CERC Prepares Blueprint for New Tariff Regulations for Renewable Projects

The Central Electricity Regulatory Commission (CERC) has come out with the draft tariff regulations 2020, which will come in force from July 01, 2020, and will remain in force until March 31, 2023.

These regulations will apply to the wind, small hydro, biomass with Rankine cycle technology, and non-fossil fuel-based co-generation projects. These regulations will also apply to solar, floating solar, solar thermal, renewable hybrid energy projects, renewable with storage projects, biogas, municipal solid waste based power projects, and refuse-derived fuel-based power projects.

The Commission has fixed 25 years as the useful life for wind power projects, 25 years for solar, floating, and solar thermal projects, and 20 years for biogas-based power projects.

The CERC has regulated that the tariff for renewable energy technologies will be a single part tariff consisting of the following fixed cost components:


  • Return on equity
  • Interest on loan
  • Depreciation
  • Interest on working capital
  • Operation and maintenance expenses

The CERC has established a debt-equity ratio of 70:30 to determine a generic tariff. For a project-specific tariff, the Commission has proposed that if the equity deployed is more than 30% of the capital cost; it will be treated as a normal loan. For tariff determination, loan tenure of 15 years will be considered.

The Commission has also added that the depreciation rate of 4.67% per annum will be considered for the first 15 years, and remaining depreciation will be evenly spread during the remaining useful life of the project. As per the regulations, a late payment surcharge at the rate of 1.50% per month will be levied by the generating company if the payment is delayed beyond a period of 45 days from the date of the presentation of bills.

Wind Power Projects

For wind power projects, the Commission will determine the project-specific capital cost, considering the prevailing market trends.

For annual mean wind power density up to 220 W/m2, the capacity utilization factor (CUF) will be 22%, and if it’s between 221-275 W/m2, the CUF will be 24%. Similarly, for annual mean wind power density between 276-330 W/m2, the CUF will be 28%, and for between 331-440 W/m2, the CUF will be 33%. For annual mean wind power density above 440 W/m2, the CUF will be 35%.

Solar PV Projects, Solar Thermal Power, and Floating Solar Projects

The minimum CUF for solar power projects will be 21%, and the minimum CUF for solar thermal power projects will be 23%. Similarly, the minimum CUF for floating solar projects will be 19%.

The Commission will approve auxiliary consumption for a project-specific tariff under the following conditions:

  • Provided that the maximum auxiliary consumption for solar PV power projects is 0.25%
  • The maximum auxiliary consumption for solar thermal power projects is 10%
  • The maximum auxiliary consumption for floating solar projects will be 0.25%

Biogas-Based Power Projects

As per the regulations, the capital cost for biogas-based power projects will be ₹118.6 million (~$1.58 million)/MW for the FY 2020-21 and will remain valid for the entire duration of the control period. The plant load factor will be considered as 90% for the determination of tariff. The auxiliary consumption will be considered as 12% for the determination of the tariff. The O&M expenses for the FY 2020-21 will be ₹6.13 million (~$81,842)/MW.

Renewable Hybrid Energy Projects

The Commission will determine only project-specific CUF considering the proportion of rated capacity of each renewable energy source, and the applicable CUF provided the minimum CUF for renewable hybrid energy projects will be 30% when measured at the interconnection point.

Renewable Energy with Storage Project  

The Commission will determine the project-specific capital cost for renewable energy with storage projects considering the prevailing market trends.

The Commission will approve the storage efficiency for project-specific tariff if:

  • The minimum efficiency for storage based on the technology of solid-state batteries is 80%
  • The minimum efficiency for storage based on the technology of pumped storage is 75%

Small Hydro Projects

The capital cost of small hydro projects in the financial year (FY) 2020-21 in the states of Himachal Pradesh, Uttarakhand, West Bengal, and the North Eastern States will be ₹100 million (~$1.34 million)/MW for projects below 5 MW. For projects in the range of 5 MW and 25 MW, the capital cost will be ₹90 million (~$1.2 million)/MW. For other states, the capital cost will be ₹77.9 million (~$1.04 million)/MW for projects below 5 MW, and for projects in the range of 5 MW to 25 MW, it will be ₹70.7 million (~$943,923)/MW.

The CUF for small hydro projects located in Himachal Pradesh, Uttarakhand, West Bengal, and North-Eastern states will be 45%, and for other states, it will be 30%.

Recently, the CERC extended the applicability of the Renewable Energy Tariff Regulations, 2017, for three months (from April 01, 2020, to June 30, 2020). The Commission further noted that the generic tariff issued by the Commission in the order dated March 19, 2019, will continue to remain in force until June 30, 2020.