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Development of Decentralised Solar Power Plants

Development of Decentralised Solar Power Plants

Development of Decentralised Solar Power Plants

The environment and climatic condition in India have an abundant potential in generating Solar Power. Renewable Energy has further made electricity generation cost much cheaper after the price slash in the establishment and maintenance of the Solar PV Panels. The Ministry of New and Renewable Energy (MNRE), Government of India has been working on improving the process of power procurement and reducing the Transmission and Distribution (T&D) losses. The Ministry has formulated and issued a specific set of guidelines to develop and promote Decentralised Solar Power Plants in the country, especially in the rural areas.


The guidelines were drafted and implemented by the Ministry to achieve the following objectives:

  • To encourage solar energy power production in all nearby sub-stations
  • To connect more than 40,000 33/11 KV sub-stations in the rural areas and generate more electricity
  • To enhance the performance of electrical machinery that are connected to the rural feeders
  • To make sure that the cheap, uninterrupted and reliable Solar Power is available in every corner of the Nation


The Ministry approves the solar power plants which achieve the following criteria:

  • Any Entities or company or cooperatives are eligible to set up the Solar Power Plants
  • The Government approves for those to set-up the Solar Power Plants provided with 20% of the estimated project cost
  • Plants with the capacity of more than 2MW and are linked to the substations that have obtained incentives under the PM-KUSUM component and are entirely depleted

Under these guidelines, the Solar Power Plants are liable for the sale of power via open access generated. Power trading agencies can float bids for the establishment of Solar Power Plants and sell the generated power to DISCOMS on an agreed amount or open access customers on a trading margin capped at Rs.0.07/KW.

Implementation of the Guidelines

Power Distribution Companies (DISCOMs) are assigned with the responsibility of allotting the solar power capacity to developers to develop the Decentralised Solar Power Plants.

  • DISCOMs purchases power from the decentralised solar power plants
  • That functions with the efficiency of more than 2 megawatts (MW)
  • That is connected to distribution sub-stations of rating 66/11 KV and higher
  • With a unit of 2 MW capacity that is linked to distribution sub-stations of any DISCOM of rating 33/11 KV and below

Infrastructure Arrangements

DISCOMs procures electricity from the Decentralised Solar Power Plants for the tenure of 25 years and at the following conditions:

  • At a cost specified and agreed by the appropriate State Electricity Regulatory Commission.
  • Identifies competitors with the initiation of the bidding process.
  • Documents and executes the Power Purchase Agreements (PPAs) towards the Developers.
  • Guarantees a ‘must run’ status on Solar Power Plants and compensates the developers in case of failures.
  • The developers are liberal in procuring their land for setting up and developing the Solar Power Plants with the concerning infrastructure.
  • DISCOMs procure the land and permit the connectivity to developers by installing 11KV lines.
  • DISCOM propose tenders for providing lands to developers, either paying the entire cost to entice lower tariff or on taken on a lease basis.
  • The Solar Power Plants are required to be commissioned within nine months from the date of issuance of letter of award (LoA) if DISCOM provides the land and connectivity.
  • The Solar Power Plants are required to be commissioned within nine months from the date of issuance of Letter of Award (LoA) if the land and connectivity are owned by other entities.

Required Documents

The SPG should provide a Bank Guarantee to DISCOMS in order to clear the selection process. The Bank Guarantee should include:

  • EoI and an Earnest Money Deposit (EMD) of Rs.1 Lakh per MW
  • Performance Bank Guarantee (PBG) of Rs.5 Lakhs/MW within 30 days from the issuance of LoA. If the land is not of SPG’s responsibility and DISCOM is offering it, then it may demand a higher PBG amount

Role of Stakeholders

The implementation partners and their responsibilities included as per the guidelines are as follows:

  1. The Ministry of New and Renewable Energy is the responsible authority in making the design and quality control orders that are most suitable for solar modules, inverters, BoS and other equipment updating on a regular basis.
  2. DISCOMs are the official agencies to choose the Solar Power Generator (SPG) and decide on the solar power capacity that can be linked to a distribution sub-station. They release the LoA and sign Power Purchase Agreement (PPA) with the chosen SPGs. They offer linkages between the sub-stations and provide infrastructure facilities to the chosen SPGs. They check on the working status of the SPGs and offers regular payments to them.
  3. State Nodal Agency (SNA) are the middlemen between the DISCOMs and other State agencies in obtaining the required approval and project development actions and support the SPG.
  4. Solar Power Generators (SPGs) is the responsible body to install the plant and carry out the norms mentioned under the PPA.

Other Conditions

The other conditions that are being laid out under the guidelines for the consideration of SPGs are as follows:

  • SPGs should obtain all the clearances required for the establishment and functioning of the plant from the State Government through the Single Window Clearance System.
  • SPGs should install the Performance Monitoring equipment to gauge the performance of the plant and submit the measured data to DISCOM on a regular basis through its online portal for the tenure period of PPA.
  • Generally, the selected SPGs should commence their commissioning within 12 months from the date of release of LoA. But in case of acquiring land from the DISCOMs, the SPGs should commission the solar power plant within nine months from the date of release of LoA.
  • DISCOMs holds the right to procure electricity from the commissioned SPP once the pact is sealed through PPA. If the SPG fails to meet the demands, DISCOM shall compensate its loss by encashing the PBG in the below-listed mode.
  • For the delay up to two months, DISCOMs would charge on the PBG on a daily basis and equal to the non-commissioned capacity.
  • For the delay of over two months, then the PPA capacity would be lessened and commissioned at the end of 11 or 13th month from the date of release of LoA.
  • If SPGs failed to generate minimum electricity during the PPA, then the DISCOMS may demand the SPGs to compensate its loss as mentioned in PPA.

Contact Details

J K Jethani
Block- 14, CGO Complex,
Lodhi Road, New Delhi -110003.
Fax: + 91-11-24361298
Phone: 24365666
Email: [email protected]

The guidelines for Development of Decentralised Solar Power Plants can be accessed below: