Solar ‘slowdown’ cloud lifts? Govt. releases new guidelines for power procurement

• Centre makes solar procurement guidelines transparent, States can deviate
• Termination compensation for buyers and payment security mechanism for generators
• Minimum PPA duration of 25 years that cannot be cancelled unilaterally

The government has released new guidelines for buying power from grid-connected solar projects through competitive bidding to standardise auctions and build confidence in solar sector.

The new rules come at a time when the sector was reportedly slowing down over falling tariffs, increasing competition and states cancelling power purchase agreements (PPAs) with firms over tariff disagreements.

The guidelines provide for termination compensation by securing investment by the generator and lenders against any arbitrary termination of a PPA.

Also, the risk of power generator’s revenue getting blocked due to delayed payments or non-payment has been addressed through instruments like Letter of Credit (LC), Payment Security Fund and State Guarantee.

The PPA will be signed for a minimum of 25 years. States can deviate from new guidelines with the approval of the power regulator.

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