Centre issues bid guidelines for procuring wind power

Aims to prod windy States to opt for bidding process

NAGERCOIL, TAMIL NADU, 15/12/2014: Tamil Nadu generate around 35% of India's total wind capacity, The Tamil Nadu Government realised the importance and need for renewable energy, and set up a separate Agency, as registered society, called the Tamil Nadu Energy Development Agency (TEDA) as early as 1985, now Tamil Nadu has become a leader in Wind Power in India, in Muppandal windfarm, Tamil Nadu the total capacity is 1500MW, which is the largest in India. As per TEDA, the total installed capacity in Tamil Nadu is 7253MW, picture taken at Aralvaymozhi mountain ranges in the Muppandal wind farm near Nagercoil, Tamil Nadu. Photo: B. Jothi Ramalingam

The government on Tuesday issued guidelines for the procurement of wind power through a bidding process, which included the standardisation of the process and a definition of the roles and responsibilities of various stakeholders.

“The guidelines are applicable for procurement of wind power from grid-connected wind power projects (WPP) having- (a) individual size of 5 MW and above at one site with minimum bid capacity of 25 MW for intra-state projects; and (b) individual size of 50 MW and above at one site with minimum bid capacity of 50 MW for inter-state projects,” the Centre said in a release.

The guidelines include provisions for compensation in case of grid unavailability, put out a payment security mechanism, standardise the bidding process, and spell out the risk-sharing framework among stakeholders.

‘Good for developers’

“The payment security approved in the new bidding guidelines has not been seen in PPAs [power purchase agreements] signed by the state distribution utilities [discoms] with wind power developers in the past,” Sabyasachi Majumdar, senior VP & group head, ICRA Ratings said in a note, flagging the development as favourable for developers while improving the bankability of the PPA document. 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.”

According to the Centre, the guidelines are expected to encourage windy States to opt for the bidding process for the procurement of wind power.

“After transition of tariff regime from feed in tariffs to bidding route, it was mainly central government bids through SECI which were helping the sector,” the release said. “State bids from Tamil Nadu and Gujarat had objections from the wind sector in absence of guidelines.”

Most PPAs so far did not provide for a termination clause and termination payments to the developers in case the developer decided to terminate the PPA due to a default by the procurer.

“In this context, the provisions for termination liability, which, along with substitution rights as approved in bidding guidelines, are expected to provide greater protection to the developers and the lenders,” ICRA said in the note.

Mr. Majumdar cautioned that these new regulations are applicable only for new projects, and that the concerns about termination would still apply to older projects.