A June order by the power ministry on inter-state electricity transmission charges could affect Delhi Metro Rail Corporation Ltd’s (DMRC) plan to buy power from one of the world’s largest solar power project at a single site in Madhya Pradesh, forcing both DMRC and the state government to seek relief from the ministry of new and renewable energy.
DMRC may have to bear an additional 91 paise per unit cost due to inter-state transmission charges and losses from the marque project, thereby increasing the tariff from Rs3.30 per unit to Rs4.21per unit from the 750 megawatts (MW) plant at Rewa, Madhya Pradesh.
The 14 June order of the power ministry limits the waiver of inter-state electricity transmission charges to distribution companies, or discoms, meeting their renewable purchase obligations. Since DMRC is not a discom, it will have to pay this additional tariff referred to as the Inter-State Transmission System (ISTS) charges. The power purchase agreements (PPAs) for the project were inked on 17 April.
A person familiar with the development who asked not to be identified admitted that this has affected DMRC’s original plan.
According to a 21 June Madhya Pradesh government note to the ministry of new and renewable energy reviewed by Mint, “The Rewa project was conceived and the PPAs were signed when exemption on ISTS charges and losses was available on all inter-state transmission of renewable energy.”
The order “will significantly affect DMRC and discourage other institutional customers from opting for RE (renewable energy)”, the note added.
Following representations from the Madhya Pradesh state government and DMRC, the ministry of new and renewable energy has requested the power ministry to not apply its order, “for those projects that have already entered PPAs with inter-state consumers other than discoms and are not paying inter-state transmission charges”.
A DMRC spokesperson said a “request has been made by the ministry of new and renewable energy and is under consideration with the ministry of power”.
Spokespersons for the power and new and renewable energy ministries didn’t respond to an email seeking comment.
Around 23% of energy from the park is being sold to the Delhi Metro and is expected to meet about 80% of its daytime energy requirement. DMRC hiked fares substantially in May due to increase in input costs such as energy. It currently purchases electricity at Rs7.16 a unit to move passengers across the national capital region.
India plans to generate 175 gigawatts (GW) of renewable energy by 2022. Of this, 100GW is to come from solar projects.
The Rewa tariff was the lowest discovered in an auction till then, when three 250MW projects were awarded to Mahindra Renewables Pvt. Ltd, Acme Solar Holdings Pvt. Ltd and global private equity fund Actis LLP’s Solenergi Power Pvt. Ltd established that power from Sun can become a competitive energy source vis-à-vis the coal-fuelled conventional source of electricity. India’s solar power tariff hit a new low of Rs2.44 per unit in May at the Bhadla solar park in Rajasthan.
Queries emailed to the spokespersons for Mahindra Renewables Pvt. Ltd and Actis remained unanswered.
Manish Karna, head, regulatory, at ACME Solar Holdings, said in an emailed response that India’s apex power sector regulator Central Electricity Regulatory Commission has to ratify the power ministry’s decision on inter-state transmission charges.
And DMRC could well stake claim to being a distribution company, he added. Railways are a “deemed licensee and a distribution company and DMRC comes under the definition of Railway (as per the order of the Delhi High Court in 2008).”
The record low-winning bids of Rs2.97 per kWh at Rewa in February marked a turning point for India’s solar power sector with the delivered cost of electricity to DMRC being Rs3.30 per kWh. The Rewa project is also India’s first solar project to conduct inter-state sale of electricity with its PPA accepted by the union government as a standard model to help achieve lowest electricity tariff rates through competitive bidding.