HPERC Finalizes Solar Tariffs For FY 2025–26 To Promote Solar Projects Up To 5 MW In Himachal Pradesh

The Himachal Pradesh Electricity Regulatory Commission issued a new order on March 27, 2025, regarding the determination of generic levellised tariffs for solar photovoltaic (PV) projects for the financial year 2025–26. This decision was made under the Himachal Pradesh Electricity Regulatory Commission Regulations of 2017, which were last amended in September 2023. The order applies to solar PV projects up to 5 MW in capacity.

To prepare the tariff order, the Commission published a draft proposal on January 10, 2025, and sought public feedback by February 7. A public hearing was held on February 19, 2025, where several stakeholders, including HIMURJA, HPSEBL, and private developers, presented their views. Some developers argued that the proposed capital cost of ₹87.62 lakh per MW for PV modules was too low due to recent increases in solar module and glass costs, partly caused by new anti-dumping duties. Others expressed concerns about the assumed capacity utilization factor (CUF) of 21%, suggesting that actual generation data indicates a lower CUF in Himachal’s diverse climatic zones.

After reviewing all suggestions, the Commission decided to keep the CUF at 21% but revised the normative capital cost. The final capital cost for projects in non-urban and non-industrial areas was set at ₹335.19 lakh per MW for 3–5 MW projects, ₹343.57 lakh per MW for 1–3 MW projects, and ₹351.95 lakh per MW for projects up to 1 MW. For projects in urban and industrial areas, an additional ₹7.5 lakh per MW was allowed.

The order also confirmed that the Operation and Maintenance (O&M) cost would be ₹10.55 lakh per MW, with a 3.84% annual escalation. The CUF was retained at 21%, and 1.45% of the energy was deducted for auxiliary consumption and transformation losses.

The Commission set the levellised tariffs for solar PV projects without any subsidy as follows: ₹3.45/kWh for up to 1 MW, ₹3.38/kWh for 1–3 MW, and ₹3.32/kWh for 3–5 MW in general areas. In urban and industrial areas, the tariffs were slightly higher—₹3.50/kWh, ₹3.44/kWh, and ₹3.38/kWh respectively.

Furthermore, a royalty of ₹0.05 per unit is to be paid to the Government of Himachal Pradesh for projects above 1 MW, as per a 2023 notification. This royalty is eligible for pass-through in tariff calculations. The tariff applies to projects for which Power Purchase Agreements (PPAs) are submitted between April 1, 2025, and March 31, 2026, and commissioned by March 31, 2027.

The financial model behind the tariff assumes a debt-equity ratio of 70:30, a 14% return on equity grossed up for tax, and a loan tenure of 15 years at 10.98% interest. The working capital interest rate was considered as 12.48%. The discount rate used for levellised tariff calculation was 9.75%, based on the weighted average cost of capital.

These decisions aim to support small-scale solar installations while balancing cost competitiveness and ensuring fair returns for investors.