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CERC Reduces Discovered Tariff Rate To Rs. 2.94/Kwh For 92 MW Floating Solar Plant In Kerala

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Recently Central Electricity Regulatory Commission (CERC) reduced levelized tariff rate discovered in reverse auction from INR 3.56/unit to INR 2.94/unit for 92 MW floating solar power plant in two phases (1st phase 22MW and 2nd phase 70MW) at Rajiv Gandhi Combined Cycle Power Project (RGCCP), Kayamkulam, Kerala.

Based on the memorandum of understanding (MOU) signed between NTPC & KSEBL on 2018, NTPC shortlisted two bidders in a reverse auction, namely M/S BHEL for 22MW floating solar power plant (1st phase) & M/S Tata Power Solar System Ltd for 70MW capacity (2nd phase).

Accordingly, NTPC & KSEBL signed PPA at levelized tariff rate INR 3.16/Kwh for 25 years. Henceforth, the levelized tariff was adopted by KSERC according to section 62 of the electricity act, 2003. As per the approved PPA, if during any contract year, it is found that the developer has not been able to supply energy corresponding to minimum CUF of 16% on account of reasons solely attributable to the developer, the developer shall pay equal 25% of the project tariff to KSEBL, for such shortfall of units. In case achieved CUF above 28%, KSEBL will purchase the power at 75% reduced tariff of original levelized tariff.

Meanwhile, as CERC notified CERC (Terms and Conditions for Tariff determination from Renewable Energy Sources) Regulation, 2020″ (or “RE tariff Regulations 2020”), NTPC filed a fresh petition to CERC for approval of revised tariff rate INR 3.51/unit for 22MW and INR 3.58/Kwh for 70MW or weighted average tariff of INR 3.56 /unit for total 92MW capacity. In addition, petitioner sought approval for deviation from the principles specified in the RE tariff regulations, 2020, to take into account the module degradation of 0.70% per annum, higher auxiliary power consumption (APC) of 0.75% transmission loss of 1.25%, additional expenditure of INR 50.77Cr for construction of 7 Km long motorable road to 70Km project site.

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In response, the respondent KSEBL submitted following reply :

a. The petitioner has not provided the detailed estimate INR 57.14 lakh/MW in 70MW project towards 7KM motorable road.

b. The transmission loss considered by the petitioner toward evacuation system is very high without any justification.

c. The tariff of Ramagundam Super Thermal floating solar power plant project is only INR 3.12 /unit.

After analyzing petitioner’s prayer & respondent’s reply, commission concluded its decision as follows :

1. Regulation 7 of the RE tariff Regulations 2020, which provides general principles for determination of project specific tariff for generation of electricity from renewable energy station including floating solar plant, shall be considered as the ceiling norms except for capital cost.

2. Regulation 8 of the RE tariff regulation 2020, specifies the formats and information which need to be accompanied with project specific tariff petition.

3. Regulation 10 of the RE Tariff regulation 2020, which specifies parameters of tariff for the renewable energy project as single tariff consisting of the following components.

a. Return on equity (RoE), b. Interest on loan, c. Depreciation , d. Interest on working capital , e. O&M expenses.

4. Regulation 11 of the RE tariff regulation 2020 provides tariff design principle for determination of project specific tariff on levelized basis considering the year of commissioning of the project for the tariff period of the project with discount factor equivalent to post tax weighted average cost of capital.

Accordingly, as per the above required norms specified in the RE Tariff Regulation 2020, commission made certain assumption and taken into consideration the input values submitted by petitioner for determination of the project specific levelized tariff for 92 MW floating solar power plant.

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The certain assumptions and input values considered by commission, elaborated as follows :

A. Capital Cost : The petitioner has submitted the details of capital cost as follows.

Capital cost of the projectRs lakh/MWPh-I (22MW)Ph-II (70MW)
Preliminary costRs lakh/MW33
Land cost- leaseholdRs lakh/MW
Land cost- FreeholdRs lakh/MW
EPC costRs lakh/MW500.51489.77
Infrastructure CostRs lakh/MW72.53
Project management (@0.5%)Rs lakh/MW2.522.83
Contingency (@0.50%)Rs lakh/MW2.532.84
Interest during construction (IDC)Rs lakh/MW18.9215.57
Capital cost (including IDC) per MWRs lakh/MW527.48586.54
Capital cost for projectRs lakh/MW116,04.52410,57.57
Total project cost (92MW)Rs lakh/MW526.62.09 or 526.62 Cr

Capital cost approved by board of director of the petitioner on 2019 was 518.70Cr for combined project of 92MW capacity. Since the project is yet to be commissioned and the actual cost of the project is not yet known, the commission approved the cost of the project as INR 518.76 Cr for the purpose of determination of tariff.

