The Central Electricity Regulatory Commission (CERC) has brought in a few changes for renewable energy developers. They would now have a way to hold on to their grid connectivity despite missing project deadlines, as long as they pay a daily charge for the extra time.
Developers who are looking for more time, especially with regard to delays in submitting land documents or achieving financial closure, may pay Rs 1,000 per megawatt per day additionally in select cases. The duration and the actual catalyst for the trigger will decide the final outgo.
Why CERC changed renewable energy grid rules
Under existing rules, developers must meet three key deadlines to keep their connectivity to the interstate transmission network. They must submit land documents for half the land needed for their project, achieve financial closure, and commission the project on time. If they miss any of these deadlines, their connectivity can be cancelled, and their bank guarantees encashed.
CERC said many companies had either received cancellation notices or were expecting them and had approached the Commission asking for more time. The regulator noted that some of these companies were already well into building their projects. It had been deciding such cases one at a time, allowing extra time on payment of compensation. The Commission said it wanted a single, uniform process instead of handling each case separately.
The order said connectivity is a limited resource. When one company holds on to grid capacity without making progress, it stops another company from getting that same capacity. The Commission said developers should be allowed extra time, but only on payment of compensation, and regardless of the reason for the delay.
CERC charges for delayed renewable energy projects
Developers who want more time to submit land documents or complete financial closure will pay Rs 1,000 per megawatt per day. For land document delays, the rate goes up by 10% in the second month and 20% in the third month. The maximum extra time allowed for land compliance is three months.
For financial closure, the same starting rate of Rs 1,000 per MW per day applies for the first three months. It then rises by 10%, 20% and 30% over the following three months. Developers can get a maximum of six extra months to complete financial closure.
For delays in starting commercial operation, or achieving what the order calls the Commercial Operation Date (CoD), the charge is higher at Rs 3,000 per MW per day. This rate increases by 10% every month from the seventh to the ninth month of delay. From the tenth to the 12th month, developers pay double the base rate, or Rs 6,000 per MW per day. The maximum extra time allowed to achieve CoD is 12 months.
Developers must pay these charges 15 days in advance. If they fail to pay, their connectivity will be cancelled, and their bank guarantees will be encashed.
Conditions to retain renewable energy grid connectivity
Companies cannot simply ask for more time. They first need to show they have already made some progress. To get extra time for land documents, a developer must show it has arranged at least 20% of the land needed. To get extra time for financial closure, the same 20% land threshold applies. To get extra time to reach commissioning, developers using the land or land-with-bank-guarantee route need to show 75% of the land is in place, while those using the letter of allotment or power purchase agreement route need to show 50% of the land in place, along with proof of contracts for equipment and construction work.
CTUIL, the grid planning body that acts as the nodal agency for this process, will check the documents submitted by developers and point out any gaps. Developers get seven working days to fix these gaps. If a developer meets the eligibility criteria after removing the deficiency, the extra time and the applicable charge will be worked out and communicated within seven working days.
If a developer clears its pending milestone before using up its full extended period, part of the charges already paid will be returned. If a developer completes commissioning without needing to pay any extra charge for that milestone, half of what it paid earlier for land or financial closure delays will also be refunded.
Where CERC’s renewable energy delay charges will go
Half the money collected for delays in land documents and financial closure, and all the money collected for delays in commissioning, will be used to lower monthly transmission charges paid by power buyers under the Sharing Regulations, 2020. The remaining half of the money collected for land and financial closure delays will be kept in a separate account by CTUIL and either refunded to eligible developers or used later to reduce transmission charges.
What renewable energy developers and discoms told CERC
CERC said it received comments from 42 stakeholders, including renewable energy developers, distribution companies, CTU and industry associations, after it published a draft version of the order in April.
Renewable energy developers such as SAEL, NSEFI, Azure Power, ReNew and others had asked the regulator to lower the land requirement, reduce the daily charges, and allow more time, in some cases up to 18 months, to complete projects. Several developers also argued that delays were often not their fault, pointing to holdups in signing power purchase agreements or delays in building transmission infrastructure like substations.
Distribution companies including MPPMCL and MSEDCL took the opposite position. They asked for higher charges and stricter conditions, saying the mechanism should not become a routine way to avoid deadlines. Some discoms also said the extension process should not affect their contractual rights under power purchase agreements, including their right to claim liquidated damages for delays.
The Commission rejected requests to remove or lower the minimum land requirements, saying developers who have not arranged any land are not showing enough seriousness about their projects. It also rejected calls to waive the charges for delays that developers said were not their fault, saying the payment applies regardless of the reason for delay because connectivity is a scarce resource.
At the same time, CERC agreed to some of the industry’s requests. It lowered the proposed charge for land and financial closure delays from an earlier draft figure to Rs 1,000 per MW per day. It also agreed to let developers pay more than the minimum 15 days in advance if they expect a longer delay, and added a clearer process for checking documents and fixing gaps before extra time is granted.
What CERC’s new grid connectivity rules mean
CERC’s grid connectivity rules, formally called the Connectivity and General Network Access to the inter-state Transmission System Regulations, 2022, have been amended three times since they were first notified in June 2022. India’s grid planning body had earlier started sending disconnection notices to clean energy projects that had gone on for a long time without meeting deadlines.
India is aiming to raise its non-fossil fuel power capacity to around 500 gigawatts, up from about 300 gigawatts currently.