The Chhattisgarh State Electricity Commission (CSERC) has issued the final generic levelized tariff regulations for small hydro, non‐fossil fuel‐based co‐generation, biomass, and solar projects in the state for the fiscal year (FY) 2019-20 and 2020-21.

In January, Mercom reported that the state issued a draft order announcing generic levelized tariffs for 2019-20 and 2020-21 for various renewable energy sources and invited comments and feedback from industry stakeholders.

Following the issue of draft regulations, the CSERC held a hearing on February 5, 2020, at its office where summaries of views, comments, the suggestions of the stakeholders were taken into consideration. Based on this feedback, the Commission has finalized the regulations.

The Commission said that the generic tariff would be set on a levelized basis for the tariff period from the commercial operation date (COD) of the projects to the end of their useful life periods.

For small hydro, solar, and non-fossil co-generation projects, the useful life would be 35, 25, and 20 years, respectively.

It noted that capital costs would include all capital works like machinery, civil works, erection and commissioning, financing and interest during construction, and evacuation infrastructure up to the interconnection point.

The CSERC stated that for solar PV power projects, the capital cost to be considered for the FY 2019-20 and 2020-21 for projects between 0.5 MW and 2 MW in capacity would be ₹45 million (~ $634,912)/MW. For projects above 2 MW and up to 5 MW, the capital cost will be ₹40 million (~$564,366)/MW for both financial years.

Capital costs for small hydro projects up to 5 MW would be ₹88 million (~$1.2 million)/MW for FY 2019-20 and ₹92.4 million (~$1.3 million)/MW for FY 2020-21, while for projects ranging between 5 MW and 25 MW in capacity, the capital cost will be ₹80 million (~$1.12 million)/MW for FY 2019-20 and ₹84 million (~$1.18 million)/MW for FY 2020-21, the Commission directed.

Separately, the capital cost of non-fossil fuel-based co-generation projects would be ₹49.25 million (~$694,875)/MW for FY 2019-20 and ₹51.71 million (~$729,584)/MW for FY 2020-21. For subsequent years, an escalation of 5% would be applicable, it added.

It also explained that for setting tariffs, loan tenure of 13 years had been factored in, and the normative interest rate would be 200 basis points above the average State Bank of India (SBI) marginal cost of funds-based lending rate (MCLR) prevalent in the last six months.

To factor in depreciation into tariff determination, the Commission noted that the salvage value of the asset would be considered as 10%, and the depreciation would be allowed up to a maximum of 90% of the capital cost of the asset. The depreciation rate for the first 13 years of the tariff period would be 5.28% per annum, and the remaining depreciation would be spread over the useful life of the project

It also added that the operation & maintenance (O&M) expenses for the solar project is taken as ₹700,000 (~$9,876)/MW for the financial year 2019-20 and ₹740,000 (~$10,440)/MW for the financial year 2020-21. An increase of 5.72% per annum would be considered after that throughout the tariff period.

CSERC also said the capacity utilization factor (CUF) for small hydro and solar PV projects was set at 30% and 19%, respectively. For renewable energy projects which achieved COD during the financial year 2019-20 and 2020-21, the Commission set the following levelized tariffs:

In the ratio of 70:30 of debt and equity, the interest rate considered for the debt component is 10.53%. For equity, the rate of return on equity (ROE) taken at post-tax ROE is 16%, considering the IT rate of 29.12%. The discount rate resulting from this method for all renewable technologies is 10.02% for FY 2019-20. For FY 2020-21, the interest rate is taken as 10.13% for the debt portion, and the ROE is maintained at 16% with an IT rate of 25.63%. The resulting discount rate is 10.07%.

The generic levelized tariff has been determined for the projects that will achieve COD in FY 2019-20 and 2020-21 and have long-term PPAs with distribution companies in the state.

In December last year, CSERC had specified the terms and conditions of tariffs for renewable energy sources for the sale of power to distribution licensees. The new regulations state that the control or review period under these regulations will be three years with the first year starting from April 1, 2019.

Earlier, to facilitate the growth of renewable energy generation systems in the state, CSERC had approved the regulations for distributed renewable sources. These regulations would apply to Prosumer Distributed Renewable Energy Systems (PDRES) owned by prosumer or third parties.