MP GRID-CONNECTED ROOFTOP SOLAR PV RESCO TENDER: A Lot to Learn
India has a huge potential for installing grid-connected rooftop solar PV projects. Plenty of unused rooftop space is available in the buildings in the government, institutional, industrial, commercial, and residential sectors that can be utilized for installing grid-connected rooftop solar PV projects.
The Government of India has also set up a target for 40 GW of solar power from rooftop installations by 2022. However, as per the MNRE’s recent report, the cumulative achieved capacity as on July 31, 2018, is only 1.2 GW.
Many state governments, state nodal agencies (SNAs), and the Solar Energy Corporation of India (SECI) have floated several tenders in the last few years, with Central Financial Assistance (CFA) available for developers under the renewable energy service company (RESCO) and capital expenditure (CAPEX) models. Even after such initiatives and subsidies, grid-connected rooftop solar PV projects are not appearing lucrative enough to project developers, and the result is higherquoted tariff and allocated capacities not translating into work orders in many cases.
ISSUES FACED BY BIDDERS/PROJECT DEVELOPERS
Bidders or project developers face issues and challenges at the time of bidding and, in many cases, after getting the LOA (letter of award) from the concerned authority/department. There is always some lack of information from the tendering authorities that is considered as uncertainties and risks by the bidders or project developers. These uncertainties and risks add up in the tariff calculation, which leads to higher-quoted tariffs. In many cases, the capacity allocated to the bidder remains unutilized or uninstalled due to various factors and bottlenecks. Some of the issues faced by most of the bidders or project developers are discussed below:
Lack of information about site location
Individual site names and geographical coordinates for the sites are not provided in most of the tenders. Due to the lack of such information, it is difficult for the bidders or project developers to judge the actual site conditions correctly, which causes them to add various assumptions and risk factors in the financial costing.
Lack of information about individual site capacities
Most of the tenders provide the aggregated capacity allotted to a particular bidder or project developer. However, the individual site capacity or roof capacity is not provided. Such lack of information can cause a wrong estimation of cable lengths and inverter sizing.
Though some of the authorities provide indicative individual site capacity, information on how that capacity is estimated, or the approach or assumptions considered while estimating that capacity, is not shared with the bidders or project developers.
Lack of information on existing evacuation infrastructure and electricity consumption
Grid-connected rooftop solar PV projects should be connected to the existing grid network, and information on the connected/sanctioned load, distribution transformer capacity, supply voltage, and so on should be made available to the bidder or project developer. Also, for RESCO bidders or project developers, information on the electricityconsumption pattern of a particular customer is also required for better tariff estimation. But as of now, information on evacuation infrastructure and electricity consumption is not provided to the bidders or project developers.
End customers are not identified
Most of the tenders do not identify the end customers, and it is the responsibility of the bidder or project developer to find them and close the deal. A cost for this business development activity is then included by the bidder or project developer in the quoted tariff. This may also lead to non-utilization of the allocated capacity in case the bidder or project developer is unable to convince the customers.
Usually tenders are open-market mode, which means that bidders or project developers are free to approach any customers and vice-versa. In such a scenario, it is difficult for the customer to finalize a particular bidder or developer and a situation of uncertainty is created in the market. This leads to a long gestation period for project confirmation.
Time-consuming process of getting work order/LOA from tendering authority
Every tendering authority or government authority takes its own time for tender evaluation, financial bid opening, and allotting the LOA. Such delays may have financial implications for the bidder or project developer in the form of interest to be paid against bank guarantees or EMDs.
Difficulties faced during PPA signing
In most of the tenders, signing the power purchase agreement (PPA) is the sole responsibility of the bidder or project developer. Getting a PPA signed from different customers who may be located at different locations is time-consuming and requires a lot of effort from the bidder or project developer. In many cases, it is very difficult for a bidder to make the customer agree on all the points in the PPA, which causes unnecessary delay in the project timelines.
Stringent subsidy/CFAreleasing conditions
Most of the tenders link subsidy disbursement with project commissioning and DISCOMs’ net-metering approval. Currently, not all DISCOMs are in favour of solar PV projects and hence take a long time to give the approval for a net-metering connection. In such cases, bidders or project developers do not get the subsidy on time despite the timely completion of the project.
MADHYA PRADESH RESCO TENDOR
In its attempt to eradicate or dilute the uncertainties, risks, and challenges faced by bidders or project developers, Madhya Pradesh Urja Vikas Nigam Limited (MPUVNL) floated two backto-back tenders (RESCO Tender 1 and RESCO Tender 2) for government colleges, police establishments, private institutions, ITI colleges, and many other customer segments. Around 31 bidders or project developers participated in the RESCO Tender 1 floated by MPUVNL. The success of both the tenders can be gauged from the lowest tariff achieved of Rs 1.38 per unit for the first year for grid-connected rooftop solar PV projects in the country for one of the tendered customer categories.
The lowest tariff can be linked to the double subsidies from the centre and state governments and a yearly tariff escalation of 3%. However, the MPUVNL team also took other recommendable steps to remove the ambiguity and challenges faced by bidders or project developers and made the process and financial estimation easier.
Some of the features of the RESCO tenders floated and their implementation are discussed below:
Pre-identified end customers
The MPUVNL team pre-identified the customers and sites, such as colleges under the Department of Higher Education, government medical colleges, government ITI colleges, police establishments, private institutions, and several other categories. This reduced the marketing and business development efforts and activities of the bidders or project developers. Unlike usual tenders, in these MP tenders if a bidder or project developer is allocated a capacity, he need not run in search of possible customers. This reduction in the project developer’s efforts and activities will help in reducing tariff to some extent.
Creation of project groups and demand aggregation
Unlike the open-market mode tenders, in MP tenders for several project groups were created. Groups were fashioned in such a way that project sites from the same departments fall under one group, for instance, all the buildings related to police departments were added to a group named ‘MP Police Establishments’ and so on. And so, the bidder or project developer needs to quote for the complete project group. Hence, the customers will face no confusion or second thoughts while selecting bidders or project developers, and a department will get the same tariff for all of its buildings irrespective of the physical location of the sites. The bidder or project developer now needs to get in touch with only one department for all the activities and approvals. Aggregating the capacities and grouping them will reduce the hassle faced by bidders and project developers and will also help in reducing the quoted tariff.
India’s first-ever innovative data room
MPUVNL, with the support of the World Bank–SBI technical assistance programme ‘SUPRABHA’, created an innovative data room to dilute the ambiguities and risks faced by bidders or project developers during the computation of bid tariffs. The data room helped bidders or project developers in getting details, such as site coordinates, estimated site capacity, indicative array layout, and electricity bill for each proposed site. By getting access to such information, bidders or project developers got more clarity on the site and the result was a better tariff estimation.
This data room was made available to the interested bidders or project developers as a link to Google Drive. The features of the data room are listed below:
Advance payment of up to 50% of subsidy against bank guarantee
To provide financial support to the bidders or project developers, MPUVNL included the issuance of advance payment of up to 50% of subsidy against bank guarantee, if required by the bidders.
Pre-cleared and approved PPAs from end customers
PPA documents were pre-cleared and approved from the end customers. This reduced the efforts of the bidders or project developers. This will also help in reducing the project timelines.
Relaxed subsidy/CFA releasing conditions
The subsidy/CFA-releasing milestone was linked to project commissioning rather than net-metering approvals from DISCOMs. However, a self-attested copy of a net-metering application submitted to the DISCOM is required.
Single platform for mass PPA signing
To reduce the efforts and timelines of bidders or project developers in getting the PPA signed from different customers, MPUVNL organized a PPA-signing event. All the customers and project developers were invited to this event and PPAs were signed on the same day.
Public opening of financial bid and on-the-spot issuance of LOA
To show more transparency and reduce the effective timelines of the project, MPUVNL organized a public opening of the financial bid. On-the-spot LOA was given to the bidders or project developers and the PPA was also signed on the same day.
Innovations like the clear identification of sites and their potential and procedural aspects, such as on-the-spot issuance of the LOA and pre-cleared PPAs will really help in developing confidence in the bidders or project developers.
Such models can be directly replicated by other SNAs or tendering authorities to help in increasing the deployment of grid-connected rooftop solar PV projects in India and diluting all the bottlenecks faced by the bidders or project developers during the tendering process.
Mr Lucky Aggarwal, Senior Consultant, GSES India Sustainable Energy Pvt. Ltd., New Delhi