Highlights of the Proposed CERC Tariff Determination Regulations for Renewable Energy (2024-2027)

The Central Energy Regulatory Commission (CERC) has issued draft regulations for the tariff determination from renewable energy sources for the period 2024-2027. These regulations aim to provide a structured approach to determining tariffs, ensuring fairness, and encouraging growth in the renewable energy sector. Key highlights and proposed changes are as follows.

Firstly, the regulation emphasizes the promotion of projects based on Municipal Solid Waste (MSW) and Refuse Derived Fuel (RDF). These projects will see a reduction in their useful life to 20 years, and certain clauses related to station heat rate and gross calorific value will be omitted. This change is intended to foster growth in these sectors by simplifying the regulatory framework and reducing operational complexities.

The regulations also address the capacity utilization factor (CUF) for renewable hybrid energy projects. The CUF will be determined on a project-specific basis, considering the proportion of rated capacity of each renewable energy source. This approach ensures that the tariff determination process reflects the actual capacity and efficiency of each project. However, the stipulation of a minimum 33% CUF, adopted from competitive bidding documents, may not be practical for hybrid projects under current resource conditions in India. This requirement might need modification to align with the real-world performance of hybrid projects, such as those combining solar and wind energy.

For projects utilizing storage, the regulations specify different efficiency standards. Solid-state battery storage projects are expected to achieve an efficiency of 80%, while pumped storage projects have a benchmark of 75%. These efficiency metrics are crucial for determining the overall viability and tariff structure for storage-based renewable energy projects.

The draft regulations also highlight the need for clear definitions and methodologies regarding excess energy or over-generation. Renewable energy projects that generate more energy than specified can sell this excess, but the first right of refusal lies with the concerned beneficiary. There is a need for further clarification on whether this excess energy refers to excess design capacity or better resource conditions, as this impacts how tariffs are calculated and applied.

Additionally, the regulations propose that the cost of fuel preparation for MSW/RDF-based projects should be included in the overall capital cost of the project. This approach eliminates the need to account for fuel costs separately, simplifying the financial modeling and tariff determination processes. Monitoring and recording the gross calorific value (GCV), station heat rate (SHR), and plant load factor (PLF) monthly for these projects is also recommended. This data collection will help set standard benchmarks in the future.

Finally, the regulations suggest developing a methodology to capture prevailing market trends for capital cost benchmarks, interest on loans, and working capital. This methodology would help in setting more accurate and fair tariffs by reflecting current market conditions and reducing biases from limited data sets. The approach aims to provide a comprehensive view of market trends, giving higher weight to recent deals and competitive tendering processes.

The proposed draft regulations by CERC for tariff determination from renewable energy sources are designed to promote growth in the sector, ensure fair tariff structures, and simplify regulatory requirements. These changes are expected to encourage investment in renewable energy projects, particularly those based on MSW, RDF, and hybrid technologies, thereby supporting India’s transition to a sustainable energy future.

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