CERC Sets New Levelized Generic Tariffs For Renewable Energy Projects For 2024-2025

The Central Electricity Regulatory Commission (CERC) has issued an order regarding the determination of levellised generic tariffs for various renewable energy projects for the first year of the control period from July 1, 2024, to March 31, 2025. This order, effective from August 2, 2024, outlines the procedure and conditions for setting tariffs for several categories of renewable energy generating stations.

The order is a result of the newly notified regulations which specify terms and conditions for tariff determination from renewable energy sources. These regulations cover small hydro projects, biomass power projects utilizing Rankine cycle technology, non-fossil fuel-based cogeneration projects, biomass gasifier-based power projects, biogas-based power projects, and refuse-derived fuel-based municipal solid waste power projects. Additionally, project-specific tariffs are to be determined for solar PV power projects, floating solar projects, solar thermal power projects, wind power projects (both onshore and offshore), and other renewable energy projects if developers opt for specific tariffs.

The Commission is mandated to determine the generic tariff before the commencement of each year of the control period. For the first year, the generic tariff order was to be determined upon the issuance of the new regulations. In line with this, a public notice was issued on July 15, 2024, inviting comments, suggestions, and objections from stakeholders. The feedback period concluded on July 31, 2024, with input received from one stakeholder, the NSL Group of Companies.

The NSL Group suggested that the price of bagasse fuel should align with the coal price set by the Coal Ministry in the National Coal Index. However, the Commission noted that the review of the basis for fuel cost determination is outside the current scope and reaffirmed the set bagasse prices for the first year of the control period.

The Commission has also specified the levellised generic tariffs for various renewable energy technologies. The useful life of these projects ranges from 20 to 40 years, depending on the technology. For example, small hydro projects have a useful life of 40 years, while refuse-derived fuel-based municipal solid waste projects have a useful life of 20 years.

The control period for the tariff determination spans from July 1, 2024, to March 31, 2027, with the tariffs determined for projects commissioned during this period remaining valid for their useful life. The tariff structure includes components such as return on equity, interest on loan capital, depreciation, interest on working capital, and operation and maintenance expenses.

For technologies with fuel cost components, such as biomass power projects with Rankine cycle technology and biogas-based power projects, the tariff consists of a fixed cost component and a fuel cost component. The levellised tariff is calculated by considering the discount factor for the time value of money over the useful life of the project.

The normative capital cost for various renewable energy projects has also been outlined. For instance, the capital cost for small hydro projects varies by region, with costs ranging from ₹890 lakh/MW to ₹1,200 lakh/MW. Biomass power projects based on Rankine cycle technology have a capital cost ranging from ₹638 lakh/MW to ₹744 lakh/MW, depending on the type of cooling condenser used.

The debt-equity ratio for these projects is set at 70:30, and the debt and equity components of the normative capital cost are calculated accordingly. For small hydro projects in certain regions, the debt component is ₹840 lakh, and the equity component is ₹360 lakh, totaling a capital cost of ₹1,200 lakh/MW.

The Commission has determined the levelized generic tariffs for the first year of the control period, ensuring a structured approach to tariff setting for various renewable energy technologies. This order aims to promote renewable energy development by providing clear guidelines and financial predictability for project developers.