MERC Approves 3000 MW Tariff and Procurement for PSPs

MERC has approved MSEDCL's procurement of 3000 MW energy storage capacity from Pumped Hydro Storage Plants, including 2000 MW under the Green Shoe option, along with tariff adoption. The 40-year contract will strengthen renewable energy integration in Maharashtra.

September 27, 2024. By EI News Network

In a significant move to bolster Maharashtra's energy infrastructure, the Maharashtra Electricity Regulatory Commission (MERC) has approved the MSEDCL's procurement of 3000 MW of energy storage capacity from Pumped Hydro Storage Plants (PSPs), along with tariff adoption.

This procurement will take place through a competitive bidding process, securing the storage capacity for 40 years. The decision is aimed at enhancing grid stability and facilitating the integration of renewable energy sources in the state.

The procurement includes an initial 1000 MW of base quantum, along with an additional 2000 MW under a Green Shoe option. This flexible arrangement allows for the expansion of capacity depending on the success of the projects. The energy storage systems, connected to the intra-state transmission system (InSTS), are designed for 8 hours of discharge with a maximum of 5 continuous hours, ensuring adequate backup during peak demand periods.

This approval follows a petition filed by the Maharashtra State Electricity Distribution Company Ltd. (MSEDCL) under Section 63 of the Electricity Act, 2003. MSEDCL sought the Commission's approval not only for the procurement process but also for the adoption of the tariffs discovered through the competitive bidding process.

The petition outlines the procurement of storage capacity through tender dated March 9, 2024, which invited bids for 2000 MW of PSP capacity, with an additional option for 1000 MW through the Green Shoe mechanism. Two key bidders emerged from the competitive process: JSW Neo Energy Ltd. and Torrent Power Ltd. Both companies offered 1500 MW each (comprising 500 MW base quantum and 1000 MW under the Green Shoe option). The annual tariffs quoted by JSW Neo Energy stood at INR 84,66,129 per MW, while Torrent Power quoted INR 83,98,400 per MW. These bids were lower than the ceiling price of INR 1,05,00,000 per MW set by MSEDCL, making them economically viable for long-term procurement.

The Commission carefully evaluated the bids based on total storage costs, considering both the annual fixed charges and cycle losses. JSW Neo Energy and Torrent Power reported cycle losses of 24 percent and 25 percent, respectively, and both were found to offer competitive rates. MERC also compared these tariffs to the rates of other similar projects and found that the effective tariff for these PSPs, which ranged from INR 6.77 to INR 6.80 per kWh, was significantly lower than past projects. Moreover, the effective tariffs were well-aligned with short-term procurement rates during peak seasons, which ranged between INR 7.44 and INR 7.90 per kWh.

This decision by MERC is also expected to help MSEDCL meet its energy storage obligations under the Renewable Purchase Obligation (RPO) regulations. The addition of this storage capacity is crucial for integrating more renewable energy sources, such as solar and wind, into Maharashtra's power grid. By ensuring a reliable backup system through Pumped Hydro Storage, the state can better manage fluctuations in renewable energy generation and provide stable electricity supply during periods of high demand.

MERC’s approval marks a critical step in the long-term planning of Maharashtra’s energy future. By contracting energy storage capacity for 40 years, the state is taking proactive measures to stabilise its energy grid and accommodate the growing share of renewable energy in its power generation mix. This initiative also demonstrates Maharashtra’s commitment to sustainability and its strategic focus on energy resilience for the coming decades.

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