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The Ministry of New and Renewable Energy (MNRE)
has vide its Office Memorandum dated December 13, 2019 issued
"Guidelines for development of Decentralized Solar Power
What is the objective?
The Guidelines were framed with the objective of providing a
facilitative framework for development of decentralized solar power
plants near distribution sub-stations in India and fulfilment of
solar renewable purchase obligations.
What are the criteria for applicability of the Guidelines?
The Guidelines are applicable for procurement of solar power by
distribution companies (DISCOMS) from
decentralized solar power plants satisfying the following
- Plants with capacity more than 2
- Plants connected to distribution
sub-stations of rating 66/11 KV and higher
- Plants with up to 2 MW capacity and
being connected to distribution sub-stations of any DISCOM of
rating 33/11 KV and below where the sanctions given to the DISCOM
under PM-KUSUM have been exhausted.
What are the salient features of the Guidelines?
Some salient features of the Guidelines are set out below:
Arrangements envisaged under the Guidelines
Selection (RFS) for development of solar power plants on build own
and operate basis
- The DISCOM is to assess and notify on its website solar power
capacity that can be injected in to identified distribution
- The DISCOM is to invite bidders (either itself or through an
authorized agency such as power trading agencies) to participate in
the open competitive bidding process against the RFS and to be
connected to the identified distribution sub-station.
technical and financial bids
- The bidders are to submit financial and technical bids.
- The financial bids are to indicate the tariff offered against
total capacity for which the bid is submitted
- The developer would be selected by the DISCOM on the basis of
the lowest tariff offered by the bidders in the closed bid or
e-reverse auction as the case may be.
||DISCOM / Developer
- The DISCOM may provide land, take responsibility of evacuation
of solar power from the plants and may charge fee for such
- Alternatively, the developer may be responsible for procuring
land on its own and providing connectivity from the power plant to
with the sub-station
- The DISCOM would be responsible for laying down a dedicated
11kV line from the plant to sub-station, construction of bay and
related switchgear including metering arrangements at sub-station
where the plant is connected to the grid.
required from State Government and other local bodies
||Solar Power Generator
- The SPG would be responsible for procuring all necessary
clearances for setting up the Plant.
Power Purchase Agreement (PPA)
||DISCOM and SPG
- The PPA is to be executed by the DISCOM and SPG, within 2
months of the date of issue of the letter of award.
- The PPA would be for a period of 25 years from the Commercial
- The DISCOM will be obliged to buy the entire power from SPG
within the contract capacity.
- The SPG would be required to achieve a minimum CUF of 15% on
annual basis during the PPA period. However, in case of low Solar
radiation zones, lower minimum CUF may be specified by the
- The SPG will be free to operate the plant after expiry of the
25 years of PPA period if other conditions like land lease, etc.,
- As a payment security measure, DISCOM will have to maintain
letter of credit and escrow arrangement as required in the
guarantees to DISCOM
- The SPG is to provide the following bank guarantees to the
- Earnest Money Deposit (EMD) of INR 1,00,000/MW in the form of
Bank Guarantee along with Expression of Interest.
- Performance Bank Guarantee (PBG) of INR 5 00,000/MW within 30
days from date of issue of the letter of award.
- The DISCOM can prescribe higher PBG amount where land and
evacuation facilities are being provided by DISCOM.
- The PBGs shall be valid for a period of 12 months from the date
of issue of the letter of award for the plant.
bank guarantees / Release of EMD
- The DISCOM can encash the bank guarantee equivalent to EMD as
penalty in case of failure by SPG to execute the PPA within the
stipulated time period.
- The DISCOM is to release the EMD within 15 days of the date of
issue of the letter of award to selected SPG(s).
- The SPG is to commission the plant within 9 months from date of
issuance of the letter of award in cases where land and
connectivity is being provided by the DISCOM.
- In other cases, the plant is to be commissioned within 12
months of issuance of the letter of award.
- A delay by the SPG in commissioning the plant would entitle the
DISCOM to encash the PBG.
Our view: By laying down a framework for DISCOMs to procure
solar power from decentralized renewable energy power plants, the
MNRE has reinforced the importance of (i) energy efficiency and the
decentralized use of solar energy; and (ii) easy accessibility of
affordable and reliable solar power in the rural areas. Considering
that land acquisition has been a major deterrent for solar
developers, the provision of the Guidelines enabling the DISCOMs to
acquire land should be a boost for the sector and hopefully attract
interest and competitive rates from bidders.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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