NLC India Receives Tariff Determination At ₹6.99/kWh For 20 MW Solar PV Plant With BESS In Andaman & Nicobar Islands

Representational image. Credit: Canva

The NLC India Limited (NLCIL) has achieved a significant milestone with the approval of the tariff for its 20 MW Solar Photovoltaic (PV) Plant, coupled with an 8 MWh Battery Energy Storage System (BESS) situated in Dollygunj and Attam Pahad in the Andaman & Nicobar Islands. The project, which commenced its operation on June 30, 2020, marks a crucial step towards sustainable and renewable energy sources in the region.


NLCIL had initially filed a petition seeking the determination of project-specific levelized tariffs for this solar PV plant. Out of the total 20 MW solar capacity with BESS, a 2.5 MW solar PV portion was commissioned on December 31, 2018, while the remaining capacity, including BESS, was brought online on June 30, 2020. In light of the full project commissioning, NLCIL requested an amendment to its initial petition, a request which was subsequently granted by the Commission. NLCIL submitted its amended petition on June 15, 2021.


Crucial to this project’s progress was the signing of a Tripartite Memorandum of Understanding (MOU) on May 10, 2016, between NLCIL, the Ministry of New and Renewable Energy (MNRE), and the Andaman and Nicobar Administration, which laid the foundation for setting up solar-based power plants in the Andaman and Nicobar Islands. The Power Purchase Agreement (PPA) was inked between NLCIL and the Electricity Department of the Andaman & Nicobar Administration on August 18, 2016. Notably, the PPA was later amended on January 6, 2021, reflecting the evolving dynamics of the project.

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The tariff determination, following the CERC (Terms and Conditions for Tariff Determination from Renewable Energy Sources) Regulations 2017, revealed that with a 15% subsidy, the levelized tariff stood at ₹9.26 per kWh, and with a 100% subsidy, it amounted to ₹7.41 per kWh. However, the project faced operational challenges, as high-frequency fluctuations in the grid prevented the solar plant from operating at full capacity. In response, the BESS logic was redesigned to curtail active power export, resulting in a loss of generation for NLCIL.

The Commission, having reviewed all relevant documents and considering the year of project commissioning (2020-21), determined that a return on equity rate of 16.964% was appropriate. Additionally, the EPC cost, discovered through competitive bidding at ₹11,287.47 lakhs, was considered for tariff determination. Notably, ₹9,454.15 lakhs had been incurred by NLCIL as of June 30, 2020, while ₹1,833.32 lakhs were considered as a liability towards the EPC contractor.

In a departure from the standard norms, the Commission approved auxiliary consumption of the Solar Project with BESS at 8.51% of gross generation, with degradation factors of 1.00% for the first ten years and 0.7% for the remaining period. For battery replacement costs, two scenarios were considered, based on declining battery costs and exchange rate variations such as a declining trend in battery costs, estimating a 46% decrease over 12 years, and an increasing trend in foreign exchange rates, escalating by 5% annually after the initial four years. Consequently, the Commission approved a replacement cost of ₹2951.47 lakh in the 12th year, with no return on equity for the old battery post-replacement.

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Taking all these factors into account, the Commission approved a tariff of ₹6.99 per kWh for the project’s lifespan, in contrast to NLCIL’s initial claim of ₹7.434 per kWh with actual CFA received. NLCIL is now mandated to raise energy bills based on the approved tariff.

This determination is a crucial step in bolstering renewable energy infrastructure in the Andaman & Nicobar Islands and paves the way for cleaner and sustainable power generation in the region.

Please read the document below for more details.

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