capacity of 32,700 MW wind power.

According to the government, the guidelines will give a boost to the wind power sector as they would facilitate windy states to go for the bidding process for procurement of wind power themselves.

“After the transition of tariff regime from feed in tariffs to bidding route, it was mainly central government bids through SECI (Solar Energy Corporation of India) which were helping the sector. State bids from Tamil Nadu and Gujarat had objections from the wind sector in absence of guidelines,” the statement explained.

The guidelines have detailed provisions for “compensation for grid unavailability and backing-down, robust payment security mechanism, standardisation of bidding process, risk-sharing framework between various stakeholders through provisions like change in law, measures in case of default of procurer as also by generator, etc”.

Experts welcomed them stating that new bidding guidelines for wind power projects is a positive measure for the sector.

Rating agency Icra said that the guidelines address some of the key concerns for the sector pertaining to off-taker’s credit profile, grid curtailment and termination payments.

“The guidelines require the procurers to direct sign power purchase agreements (PPAs) with wind power developers to provide a payment security through letter of credit equivalent to one month average billing and a payment security fund to support payment for at least three months of receivables for the projects tied up. In addition, the procurer may also choose to provide state government guarantee in a legally enforceable form, both for payment of energy charges and termination compensation,” said Icra.

“The payment security approved in the new bidding guidelines has not been seen in PPAs signed by the state distribution utilities (discoms) with wind power developers in the past. This along with the measures on compensation for grid curtailment and termination payments, if implemented, is favourable for the wind power developers and improves the bankability of the PPA document,” said Sabyasachi Majumdar, who is senior vice president and group head, ICRA Ratings.

“It is noteworthy that these regulations shall be applicable only for new projects. The aforementioned concerns would continue to prevail for existing projects,” Majumdar added.

Wind power bids fell to a record low of Rs2.64 per unit in an auction conducted by state-run Solar Energy Corp. of India in October. The NDA government also recently announced an ambitious plan to award 100,000 MW of solar and wind contracts by March 2020. Of those, 23,000 MW are planned to be of wind power projects.