The cost towards interest during construction (IDC) approved by the commission as follows :

Interest during construction (IDC) (per MW)Ph-I (22MW)Ph-II (70MW)
Rs Lakh/ MW14.815.63

B. Debt Equity Ratio :

Debt equity ratio approved by the commission :

ParticularsAs proposed by the petitionerAs proposed by the petitionerAs considered by the commissionAs considered by the commission
Ph-I (22 MW)Ph-II (70 MW)Ph-I (22 MW)Ph-II (70MW)
Debt component (%)70708080
Equity Component (%)30302020
Debt Component (Rs lakh)8,123.1728,740.309211.2032,289.57
Equity Component (Rs lakh) 3481.3612317.272302.808072.39

C. Loan Tenure And Interest On Loan :

The commission while notifying the levelized generic tariff for renewable energy technologies for FY 21-22 in its order dated 31.03.2021, had considered the interest on loan as 9%. Accordingly, the commission approves the interest on loan at 9% per annum.

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D. Depreciation :

Depreciation approved by the commission.

ParticularAs Proposed By The PetitionerAs Considered By The Commission
Useful Life25 years25 years
Debt70%80%
Repayment period1515
Depreciation for 1st 15 years4.67%4.67%
Depreciation for 16th years onward2%2%
Salvage value as % of capital cost10%10%

E. Return On Equity (RoE) :

Commission has considered return on equity (RoE) as 16.96% i.e. 14%/ (1-17.47%) (after grossing up by MAT rate of 17.47%) for the first 20 years of the project and as 21.52% i.e.14%/(1-34.94%) (after grossing up by corporate tax rate of 39.94%) for the remaining five years of the useful life of the project.

F. Interest On Working Capital :

Commission has decided to consider 10.5% as interest on working capital for the purpose of tariff determination.

G. Capacity Utilization Factor (CUF) :

Upon considering CUF guaranteed by the successful bidder and provision of the PPA, the commission decides the CUF of 25.11% for Ph-I of 22MW & CUF of 27.24% for Ph-II of 70MW for determination of project tariff.

H. Operation & Maintenance (O&M) expenses :

The Commission observes that the O & M cost applicable after three years of the commissioning of the projects is below 1% of the EPC cost and in line with the prevailing market practice. Accordingly, the Commission has considered the O&M expenses of Rs.3.5 lakh/ MW/ Year for both phase-1 of 22MW and phase-2 of 70 MW projects as proposed by the Petitioner. Further, as specified in the Regulations, the escalation rate of 3.84% per annum shall be applicable on O&M expenses and hence, the Commission has considered an escalation rate of 3.84% per annum on O&M expenses as proposed by the Petitioner.

I. Auxiliary Consumption :

Commission has considered auxiliary consumption of 0.75% for both Ph-I of 22MMW & Ph-II of 70MW.

J. Module Degradation :

Commission has not considered module degradation factor for tariff determination.

K. Transmission Loss :

Commission decided not to consider transmission loss for determination of tariff.

L. Discount Factor :

The discount factor derived for this case is 7.48%.

Conclusion : Based on the parameters, assumptions and methodology outlined in earlier paragraphs, the levelized Tariff for Phase-1 of 22 MW works out to Rs.2.91 per kWh and that for Phase-2 of 70 MW works out to be Rs.2.94 per kWh. Weighted average tariff calculated for 92 MW is Rs.2.94 per kWh.

Name of
Floating SPV Power Project
Net Life time
Generation
Per MW
(MU)
Net Life time
Generation
from project
(MU)
Capital Cost
(Rs. lakh)
Capital Cost
(Rs. lakh/ MW)
Payable
Levelised
Tariff
(₹/kWh)
22 MW Kayamkulam floating
SPV Project
54.481198.5211514.00523.362.91
70 MW Kayamkulam floating
SPV Project
59.104136.9640362.00576.602.94
Weighted Average for 92 MW
floating SPV Project
113.585335.4951876.00563.872.94

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