CERC Rejects SECI's Proposed Tariff for BESS Project Due to Delays and Market Price Shifts
CERC rejected SECI's tariff proposal for the Gujarat BESS project, citing delays in agreements and falling battery prices, which misaligned the tariff with current market conditions. The Commission emphasised the importance of adhering to timelines and ensuring fair pricing.
January 05, 2025. By EI News Network
The Commission expressed concerns that these delays, which allowed the developer to benefit from falling battery prices, resulted in unintended advantages for the developer, potentially at the expense of consumers. SECI had originally discovered a tariff of INR 10,88,917/MW/month, but recent market trends, with prices falling significantly in similar projects, rendered this rate outdated and misaligned with current conditions. For instance, in March and June 2024, Gujarat Urja Vikas Nigam Ltd. (GUVNL) discovered rates between INR 4,48,996 and INR 3,72,978/MW/month, much lower than SECI's rate.
Further, the timeline reveals that the e-Reverse Auction for the project was conducted on August 25, 2022, but Letters of Award (LoAs) were issued 145 days later, on January 18, 2023. Additionally, the BESSA was executed with Gujarat Urja Vikas Nigam Ltd. (GUVNL) on June 26, 2023, 160 days after the LoAs, while the BESPA for 150 MW capacity was only signed with JSW Renew Energy Five Ltd. on February 27, 2024, marking a delay of 245 days.
The Commission noted that while price reductions after bidding are generally not grounds for rejecting a tariff, the prolonged delays and subsequent market price drops justified a review. "The Commission is conscious of the fact that price falls post-bidding cannot generally be a ground for rejecting an earlier bidding process and price discovery. Even in the instant case, there would not have been any occasion for review or rejection of the adoption of the tariff, notwithstanding subsequent developments had the project been completed within the original timelines. SECI should have been more careful in adhering to the timelines. The Commission could not have overlooked the consequences of delay," said the Commission. The Commission emphasised that adopting SECI’s proposed tariff would result in undue benefits for the developer and potential losses for consumers, leading to the rejection of the tariff.
In its petition, SECI had requested the adoption of the tariff discovered through the competitive bidding process, in line with the terms outlined in the Battery Energy Storage Services Agreement (BESSA) and the Battery Energy Storage Power Agreements (BESPA) with Gujarat Urja Vikas Nigam Ltd.. Additionally, SECI sought approval for a trading margin of 0.5 percent of the applicable tariff, as agreed upon with GUVNL, with an additional margin of INR 0.07/kWh for charging/discharging of BESS capacity allocated for grid ancillary services, as agreed between SECI and NLDC. Additionally, the Petitioner has asked for any further orders that the Hon’ble Commission may consider fit, based on the facts and circumstances of the case.
It may be mentioned that the project followed a tariff-based global competitive bidding (ESS-I) process and involved key milestones such as the issuance of BESS guidelines in March 2022, the release of the Request for Selection (RfS) in April 2022, and the e-reverse auction in August 2022. Following these events, the Letters of Award were issued in January 2023, the BESSA was signed in June 2023, and the BESPA agreements were concluded in February 2024.
However, the extended timeline and market shifts led to the rejection of the originally proposed tariff. The rejection of SECI’s proposed tariff highlights the importance of adhering to project timelines and ensuring that tariffs reflect current market conditions. The decision also underscores the Commission's role in safeguarding public interests by ensuring that delays and market developments do not lead to unfair advantages for developers in the renewable energy sector.
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