The Ministry of Power (MoP) recently introduced a uniform renewable energy tariff (URET) for renewable energy procurement. The implementing agency will compute a uniform renewable energy tariff, on a monthly basis, for each category of central pool like the Solar Power Central Pool and the Wind Power Central Pool. The intermediary procurer will sell power from that central pool to all the end procurers at the uniform tariff. While no new capacity will beadded to the pool after five years, the existing capacity will remain until the validity of the power purchase agreement expires. Industry experts share their views on the impact of URET on the sector…
What are your views on the recently notified procedure for uniform renewable energy tariff? Does it meet your expectations? How will it impact on the sector?
Pallavi Bedi
The concept of “URET” for separate categories within central pools for different types of renewable energy projects appears a step in the right direction for the envisaged growth of clean energy. This construct was introduced by the Electricity (Amendment) Rules, 2022. It aims to address the long-standing issues of (a) discoms delaying the signing of power sale agreements (PSAs), leading to delays in Solar Energy Corporation of India and other intermediary procurers signing PPAs with generators; and (b) discoms reneging (or wanting to renege) on signed PSAs/PPAs on account of tariff fluctuations.
The MoP, in accordance with the Electricity (Amendment) Rules, 2022, recently issued the procedure for the implementation of URET. The procedure is comprehensive and a few observations are outlined below:
- It is important to ensure that the bidding documents to be issued by the intermediate procurer (IP) adequately address the requirements of URET in accordance with the rules and procedures.
- While a detailed formula for adjustment between different IPs has been provided, it remains to be seen how it pans out in practice, with the hope that it does not create issues among IPs.
- It appears that an eligible generator must register its renewable energy project to be part of a particular central pool. However, it is unclear whether the generator has to undertake this registration or if providing the details through the IP is sufficient. Clarity on this aspect would be helpful.
- A discom requires approval from the State Electricity Regulatory Commission to procure electricity from a specified central pool under URET. However, both the rules and procedures are silent on the timeline within which such approval may be granted. While this (along with the absence of prescribed timelines within which the tariff discovered through competitive bidding under section 63 of the Electricity Act, 2003 would be adopted for the projects in the central pool) are broader issues, it would be useful to address them at some stage to provide certainty to investors (and consequently attract the investment for the growth of this sector).
- The different categories of central pools envisaged seem reasonable; however, the viability of these would depend on the quantum of bidding under each subset.
The uniformity in tariffs is expected to assist in creating a more stable and predictable environment, consequently fostering the growth of the renewable energy market. In addition to providing incentives to discoms through the availability of monthly levellised tariffs, the ability of open access consumers to procure renewable energy power from IPs under URET will increase the penetration of renewable energy in the overall electricity supply.
Once the government notifies the start date for separate categories of the central pool, the on-ground implementation of the rules and procedures will result in the success of URET.
UThe uniformity in tariffs is expected to assist in creating a more stable andpredictable environment, consequently, fostering the growth of the renewable energy market.”Pallavi Bedi
Sachin Gupta
The MoP introduced the Electricity (Amendment) Rules 2022, aiming to implement URET on December 29, 2022. The procedure for implementing URET was officially notified on October 25, 2023. These rules are designed to establish a monthly URET for different segment pools—such as plain solar, wind, hydro, solar-wind hybrids and round-the-clock (RTC) renewables—over a five-year period. Capacities covered by PSAs within this duration will be included in the pool, while new capacities without PSAs will not be considered. The Grid Controller of India Limited (Grid India), the implementing agency, will compute monthly tariffs and ensure settlement among intermediary procurers within 15 days of billing.
Transitioning to segment-specific URET is a positive move towards creating a more organised and equitable renewable energy market. From an offtaker’s perspective, this initiative will ensure that the PPA-PSA backlog will subside due to averaging of their purchase prices. During the Covid period, it was observed that offtakers were sensitive about the tariffs at which they were signing PSAs and preferred not to sign agreements at the lower end of the previously determined tariffs. Meanwhile, due to the increasing capital costs, the determined tariffs in various biddings were on the rise, which resulted in a substantial backlog of auctioned capacity. It was observed that despite the issuance of a letter of award to the developer, there was no progress as PSAs and PPAs could not be signed.
This shift will also strengthen the wind energy sector. Previously, developers concentrated their projects in states such as Gujarat and Tamil Nadu, which have high wind potential, under reverse bidding, aiming for the lowest tariffs. With URET in place, offtakers are expected to be indifferent to signing PSAs, as the settlement will occur at the pooled tariff. This change can foster comprehensive renewable energy development across various states, mitigating the imbalance caused by concentrated development in a few regions.
‘Transitioning to segmentspecific URET is a positive move towards creating a more organised and equitable renewable energy market.”
Arun Tripathi
The introduction of URET by the MoP is a welcome step for the renewable energy sector in India. These rules are designed to establish a consistent and fair pricing system for renewable energy across various sectors, including solar power and wind power. The implementation of URET will be beneficial to both the discoms as well as the developers and investors. In recent years, we have witnessed discoms delaying their decisions to enter into PPAs; they have also tried to renegotiate tariffs with the discovery of lower tariffs in other bids. URET is expected to remove uncertainty regarding tariffs for discoms, encouraging them to sign PPAs without the fear of losing out on lower tariffs discovered in subsequent bids.
The establishment of source-specific and type-specific pools, including solar power, wind power, hydropower, solar-wind hybrid, RTC power, peaking power and other pools specified by the central government, will also help catalyse the sector. Grid India will play a crucial role in ensuring the successful implementation of these regulations. It has clearly established and formulated the operational roles of each stakeholder in the procedure.
Going forward, it would be interesting to observe how discoms approach the state regulatory commissions for grant of approval to procure power from the central pool. Overall, this marks a significant step towards a more organised and equitable renewable energy market in India, creating a conducive environment for sustainable energy growth and investment in the renewable energy sector.
UURET is expected to remove uncertainty regarding tariffs for discams, encouraging them to sign PPAs without the fear of losing out on lower tariffs discovered in subsequent bids.”
