India tests new hydro technology as CERC approves first project's tariff

The regulator approved a Rs 3.39 per unit tariff for BBMB's 1 MW pilot project despite the absence of specific central guidelines, with one member dissenting over CERC's jurisdiction

The Central Electricity Regulatory Commission (CERC) recently approved the tariff rate for supply of power from India's first Surface Hydrokinetic power plant being set up by the Bhakhra Beas Management Board (BBMB), which manages the water and power supply from the Bhakra Nangal and Beas projects in Punjab.

 

Surface hydrokinetics is a renewable energy (RE) technology that uses the natural kinetic energy of flowing water near the surface, such as in free-flowing rivers, canals, or tidal streams, to generate electricity without building dams or changing water elevation. The order, pronounced by CERC using its special regulatory powers under the Electricity Act, brought down the curtains on months of discussion over key challenges in tariff adoption, given the novel technology involved and the absence of power ministry guidelines for such projects.

 

While this sets the stage for future deployment of large capacities based on the technology under the hydropower segment of India's energy basket, the regulatory hearings in the case have set a precedent for future clarity surrounding energy projects. Further, the case assumes significance given the dissent order passed by one of the four members of the CERC regarding whether, in the absence of guidelines, CERC can claim the power to adopt a particular tariff rate.

 

The genesis of the case is in a 2021 report by the Central Electricity Authority (CEA) to study the concept and commercial application of hydrokinetic turbine technology developed indigenously by MACLEC, a Delhi-based renewable energy firm, based on the findings of a committee comprising experts from CEA, Ministry of ew and renewable Energy (MNRE), NHPC, THDCIL, and Indian Institute of technology (IIT) Roorkee.

 

A year later, in October 2022, the power ministry asked the BBMB to undertake new hydro, pumped-storage, and RE projects within the geographical areas of the BBMB's partner states. Two years later, in November 2024, CEA recognized Surface Hydrokinetic Turbine (SHKT) technology under the hydro category to drive innovations and explore alternate technologies to achieve net zero emission targets.

 

Finally, BBMB floated a tender in May 2025 for design, engineering, supply, installation, commissioning, ownership, operation and maintenance of a 1 Megawatt plant at the Tail Race Channel of Kotla Hydro Power Station, under the Renewable Energy Service Company (RESCO) mode for a period of 40 years. "Since Hydrokinetic Energy is a novel technology and no specific guidelines had been issued by the Ministry of Power or MNRE, the bidding process was undertaken in terms of the CVC Manual for procurement of works, the provisions of the CEA, and the MNRE guidelines for hydro-based RESCO mode," BBMB said in its petition to CERC.

 

Later that year, in August, BBMB opened the technical bids from three bidders, including MACLEC Technical project Laboratory, Passi Machine Tools, and S K Sales Company. After the tender evaluation committee found the first two firms technically qualified, financial bids were opened and e-reverse auction conducted. Finally, the committee recommended the award of the contract to MACLEC which was the successful lowest bidder (L1) at a discovered tariff of Rs 3.39 per kW. This was lower than both the Average Power Purchase Cost (APPC) of the partner states, except Himachal Pradesh, and the tariffs of hydro projects under construction and commissioned in recent years.

 

BBMB said the project would generate renewable electricity on a continuous basis and help in reducing the demand-supply gap of the partner states. "The fixed tariff structure for 40 years would ensure long-term tariff certainty and price stability. The bidding process was conducted in accordance with the applicable CVC, CEA and MNRE guidelines, and the Letter of Award (LoA) and the PPA were executed after due approval of the BBMB Board. The Surface Hydro Turbine Technology utilises the kinetic energy of flowing water with comparatively minimal infrastructure requirements as against conventional hydroelectric projects involving substantial civil works such as dams, diversions, etc., thereby providing a viable source of round-the-clock renewable energy, especially in areas with poor grid accessibility," the BBMC told CERC.

 

It added that the fixed tariff structure for a period of 40 years has been stated to be economically advantageous in view of the upward trend in fuel and capital costs associated with conventional generating projects, including hydro projects.

 

BBMB's main contention was that while CERC is bound by the central government guidelines issued under Section 63 of the act, in the absence of any guidelines, it may exercise its regulatory powers under Section 79(1)(b) and 86(1)(b) of the Act, which empower the CERC and SERC, respectively, to regulate the procurement of electricity, including approval of the bidding process, Power Purchase Agreements (PPAs), and the tariff associated.

 

Section 63 of the Electricity Act deals with the determination of tariff by bidding process, saying: "Notwithstanding anything contained in section 62, the Appropriate Commission shall adopt the tariff if such tariff has been determined through transparent process of bidding in accordance with the guidelines issued by the Central Government."

 

In its order, CERC held that the selection of the successful bidder and the discovery of the tariff for the project have been carried out by BBMB through a transparent competitive bidding process in accordance with the Tender Document issued by BBMB, and the CVC Manual for Procurement of Works and the applicable CEA and MNRE guidelines for hydro-based projects under RESCO mode.

 

"Considering the nascent stage of the proposed project, and based on the TEC Report, we approve and adopt the tariff of Rs 3.39 per unit as per the final offer of the successful bidder. The tariff shall remain valid throughout the period covered in the PPA," CERC said in its order signed by chairperson Jishnu Barua, and two members, R S Dhillon and Ramesh Babu V.

 

However, Harish Dudani, the fourth member of the tariff-setting panel, dissented from his colleagues. In his separate order, Dudani argued that the presence of the central government is necessary in order to enable CERC to adjudicate and settle all the questions involved, and that the appropriate government office be impleaded as a party for its response. He stated that the scope and ambit of Section 63 makes it evident that adoption of tariff by the commission is contingent upon satisfaction of two essential requirements. First, the tariff must be determined through a transparent process of bidding, and second, that the transparent bidding process be conducted in accordance with the guidelines issued by the central government.

 

"The statutory requirement under Section 63 is not merely that tariff should be discovered through a competitive process but that such competitive bidding should be undertaken in accordance with the guidelines framed by the Appropriate Government. In such circumstances, the commission cannot undertake an examination as to whether the bidding process conforms to the guidelines envisaged under the provision," he argued.

 

Experts, however, say there is nothing wrong in the electricity regulator using its specific regulatory power to approve tariff in a case where the technology is new and the project size is very small, and where there are no ministry guidelines for such competitive bidding.

 

"The purpose of such an approval is to help in creating the right regulatory support and environment for the specific technology to develop," former power secretary Alok Kumar said.

 

Meanwhile, the regulatory approval for the nascent surface hydrokinetic turbine technology, on the back of the government's steps to formalise it under official renewable energy frameworks, has effectively opened up a new energy resource for commercial applications in an area where India is known to have significant potential along with China and Brazil.