Path-breaking step in the large scale Battery Energy Storage System (BESS)

On 10^th March, 2022, Ministry of Power has issued guidelines for the procurement of Battery Energy Storage Systems (BESS) in the generation, transmission and distribution network of energy.

With joint efforts of both Ministry of New and renewable energy and Ministry of Power who have been working on this to provide a road map for the installation of the energy storage system in the country since last year.

It will provide a push for India’s energy security, the central government has given state-owned Solar Energy Corp of India (SECI) for calling expressions of interest (EoI) for setting up a 1 gigawatt-hour (GWh) grid-scale battery storage system.

Journey of large scale Battery Energy Storage System (BESS)-

There is growing traction for hydropower projects among Indian clean energy majors. The aim is to use green power during off-peak hours to raise water to a height and then release it into a lower reservoir to generate electricity.

Energy storage system has been created to maximize the use of transmission system and strengthening grid stability this will save investment in the expansion of transmission infrastructure.

Storage as an asset for balancing services and flexible operation. The system operator which are load dispatchers (RLDCs and SLDCs) may use storage system for frequency control and balancing service.

With the limited support available from existing Pumped Hydro Storage Plants and the long

gestation period for the new Pumped Hydro Storage Plants, the circumstances merit consideration of Battery Energy Storage System (BESS) as one of the sources of resource adequacy for the Indian power system. RE plus storage/BESS can provide the required flexibility in generation apart from ensuring the resource adequacy.

Key points–

Objectives–

• These Guidelines are being issued under the provisions of Section 63 of the Electricity Act, 2003 for procurement of energy from BESS by the ‘Procurers’, through competitive bidding, from grid connected Projects to be set up on “Build-Own-Operate” or “Build-Own-Operate Transfer” basis.
• These guidelines, for the purpose of procurement of BESS, will ensure optimum utilisation and provide standardisation in the process of transmission and distribution.
• It will bring in a framework between stakeholders involved in the energy storage and storage capacity procurement.
• These Guidelines shall be binding on the BESSD /Procurer/ Intermediary Procurer/End Procurer/Implementing Agency and the Authorised Representative of the Procurer.

Bidding Process and award of Projects–

• The procurer is supposed to prepare the bid documents and seek prior approval of the government in the draft.
• The obligation on the part of Procurer and Developer to ensure timely commencement of supply electricity that various Project preparatory and other implementation related activities are completed by the respective entities.
• He may choose to locate the Project in a specified zone. In case where he does not specify, the Project site is selected by Battery Energy Storage System Developer (BESSD).
• Obtaining all other clearances prior to Project commissioning as required for Project execution, shall be entirely the responsibility of the BESSD, and the Procurer shall not be responsible in case of delay in obtaining the above / such clearances. Provisions regarding treatment of the same will be explicitly provided in the tender documents.

Qualification of Bidder–

• The Bidder/Procurer should either be falling under:

1. 1. Company under the Companies Act, 2013
   2. Foreign Company under the respective nation’s laws
   3. Alternative Investment Funds (AIF) as registered under Securities Exchange Board of India (SEBI)
   4. Consortium comprising the above entities

• The Procurer shall specify financial and technical criteria in the form of net-worth as a part of the qualification requirement.
• It is clarified that the net-worth to be considered for this clause will be the total net-worth as calculated in accordance with the Companies Act, 2013, and AUM or investible funds to be considered under this clause will be calculated in accordance with applicable SEBI (AIF) Regulations.
• The bidder has to maintain his company’s liquidity by the means of sufficient cash flow/ internal accruals/ bank references to manage the fund requirements for the Project. The Procurer may also stipulate suitable parameters such as annual turnover, PBDIT, internal resource generation, bank references/line of credit, etc.

Battery Storage Purchase Agreement for the Bidder for Implementation of the Project–

• An agreement including proposed standard provisions by Battery Storage Purchase Agreement (BESPA) along with BESSA will be incorporated for the implementation of the Project.
• Evaluation Committee after critical analysis of the bids shall sign the contract. The BESPA shall be executed between BESSD and Procurer. A minimum period of eight years term from the Scheduled Commissioning Date (SCD) or the date of full commissioning of the Project, whichever is later, for BESPA shall be concluded in the prevailing life cycles of battery system.
• Provisions for treatment of excess supply (if any) shall be specified in the Bidding Documents to be issue by End Procurer / Intermediary Procurer. Change in Law compensation / payment shall be limited to the Contracted capacity only.

Financial Closure-

• The time period for attaining the financial closure needs to be reduced than that provided in these Guidelines, BESSD shall attain the Financial Closure in terms of the BESPA, within the date which is 12 months of the Date of Signing of the Battery Energy Storage Purchase Agreement.
• In case of failure, the Procurer/Intermediary Procure shall encash the PBG/POI. An extension subject to Clause A.11.4 and Clause A.11.5 of Section 3, for attainment of the financial closure can however be considered by the Procurer, on the sole request of the BESSD.
• Any delay in adoption of tariff by the Appropriate Commission, beyond 120 days after Effective Date of BESPA shall entail a corresponding extension in financial closure deadline.

Delay caused due to Force Majeure–

• Defining Force Majeure, in Clause H.1, meaning any acts, event, circumstances or unavoidably delays. Force Majeure shall not include any event or circumstance which is within the reasonable control of the Parties and the following-

1. 1. Unavailability, late delivery, or changes in cost of the plant, machinery, equipment, materials, spare parts or consumables for the Power Project;
   2. Delay in the performance of any contractor, sub-contractor or their agents;
   3. Non-performance resulting from normal wear and tear typically experienced in power generation materials and equipment;
   4. Strikes or labour disturbances at the facilities of the Affected Party;
   5. Insufficiency of finances or funds or the agreement becoming onerous to perform; and
   6. Non-performance caused by, or connected with, the Affected Party’s: (i) Negligent or intentional acts, errors or omissions, or lack of due diligence expected from any prudent and rational human being; (ii) Failure to comply with an Indian Law; or (iii) Breach of, or default under this Agreement.

• The Affected Party shall give notice of delay to the other part not later than fifteen days. After receiving of such notice the party shall take decision of claim, within thirty days, provided that such notice shall be a pre-condition to the Affected Party’s entitlement to claim relief under the BESPA.
• After the completion of the 180-day period (or any extended period) for a Force Majeure Event, parties may continue the extension of Clause 4 of Guidelines and BESPA can be terminated.
• The Termination Compensation will be payable to BESSD or the Procurer will have the option to (but will not be obliged to) take-over the Project assets by paying the Debt Due.
• The BESSD shall be eligible for undisputed payments under outstanding Monthly Bill(s), before the occurrence of Force Majeure

*Shubhi Srivastava, Editorial Assistant has reported this brief.