CERC proposes generic tariff of ₹4.76-5.84/unit for small hydro projects in FY23

The Central Electricity Regulatory Commission (CERC) has proposed generic tariffs in the range of ₹4.76–5.84 per kilowatt hour (kWh) for various small hydro projects across states for the current financial year.

For small hydro projects below 5 megawatts (MW) in Himachal Pradesh, Uttarakhand, West Bengal, and North Eastern States, as well as Jammu and Kashmir and Ladakh, the regulator proposed a levelised total tariff of ₹5.23 per unit, while for projects with a capacity of 5–25 MW in these States, the rate is 4.76 per unit.

Similarly, for other States with small hydro capacity below 5 MW, the levelised total tariff is proposed at Rs 5.84 per unit, whereas for projects from 5 to 25 MW, it is proposed at ₹5.76 a unit.

These are part of the commission’s proposals, under Regulation 8 (1) of the CERC (Terms and Conditions for Tariff Determination from Renewable Energy Sources) Regulations, 2020, to fix generic tariffs for various RE projects for the third year of the control period (FY 23).

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Besides small hydro power projects, the proposed levelised generic tariffs also cover biomass power projects with Rankine cycle technology, non-fossil fuel-based co-generation projects, biomass gasifier-based power projects, and biogas-based power projects.

Stakeholders have been asked to share their comments on the same by August 30, 2022.

Generic tariffs for FY23

For various technologies of biomass power projects, the CERC proposed net levelised tariffs (upon adjusting for Accelerated Depreciation Benefit, if availed) in the range of ₹8.01 to ₹9.49 per unit.

It has proposed tariffs for biomass projects based on states with biomass availability, such as Punjab, Haryana, Tamil Nadu, Andhra Pradesh, Telangana, Maharashtra, Uttar Pradesh, and Rajasthan. The rest have been grouped under “Others”.

A similar structure has been followed for bagasse-based co-generation projects, with separate tariffs for the above eight States (in the range of ₹6.05-7.70 per unit) and for ‘Others’ at ₹6.87 a unit.

In the case of biomass gasifier power projects, the proposed tariffs for Punjab, Haryana, Tamil Nadu, AP, Telangana, Maharashtra, UP, and Rajasthan are in the range of ₹7.58-8.71 per unit. For ‘Others’, it is proposed at ₹8.05 a unit.

Tariff structure

CERC said that the levelised tariff is proposed to be calculated by carrying out levellisation for the “useful life” of each technology based on the discount factor, which is calculated considering the normative debt-equity ratio and weighted average of the post-tax rates for debt and equity components.

Similarly, the interest rate considered for the loan component (that is 70 per cent of the capital cost) is 9.12 per cent. For the equity component (that is 30 per cent of capital cost), the rate of Return on Equity (ROE) is considered at a post-tax rate of 14 per cent. The corporate tax rate has been calculated at 34.94 per cent.

Further, the capital cost is inclusive of land cost, pre-development expenses, all capital work including plant & machinery, civil work, erection, commissioning, financing cost, interest during construction, and evacuation infrastructure up to the inter-connection point.

CERC proposed that the “useful life” of small hydro projects be 40 years, while the same for biomass power projects with Rankine cycle technology, non-fossil fuel-based co-generation projects, biomass gasifier-based power projects, and biogas-based power projects is 25 years each.

“For RE technologies having a fuel cost component, like biomass power projects with Rankine cycle technology, non-fossil fuel based cogeneration, biomass gasifier based power projects, and biogas based power projects, a single-part tariff with two components, i.e., a fixed cost component and a fuel cost component, is proposed to be determined,” the regulator explained in its proposal.