VIJAYAWADA: Andhra Pradesh is set to procure 1,600 MW of coal-based thermal power to meet the State’s rising electricity demand, and strengthen long-term energy security.
The Andhra Pradesh Electricity Regulatory Commission (APERC) has granted in-principle approval to the State’s power distribution companies to initiate a competitive bidding process for the power procurement. Power will be procured through Tariff-Based Competitive Bidding under Section 63 of the Electricity Act, 2003, using the Design, Build, Finance, Own and Operate model.
The bidding process will be based on the standard Request for Qualification, Request for Proposal and Power Supply Agreement notified by the Union Ministry of Power.
The proposed procurement provides a significant opportunity to power developers seeking long-term supply contracts in AP, where electricity consumption and peak demand are projected to increase substantially over the coming decade.
The 1,600 MW procurement forms the first phase of AP’s long-term thermal capacity addition programme. The Central Electricity Authority’s Resource Adequacy Plan for AP has recommended the phased addition of 5,588 MW of thermal power generation capacity by 2035-36. Of this, 1,600 MW is proposed to be procured in the first phase to address the State’s projected increase in electricity demand and peak load.
APERC clears competitive bidding for new thermal power capacity
The move comes as AP expands industrial activity, urban infrastructure and electricity-intensive investments across sectors. The planned thermal capacity is expected to provide firm, dispatchable power that can support the grid during periods of high demand and lower renewable-energy generation.
It will also complement AP’s growing renewable-energy portfolio by ensuring reliable electricity availability during evening peaks, seasonal fluctuations and periods when wind and solar generation are unavailable.
The regulatory approval is limited to the commencement of the bidding process. It does not constitute approval of the tariff that will be discovered through competitive bidding or of the Power Supply Agreements that will eventually be signed with successful bidders. Following the completion of the bidding process, the Discoms will have to submit the bid evaluation report, discovered tariff, draft Power Supply Agreements and details of any deviations from the Union Government’s model bidding documents to the APERC.
The Commission has specifically directed the Discoms to reject the bids if the tariffs discovered through the process are not competitive. The regulator has also asked the Discoms to ensure that the proposed capacity is preferably connected to the AP State Transmission Network.
According to the Commission, this could optimise the utilisation of the State’s transmission infrastructure and reduce the risks and delays associated with obtaining connectivity through the Inter-State Transmission System.
However, projects connected through the inter-state network may be preferred where the landed cost of power at the AP boundary is lower than the cost of generation connected to the State network. This provision leaves room for both projects located within AP and competitively priced generation projects situated outside the State. For developers planning new capacity within AP, connectivity to the State grid could emerge as an important competitive advantage.
The 1,600 MW procurement could emerge as one of the larger long-term thermal-power opportunities in the Indian power market. For AP, the procurement is aimed at securing sufficient electricity well before projected demand begins to exert pressure on the State’s existing generation and procurement portfolio.
