MPERC Introduces 5 Paise Per kVArh Reactive Power Compensation for RE Generators

The Madhya Pradesh Electricity Regulatory Commission (MPERC) has introduced a dynamic reactive power management mechanism for renewable energy generators connected to the intra state transmission and distribution grid at 11 kV and above, with the new framework taking effect from November 1, 2026.

The Commission, in its order dated July 15, 2026, in Petition No. 12 of 2026 filed by Madhya Pradesh Urja Vikas Nigam Ltd. (MPUVNL), specified a reactive power compensation charge of 5 paise per kVArh. The rate will escalate by 0.5 paise per kVArh annually thereafter, unless revised by the Commission. As it said," The charge for VArh shall be at the rate of 5 paise/kVArh w.e.f. the date of effect of these regulations. This rate shall be escalated at 0.5paise/kVArh per year thereafter, unless otherwise revised."

The mechanism applies to reneIS IT 5 wable energy generators connected at 11 kV and above in the intra state transmission system and distribution grid, except net metering connections. It is intended to encourage renewable energy generators to use the reactive power capabilities of their inverters to support voltage management and improve grid stability.

Under the framework, renewable energy generators will receive an incentive of 5 paise per kVArh when they supply reactive power to the grid during low voltage conditions, defined as voltage below 97 percent at the point of common coupling (PCC). Conversely, reactive power drawn from the grid below 97 percent voltage will attract a penalty of 5 paise per kVArh.

For high voltage conditions, defined as voltage above 103 percent, generators will receive an incentive of 5 paise per kVArh for drawing reactive power from the grid, while supplying or injecting reactive power into the grid will attract a penalty at the same rate.

No incentive or penalty will apply when the PCC voltage remains between 97 percent and 103 percent, which has been designated as the deadband.

The Commission said  that the mechanism is aligned with the Indian Electricity Grid Code (IEGC), 2023, and the Madhya Pradesh Electricity Grid Code (MPEGC), 2024. It also rejected a proposal from MP Power Management Company Ltd. (MPPMCL) to prescribe different charges for supporting and deteriorating grid voltage. The Commission noted that the Central Electricity Regulatory Commission (CERC) has specified uniform rates for both situations.

The Commission also declined MPPMCL's proposal to keep the reactive energy charge unchanged without escalation. It retained the annual escalation of 0.5 paise per kVArh, in line with the approach adopted under the IEGC.

MPERC said that dynamic reactive power management could provide a cost effective means of managing grid voltage while also increasing renewable energy generation. The Commission noted that inverter based renewable generators can provide both injection and absorption of reactive power, unlike conventional capacitor banks, which primarily provide support under low voltage conditions.

The move is particularly relevant for decentralized renewable energy projects, including projects being implemented under the PM KUSUM scheme and feeder solarisation initiatives. These projects are often connected to distribution networks where voltage fluctuations can be significant because of agricultural and other inductive loads.

MPUVNL had argued that solar inverters could provide dynamic reactive power support without the additional capital expenditure associated with reactors, STATCOMs and other grid compensation equipment. A technical study conducted by Maulana Azad National Institute of Technology (MANIT), Bhopal, with World Bank support, also examined the use of solar inverters for voltage regulation and reactive power management.

According to the study cited in the petition, inverter based reactive power support can respond dynamically to voltage fluctuations and can operate in both directions, allowing generators to inject or absorb reactive power. The study also noted that inverter based compensation can remain effective during low voltage conditions, when the effectiveness of conventional capacitor banks declines.

MPPMCL broadly supported the proposed reactive power management mechanism but raised concerns about its implementation. These included synchronisation of meter timing, validation of voltage measurements at the PCC, development of rules for classifying reactive power support and deviations, integration with DISCOM billing systems, preparation of auditable data and dispute resolution mechanisms, and alignment of metering and billing arrangements.

MPMCL had also proposed retaining the existing reactive power charge of 27 paise per kVArh for reactive power drawn from the grid. However, MPERC replaced the existing 27 paise per kVArh charge applicable to renewable generators with the new 5 paise per kVArh mechanism from November 1, 2026.

MP Power Transmission Company Ltd. and the Madhya Pradesh State Load Despatch Centre supported the proposed dynamic reactive power management framework. They said that inverter based renewable generators have the inherent capability to inject and absorb reactive power and that extending the mechanism to distribution connected renewable generators would help improve voltage regulation and reactive power management.

The Commission has provided DISCOMs three months to prepare for implementation, including suitable metering arrangements, remote access arrangements and modifications to billing software. The cost of metering will be borne by the concerned renewable power generator.

The reactive energy charges will be settled by the concerned DISCOM through the respective HT bills of renewable generators under the HV 7 tariff category of the Retail Supply Tariff Order.

MPERC has also clarified that active power consumed by inverter based resources for providing reactive power support while operating in synchronous condenser or night mode will not be charged and will instead be treated as transmission or distribution losses, as applicable, in the intra state network.

With the new framework, Madhya Pradesh has established a commercial mechanism for renewable energy generators to participate in dynamic voltage and reactive power management at the state transmission and distribution levels. The Commission said that the mechanism would support grid voltage management while helping renewable generators avoid loss of generation caused by low voltage and inverter disconnection.