CERC Moves to Free Up Idle Grid Capacity for Renewable Push
- RE Society of India RESI
- 4 days ago
- 4 min read
CERC’s staff paper proposes converting, substituting, or auctioning idle LOA‑based grid connectivity to ensure efficient transmission use. These reforms aim to accelerate India’s 500 GW green energy integration and support the net‑zero pathway by enforcing discipline, transparency, and locational efficiency.
The Central Electricity Regulatory Commission (CERC) staff paper (SP‑251125) addresses a critical bottleneck in India’s Renewable Energy (RE) integration: connectivity granted under the Letter of Award (LOA) route that remains idle due to delays in signing Power Purchase Agreements (PPAs). With India targeting 500 GW of RE capacity by 2030 and a net‑zero pathway by 2070, efficient utilization of transmission assets is indispensable. The staff paper proposes conversion, substitution, and auction mechanisms to reallocate stranded connectivity, alongside future regime options.
This article provides a technical and professional assessment of the possible outcomes if these proposals are implemented, with emphasis on system efficiency, stakeholder impacts, and alignment with the Electricity Act, CEA transmission planning, and national decarbonization goals.
Key Proposals in the Staff Paper
Option I – Conversion: LOA‑based connectivity converted to Land/Land‑BG route with strict milestones (land, financial closure, SCOD) and penalties (Milestone Extension Charges, PBG encashment).
Option II – Substitution: Replace LOA1 with a PPA under LOA2, subject to NoCs, liability retention, and ATS neutrality.
Option III – Exit + Auction: Surrender connectivity and reallocate via auction with base price Rs 3 lakh/MW, milestone obligations, and proceeds applied to reduce transmission charges.
Future Regimes: Either restrict connectivity to PPA‑backed projects or move entirely to auction‑based allocation with firm COD and FC requirements.
Possible Outcomes
1. Improved Transmission Efficiency
Outcome:Â Idle connectivity (~45 GW) is released and reallocated to projects with credible timelines.
Impact: Higher utilization of commissioned ATS, reduced mismatch charges, and better alignment with CEA’s transmission expansion plan (₹9.15 lakh crore investment by 2030).
Technical Justification:Â By enforcing milestones and auction reallocations, transmission corridors are matched to projects with higher readiness, reducing stranded assets.
2. Enhanced Developer Discipline
Outcome:Â Developers face stricter milestone obligations and financial exposure (MEC, PBG).
Impact:Â Reduced speculative applications; improved bankability for projects with genuine PPAs or merchant strategies.
Technical Justification: Graduated penalties and incentives align developer behavior with system readiness, ensuring faster commissioning in RE zones.
3. Locational Price Signals
Outcome: Auctions introduce scarcity‑indexed reserve prices, reflecting congestion and ATS readiness.
Impact: Developers prioritize high‑value nodes; CTU planning is optimized; curtailment risks decline.
Technical Justification: Locational pricing mirrors international best practices (PJM, ENTSO‑E), ensuring efficient allocation of scarce evacuation margins.
4. Integration of Storage and Hybrid Projects
Outcome:Â Smaller auction lots and tailored milestones enable ESS and hybrid participation.
Impact: Supports CEA’s plan for ~47 GW BESS and ~31 GW PSP by 2030; improves evening peak adequacy and RTC portfolios.
Technical Justification: Storage‑friendly rules unlock flexibility, reduce curtailment, and enhance system reliability.
5. Consumer Tariff Relief
Outcome:Â Auction/MEC proceeds applied to reduce transmission charges; mismatch charges decline.
Impact:Â DISCOMs and consumers benefit from lower pooled transmission costs.
Technical Justification: Transparent pass‑through of proceeds under Sharing Regulations ensures measurable tariff stability.
6. Legal and Procedural Transparency
Outcome:Â Codified NoC standards, appeals timelines, and quarterly dashboards improve governance.
Impact: Non‑discriminatory access and reduced disputes; faster reallocation cycles.
Technical Justification: Aligns with Electricity Act principles of fairness and transparency, strengthening institutional credibility.
Comparative Table: Staff Paper vs Suggested Enhancements
Staff Paper Proposal | Suggested Enhancement | Possible Outcome | Justification |
Flat Rs 3 lakh/MW auction base price | Locational reserve price bands, node information packs | Efficient allocation to scarce nodes | Reflects congestion, ATS readiness; reduces curtailment |
Uniform MEC rates | Graduated MEC by CTU readiness tier; PBG step‑downs for early milestones | Fairer penalties, stronger incentives | Aligns developer risk with system delays; accelerates COD |
50 MW minimum auction lot | Smaller lots (10–25 MW) for ESS/hybrid | Storage integration, peak adequacy | Supports CEA’s storage targets; improves grid flexibility |
Substitution allowed with NoCs | ATS‑neutrality test; stranded ATS surcharge | Protects consumer‑funded ATS | Prevents stranded corridors; internalizes externalities |
Proceeds reduce transmission charges | Quarterly audited dashboards | Transparent consumer benefit | Builds trust; measurable tariff relief |
Future PPA‑only or auction‑only | Dual‑track regime (PPA + merchant/auction with safeguards) | Balanced innovation and discipline | Supports RTC, merchant markets, and hydrogen demand |
Strategic Implications
For Developers: Stricter timelines and locational signals will require robust project planning and financing discipline.
For DISCOMs:Â More reliable delivery schedules and tariff relief from proceeds; better alignment with demand profiles.
For CTU/CEA: Reduced stranded ATS, improved N‑1 security, and better synchronization with transmission expansion plans.
For Consumers: Lower transmission charges and improved reliability of RE supply, supporting affordable decarbonization.
For National Targets: Accelerates integration of 500 GW RE and supports net‑zero pathway by ensuring transmission readiness and storage participation.
Conclusion
The CERC staff paper is a pivotal step in reforming India’s connectivity regime. If implemented with the suggested enhancements—locational pricing, graduated MECs, storage‑friendly rules, ATS safeguards, and transparency protocols—the outcomes will be transformative: efficient transmission utilization, disciplined project development, tariff relief, and accelerated progress toward 500 GW RE capacity and net‑zero goals.
This framework positions India’s power sector to manage the scale of renewable integration while protecting consumer interests and maintaining system reliability.
