The government has implemented new rules for buying power from grid-linked solar power projects through competitive bidding under the National Solar Mission to improve transparency and standardise auctions.

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, an official said.

The official said this will help in reducing off-takers’ risks, encourage investments, enhance bankability of projects and improve profitability for investors.

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.

The issues related to land, connectivity and clearances and the extension in the case of delay have been streamlined for ensuring project preparedness.

The event of default and the consequences thereof are clearly defined to ensure optimal risk sharing.

There is a provision for termination compensation to increase bankability of projects by securing investment by the generator and lenders against any arbitrary termination of a PPA.

The guidelines also provide for payment security mechanism. 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.

The early commissioning and part commissioning of projects have not only been allowed, but incentivised, by way of allowing the PPA for a minimum 25 years from the scheduled commissioning date under the new norms.

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