Ministry of Power Releases TBCB Guidelines for Pumped Storage Plants

The Ministry of Power (MoP) has issued new tariff-based competitive bidding (TBCB) guidelines for procuring storage capacity from Pumped Storage Plants (PSPs), focussing on increasing transparency and accelerating PSP development across India.

These guidelines address the growing need for energy storage due to the variability of renewable energy sources and align with India's ambitious renewable energy targets. The document references the National Electricity Plan 2023, which projects substantial energy storage system (ESS) requirements to meet future demand. It also highlights the existing guidelines for Battery Energy Storage Systems (BESS) while emphasising the necessity for separate guidelines tailored to PSPs.

The guidelines apply to developers and procurers involved in PSP projects, whether existing, under construction, or new. They provide a comprehensive glossary defining key terms such as 'Actual Commencement of Supply Date,' 'Pumped Storage Plant,' 'Tolling Tariff,' and 'Composite Tariff,' ensuring clarity and consistency across the bidding process. Any clarifications or modifications to the guidelines must follow a specified process, and all activities under these guidelines remain subject to prevailing laws and regulations. The document seeks to establish a clear, standardised approach to PSP development while allowing flexibility through detailed specifications in the Request for Selection (RfS) and Special Conditions of Bid.

The bidding process outlined in the guidelines involves a two-part bid structure comprising technical and financial components. It includes an e-reverse auction mechanism to foster competitive pricing. Bid documentation must adhere to the prescribed requirements, and the RfS notice will be published to initiate the process.

The guidelines define the eligibility and qualification criteria for bidders, including technical experience, financial capacity (such as net worth, assets under management, and liquidity), and consortium participation rules. The technical requirements are provided in the bid documents and encourage the use of proven technologies, with specific parameters for PSPs detailed in Appendix I.

The guidelines specify two procurement modes for PSPs. Mode 1 involves procuring storage capacity from a PSP at a site specified by the procurer, which may include a Detailed Project Report (DPR) and the creation of a Special Purpose Vehicle (SPV). In Mode 2, the procurement is from a PSP at a site identified by the bidder or from an existing or under-development project, with the developer responsible for obtaining necessary clearances. Each mode comes with indicative timelines and specific technical and financial eligibility criteria. Bidding parameters may include storage charges, storage charges with Viability Gap Funding (VGF) or annuity support, and a composite tariff. Minimum bid capacities are defined for projects connected to the Inter-State Transmission System (ISTS) and the Intra-State Transmission System (InSTS).

The General Conditions of Contract (GCC) govern the contractual relationship between the procurer and the developer. Upon successful bidding, a Power Purchase Agreement (PPA) is signed between the procurer and the successful bidder or SPV. If an intermediary procurer is involved, they sign a PPA with the developer and a Power Sale Agreement (PSA) with the end procurer, with the PSA mirroring the PPA terms. The intermediary procurer is entitled to a trading margin. Centralized power procurement entities are classified as procurers rather than intermediaries. PPAs must ideally be executed within six months of issuing the Letter of Award (LoA), extendable to twelve months, with non-compliance risking capacity cancellation. The procurer is also required to publicly disclose the successful bidder and tariff post-PPA execution and must apply to the appropriate commission for tariff adoption within 30 days of the LoA. The commission is expected to adopt the tariff within 60 days, and any delays may lead to an extension of the Scheduled Commencement of Supply Date (SCSD) and financial closure deadlines.

The term of the PPA is determined by the procurer and specified in the RfS. Upon expiration of the PPA, the developer retains the right to continue operating the PSP project. If the procurer designates the project site, their land arrangement responsibilities are limited to the PPA duration. Performance parameters and other operational conditions are specified in the Special Conditions of Contract. The guidelines also establish provisions for liquidated damages in cases of non-performance or capacity shortfalls. Such penalties must be genuine and reasonable, with predefined charges for deviations in ancillary services parameters.

The developer must achieve financial closure within the specified period under the Special Conditions of Contract, with penalties for delays unless the delay arises from reasons beyond the developer's control, such as land allotment issues, government-related delays, or Force Majeure events. Extensions may be granted under such circumstances. The developer is also responsible for securing transmission connectivity to either ISTS or InSTS networks at their cost. Transmission charges and losses beyond the delivery point are borne by the end procurer, while the developer is responsible for costs up to the delivery point. Metering is conducted at the metering point, usually at the low-voltage bus bar of the substation.

The guidelines emphasise transparency and regulatory compliance, particularly concerning the commencement of supply. Projects must begin operations within the specified period in the PPA, although early commencement is permitted with prior notice.

The Deviation Settlement Mechanism (DSM) applies to scheduling deviations per existing regulations, and the developer is responsible for settling any associated DSM charges. These comprehensive guidelines provide a structured approach to procuring stored energy from PSPs while allowing room for flexibility in implementation through the RfS and Special Conditions of Contract.