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Andhra Pradesh Regulator Clears 1 GWh Battery Storage Procurement, Caps Trading Margin

Andhra Pradesh Electricity Regulatory Commission (APERC) has approved agreements for procuring 500 MW/1,000 MWh of battery energy storage capacity by the state’s distribution companies. The approval includes both battery energy storage sale and purchase agreements, along with tariffs discovered through a competitive bidding process for a 12-year period.

However, the Commission declined the trading margin proposed by NHPC Limited and instead directed that it be capped at 0.5% of the monthly capacity charges, in line with guidelines issued by the Ministry of Power.

The procurement initiative was jointly proposed by Eastern Power Distribution Company of Andhra Pradesh, Southern Power Distribution Company of Andhra Pradesh, and Andhra Pradesh Central Power Distribution Corporation to strengthen grid reliability and support renewable energy integration.

The battery storage projects are part of a central government-backed program offering viability gap funding (VGF) of up to 30% of the capital cost, capped at Rs 2.7 million per MWh. The tender process, initiated last year, concluded with an e-reverse auction conducted by NHPC.

Key project allocations include 225 MW/450 MWh awarded to Patel Infrastructure at the Jammalamadugu substation, and two projects totaling 275 MW/550 MWh awarded to ACME Solar Holdings at Kuppam and Ghani substations. The tariffs discovered were found to be in line with prevailing market benchmarks.

APERC noted that the state’s growing renewable energy capacity has introduced grid management challenges, particularly due to the mismatch between daytime solar generation and evening peak demand. Battery storage systems are expected to address this issue by storing surplus energy and dispatching it during high-demand periods.

The Commission emphasized that such systems will help reduce dependence on costly short-term power purchases and minimize renewable energy curtailment, thereby protecting consumer interests.

Addressing concerns over transparency, APERC stated that the bidding process was competitive and open, with participation from 17 companies, followed by a structured reverse auction mechanism.

While upholding the procurement framework, the Commission ruled that applying a per-unit trading margin was not appropriate for capacity-based battery storage projects. Instead, limiting the margin to 0.5% of capacity charges more accurately reflects the administrative role involved, avoiding excessive costs.