The Chhattisgarh Electricity Regulatory Commission (CSERC) has issued guidelines to determine the generic levelized tariffs for small hydro projects and non‐fossil fuel‐based co-generation plants. The tariff is for projects that achieve commercial operation during the financial year (FY) 2021-22. It also finalized the energy charges for existing biomass power projects.

Stakeholders can submit their suggestions and objections by October 5, 2021.

The Commission refrained from considering the latest capital cost for FY 2021-22 as it noted that there had been continuous improvement in renewable energy technologies, especially in solar PV technologies. It said that the cost had considerably reduced over the past few years due to multiple factors, including economies of scale, technological advancement, and efficiency improvement.

It observed that Central and State commissions were not specifying capital cost for determining preferential tariffs anymore.

Generic Levelized Tariff FY 2021-22 

The generic levelized tariff for small hydropower projects below 5 MW capacity was proposed as ₹7.48 (~$0.102)/kWh. For small hydropower projects of capacities in the range of 5 MW-10 MW, a tariff of ₹6.74 (~$0.092)/kWh was suggested. The tariff for small hydropower projects of 10 MW-25 MW capacities is ₹6.33 (~$0.086)/kWh. The tariff for mini and micro hydropower projects up to 2 MW is ₹7.98 (~$0.108)/kWh.

The energy charges considered for biomass-based projects is ₹5.35 (~$0.073)/kWh. The fixed and variable cost for non-fossil fuel-based co-generation projects is both taken as ₹4.18 (~$0.057)/kWh.

Some of the other main factors based on which the tariffs were arrived at are as follows:

Interest Rate and Discount Factor

The interest rate considered for the loan component (70%) of capital cost was 9%. A 30% return on equity (ROE) was considered for the equity component at a post-tax ROE of 16%, considering the IT rate of 29.12%. The discount rate derived by this method for all renewable energy technologies was 9.27%.

The discount factor used for tariff leveling was equivalent to the post-tax weighted average cost of capital. It was calculated based on the normative debt-equity ratio of 70:30 in the Renewable Energy Tariff Regulations 2019.

Biomass and Bagasse

Biomass and bagasse prices were considered at ₹3735 (~ $51) and ₹2388 (~$33)/ton. The calorific value of biomass and bagasse to determine tariff was 3100 and 2250 Kcal/kg, respectively.

Operation & Maintenance Expenses 

Operation and maintenance (O&M) expenses would be escalated at 5.72% per year over the tariff period. Normative O&M expenses for non-fossil fuel-based co-generation projects for 2021-22 were determined as ₹2.63 million (~$35,883)/MW.

Working Capital 

The working capital requirement for small hydropower and solar PV power projects was determined by adding the O&M expenses for one month, receivables equivalent to two months of energy charges for the sale of electricity. This was calculated on the normative capacity utilization factor and maintenance spares @15% of O&M expenses.

The working capital requirement for non-fossil fuel-based co-generation projects was computed by adding the above three components plus the fuel costs for four months equivalent to the normative plant load factor (PLF). Receivables were calculated on target PLF rather than the normative capacity utilization factor (CUF). Interest on working capital was at 10% per year.

Return on Equity

The return on equity for the entire useful life of the project was 19.39% for FY 2021-22. The CUF for small hydropower generating stations was considered as 30% for the determination of tariff.

Depreciation

The asset’s salvage value was determined as 10% and allowed up to 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. The remaining depreciation will be spread over the remaining useful life of the project from the 14^th year onwards on the “Straight Line Method.”

Loan and Finance Charges

The normative interest rate would be considered at 200 basis points above the average State Bank of India Marginal Cost of Funds based Lending Rate (MCLR) (one year tenor) during the last available six months. One year tenor MCLR Rate (SBI) was 7% on average.

The capital cost of Small Hydro Projects

The capital cost for projects up to 5 MW was ₹97.02 million (~$1.32 million) and for those above 5 MW was ₹88.20 million (~$1.20 million).

Useful Life

The useful life of a generating station from the commercial operation date was decided as 35 years for a small hydropower generation facility and 20 years for a non‐fossil fuel co‐generation facility.

In March 2020, the Chhattisgarh regulator had issued the final generic levelized tariff regulations for small hydro, non‐fossil fuel‐based co‐generation, biomass, and solar projects in the state for 2019-20 and 2020-21.

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