New Solar Power Procurement Norms Announced

Under the National Solar Mission the government has implemented new rules for buying power from grid-linked solar power projects through competitive bidding. These guidelines, prepared by the Ministry of New and Renewable Energy (MNRE), cover the grid-connected solar PV power projects with a size of 5 mw and above.

  1. The norms provide that the minimum power purchase agreement tenure (PPA) will be 25 years that will help ensure lower tariffs. Besides, unilateral termination or amendment of PPA is not allowed.
  2. The issues related to land, connectivity and clearances and the extension in the case of delay have been streamlined for ensuring project preparedness.
  3. The event of default and the consequences thereof are clearly defined to ensure optimal risk sharing.
  4. There is a provision for termination compensation to increase bank-ability of projects by securing investment by the generator and lenders against any arbitrary termination of a PPA.
  5. The risk of generator’s revenue getting blocked due to delayed payment or non-payment has been addressed through provision of Payment Security Mechanism through instruments like Letter of Credit (LC), Payment Security Fund, State Guarantee and the like.
  6. The penalties have been rationalized so as to reduce the overall cost to the generator while at the same time ensuring compliance with rules.

All these major will help in reducing off-takers’ risks, encourage investments, enhance bank-ability of projects and improve profitability for investors.