Ministry of Power eliminates penalties for RE power delays

08 Feb 2024 CW Team

The updated guidelines eliminate the provision concerning punitive measures for delays in initiating power supply. Previously, if the power supply commencement exceeded the scheduled commercial operation date (SCOD) by up to six months, the generator faced penalties, including the encashment of the performance bank guarantee or alternative instruments on a per-day basis proportional to the contracted capacity not delivering power.

For delays surpassing six months from the SCOD, the contracted capacity was reduced to the project capacity that had initiated power supply within the SCOD plus six months. Consequently, the power purchase agreement (PPA) for the remaining contracted capacity, which had not commenced power supply, was terminated.

Under the prior guidelines, generators risked being debarred from participating in bids by any procurer or intermediary procurer for one year after the first default and for not less than two years and not more than three years for the second and subsequent defaults.

Typically, developers or power generators were expected to initiate power supply within 24 months from the PPA execution date for allocations not exceeding 1 GW and within 30 months for allocations exceeding 1 GW. However, the procurer now has the flexibility to adjust the SCOD period if needed.

Mercom Research suggests that this relaxation might result in delays in project installation and commissioning. In the previous year, the Ministry of New and Renewable Energy instructed public sector undertakings to blacklist renewable energy developers failing to complete projects within deadlines, with potential blacklisting spanning 3-5 years. During the second quarter of 2023, solar project delays and postponements led to a 46% decline in investments.

The Ministry of Power (MoP) has made revisions to the guidelines governing the tariff-based competitive bidding process for procuring firm and dispatchable renewable power from grid-connected solar, wind, wind-solar hybrid, and renewable energy projects with energy storage. The updated guidelines eliminate the provision concerning punitive measures for delays in initiating power supply. Previously, if the power supply commencement exceeded the scheduled commercial operation date (SCOD) by up to six months, the generator faced penalties, including the encashment of the performance bank guarantee or alternative instruments on a per-day basis proportional to the contracted capacity not delivering power. For delays surpassing six months from the SCOD, the contracted capacity was reduced to the project capacity that had initiated power supply within the SCOD plus six months. Consequently, the power purchase agreement (PPA) for the remaining contracted capacity, which had not commenced power supply, was terminated. Under the prior guidelines, generators risked being debarred from participating in bids by any procurer or intermediary procurer for one year after the first default and for not less than two years and not more than three years for the second and subsequent defaults. Typically, developers or power generators were expected to initiate power supply within 24 months from the PPA execution date for allocations not exceeding 1 GW and within 30 months for allocations exceeding 1 GW. However, the procurer now has the flexibility to adjust the SCOD period if needed. Mercom Research suggests that this relaxation might result in delays in project installation and commissioning. In the previous year, the Ministry of New and Renewable Energy instructed public sector undertakings to blacklist renewable energy developers failing to complete projects within deadlines, with potential blacklisting spanning 3-5 years. During the second quarter of 2023, solar project delays and postponements led to a 46% decline in investments.