INTRODUCTION

The integration of diverse renewable resources is pivotal for sustainable energy solutions and addressing inherent output fluctuations. Recognising the complementary nature of solar and wind energy, the Indian Ministry of New and Renewable Energy introduced the Wind-Solar Hybrid Policy on May 14, 2018 (“Policy”), which aims to optimise land and transmission use for large grid-connected wind-solar photovoltaic hybrid systems. By fostering synergy between wind and solar energy, the Policy seeks to leverage their respective strengths to create a more reliable and consistent power supply with sustainable energy sources.

Aligning with the broader national agenda, the Ministry of Power vide its notification dated August 21, 2023, introduced the Guidelines for Tariff-based Competitive Bidding Process for Procurement of Power from Grid-Connected Wind-Solar Hybrid Projects (“Guidelines”). These guidelines not only promote market-based tariffs but also ensure a fair and efficient mechanism for the integration of renewable energy into the power sector. The Guidelines in conjunction with existing legislative frameworks, reflect a strategic initiative to foster a more competitive and sustainable and competitive energy landscape in India. 

KEY FEATURES OF THE GUIDELINES 

1. Objectives: The Guidelines encourage competitive electricity procurement by distribution licensees, their authorised representatives, and intermediary procurers (collectively referred to as “Procurers”) from grid-connected wind and solar hybrid power projects (“Hybrid Power Projects”). It aims to meet DISCOM’s renewable purchase obligation requirement, facilitate renewable capacity addition, and enhance project profitability.
2. Applicability: The Guidelines apply to Hybrid Power Projects having a bid capacity of 10 MW and above for intra-state transmission and 50 MW and above for inter-state transmission, subject to the condition that the rated power capacity of either the solar or the wind resource will at least be 33% of the total contracted capacity of the Hybrid Power Project. 
3. Bid Invitation and Structure: The Procurer will have to adhere to these Guidelines while preparing the bid documents. Any material deviation from the Guidelines would require government approval. The bids are invited in power capacity terms and will be awarded to the bidder quoting the least tariff followed by the bidder quoting the second least tariff. However, the Procurer can only allocate a maximum of 50% per cent of the total capacity provided in the RFS to a single bidder.
4. Bidding Process: The bids for power procurement will be undertaken by the Procurer through a single-stage two-part electronic bidding process. The two-part bidding process will begin with the technical bid followed by the financial bid. 
5. Request for Selection Document (“RFS”): The Procurer may set technical criteria based on the Hybrid Power Projectdeveloper/generator’s (“Developer”) qualifications, financial conditions, and liquidity. Financial criteria will include a minimum net worth requirement of the Developer of at least 20% of the estimated project cost. Liquidity parameters such as annual turnover, internal resource generation, and bidding capacity will also have to be specified. The Procurer will have to outline the Earnest Money Deposit to be paid by the Developer which will not be less than 2% of the estimated project cost and will have the right to forfeit it if the Developer fails to execute the Power Purchase Agreement (“PPA”) within the stipulated period.
6. Bid Process Timeline: The bidder will have a minimum bid submission window of 22 days. The selected bidder is expected to receive the Letter of Award within 110 days from the date of issuance of RFS, and the signing of the PPA is anticipated to take place within 140 days from the date of issuance of RFS.
7. Contract Award and Conclusion: The Procurer will form a committee to evaluate the RFS bids and select the bidders who fulfil the technical and financial criteria of the RFS. The Procurer will publicly disclose the successful bidders’ names and tariffs on its website for at least 30 days post the execution of the PPA. 
8. Bank Guarantees/ Payment on Ordering Instruments/ Letter of Undertaking: The Developer will have to provide a performance bank guarantee of a minimum of 5% of the estimated capital cost for the financial year in which the bids are invited, during the signing of the PPA. The Procurer may choose to encash the bank guarantee if the Developer breaches any of the terms of the PPA. Additionally, the Procurer will have to release the bank guarantee if they are replaced by a secure Payment on Order Instrument or Letter(s) of Undertaking issued by the Indian Renewable Energy Development Agency, Power Finance Corporation Limited, or REC Limited.
9. Shareholding Structures: The selected bidder will have to maintain a shareholding of at least 51% in the Hybrid Power Project company executing the PPA except with the prior approval of the Procurer. If the bidder is a consortium, the combined shareholding of the consortium members in the Hybrid Power Project company executing the PPA cannot fall below 51% at any time prior to the end of 1 year from the Scheduled Commencement Date of Supply (“SCDC”), except with prior approval of the Procurer. If the bidder is executing the PPA itself, its promoters will not be able to transfer control till 1 year from the SCDC, without the Procurer’s prior approval. 
10. Role of State Nodal Agency: State Nodal Agencies appointed by respective governments, will facilitate approvals and sanctions related to the Hybrid Power Project to ensure that the power supply commencement is within the scheduled timeline. 

THE WAY FORWARD

The Guidelines provide a clear framework for project preparation, bidding, and execution, ensuring that the Developers adhere to standards, and contribute to the sustainable growth of the renewable energy landscape. The successful implementation of the Guidelines will depend on the effective coordination between government bodies, state nodal agencies, and project stakeholders. The commitment to regular performance monitoring, adherence to transmission connectivity regulations, and the facilitation of approvals by state nodal agencies are critical elements for the successful commencement of the hybrid power supply. The continued collaboration and periodic reviews will also be essential to address emerging issues, foster innovation, and drive the long-term success of the Hybrid Power Projects in India.

If you would like to know more about the guidelines, contact our dedicated team of energy lawyers in India at contactus@spiceroutelegal.com.