The Decree stipulates the terms of the Power Purchase Agreement (PPA) between the National Electricity Utility (UTE) and electricity generators who produce solar photovoltaic energy.
It established a 206MW auction for solar PV plants ranging between 500kW and 50MW each. The decree sets three tranches according to plant size: (1): 500kW-1MW; (2) 1-5MW; and (3) 5-50MW, with a maximum total capacity to be installed per tranche of 1MW, 5MW and 200MW respectively.
For tranches 1 and 2, the decree sets a competitive auction to award 25-year PPAs. Tranche 2 PPAs will be awarded only if the price is at least 20% lower than tranche 1. For tranche 3, 20-30 year PPAs are awarded in USD with a linearly decreasing tariff from USD 91.5/MWh if operative by December 2014, to USD 86.6/MWh if operative by December 2015 (as amended by Decree 420-013).
Other requirement under the Decree are as follows:
- All projects required at least 20% local content (which excluded furniture or renting of equipment) and carbon credits from the CDM or any future carbon mechanism will accrue to the project owner.
- The PV panels, inverters and rest of equipment had to be new.
- A strong bid guarantee system was imposed. In addition to the 1% bidding guarantee, there was a contract guarantee of 5% of expected revenue over ten years at the time of signing the PPA. Guarantees are mostly recovered upon entry into service of the plant.
- The generator must bear all costs related to grid connection and expansion.
- The National Electric Utility (UTE) shall be the only purchaser of energy from the producer at the set price and number of years as agreed in the contract.
In late 2014 there were 194MW of signed PPAs under the Decree.