Himachal Pradesh Sets New Generic Tariffs For Solar PV Projects For FY 2024-25

The Himachal Pradesh Electricity Regulatory Commission has determined the generic levelised tariff for solar photovoltaic (PV) power projects for the financial year 2024-25. The decision was made after considering suggestions from various stakeholders, including solar power producers and hydropower developers. The process included public consultations and hearings to gather opinions on factors affecting the cost and viability of solar PV projects in the state.

During the consultation process, concerns were raised about the capital cost assumptions for solar PV modules. Stakeholders suggested that the module cost considered in the draft proposal was lower than the actual market rates. They argued that the cost should be adjusted to reflect the prevailing prices, which were higher than those proposed by the commission. Some participants proposed a module cost of ₹160 lakh per megawatt (MW), while others suggested up to ₹180 lakh per MW, considering market realities and challenges faced by small project developers.

After reviewing the suggestions, the commission acknowledged the need to revise the module cost assumptions. It decided to allow an all-inclusive escalation of 40 percent on the basic cost proposed earlier. As a result, the cost of solar PV modules was increased to ₹132.56 lakh per MW. The cost of other components, such as land, civil works, and mounting structures, was also revised from ₹220 lakh per MW to ₹231.55 lakh per MW. Therefore, the total normative capital cost for solar PV projects was set at ₹364.11 lakh per MW for projects above 1 MW and up to 5 MW. For projects up to 1 MW, the normative capital cost was slightly higher, at ₹367.75 lakh per MW. Projects in urban and industrial areas received an additional allowance, bringing their capital cost to ₹375.33 lakh per MW for projects up to 1 MW and ₹371.61 lakh per MW for projects above 1 MW and up to 5 MW.

On the issue of capacity utilization factor (CUF), some stakeholders suggested that the 21 percent CUF assumption was not realistic. They claimed actual generation data indicated a CUF closer to 16 percent. However, the commission decided to retain the 21 percent CUF, stating that this level aligns with the central regulatory guidelines and reflects expected improvements in technology and efficiency.

The commission also addressed concerns about interest rates used in tariff calculations. Stakeholders pointed out the recent increase in interest rates and recommended considering a higher rate of 12 percent. The commission, however, maintained an interest rate of 10.60 percent, calculated by adding 200 basis points to the average marginal cost of funds-based lending rate of the State Bank of India over the past six months.

For depreciation, the commission applied a rate of 4.67 percent per year for the first 15 years and 1.995 percent thereafter. The operation and maintenance expenses were set at ₹10.16 lakh per MW with an annual escalation of 3.84 percent.

Based on these inputs and assumptions, the commission finalized the generic levelised tariffs for solar PV projects in the state. For projects up to 1 MW in non-urban and non-industrial areas, the tariff was set at ₹3.50 per kilowatt-hour (kWh). For projects above 1 MW and up to 5 MW in these areas, the tariff was ₹3.47 per kWh. In urban and industrial areas, the tariffs were slightly higher: ₹3.55 per kWh for projects up to 1 MW and ₹3.52 per kWh for projects above 1 MW and up to 5 MW.

These tariffs do not include any subsidies or incentives. Adjustments will be made if project developers avail of any government subsidies or grants. The tariff applies to solar PV projects that directly convert solar energy into electricity using approved technologies and are connected to the grid.

The decision aims to encourage solar power generation in Himachal Pradesh by offering fair and reasonable tariffs while protecting consumer interests. The commission expects these tariffs to promote the development of small and medium-sized solar PV projects across the state, contributing to renewable energy growth and energy security.