Himachal Pradesh Reduces Levelized Tariffs for Solar Projects up to 5 MW

The Himachal Pradesh Electricity Regulatory Commission (HPERC) has issued a generic levelized tariff for solar projects (up to 5 MW) for the financial year (FY) 2021-22.

The Commission also sought suggestions from stakeholders, including the state government and distribution company (DISCOM), on its draft order in May 2021.

Based on the stakeholder comments, the Commission has made amends to the cost calculations to arrive at the levelized tariff.

On the capital cost, the Commission acknowledged the stakeholders’ suggestions to marginally increase the normative capital cost. However, it also opined that technological advancement and increased efficiency of solar modules would increase savings in some other components’ costs. The cost of mono PERC modules is considered to determine the normative capital cost and decided that thin film modules may no longer be a viable option for larger solar projects.


Considering the evolving module technologies, the Commission increased overheads of the module cost by 15% against 9% as per the proposal. However, it did not change the cost of other components, including land. In its tariff order for FY 2020-2021, the regulator had noted that since the price of solar modules was falling globally, the per MW capital cost had to be lower than what was considered previously.

To determine the tariff, the Commission considered the normative capacity utilization factor (CUF) as 21% in line with the Central Electricity Regulatory Commission’s (CERC) norms. The auxiliary consumption of 0.75% was considered a separate component. This remained unchanged from the earlier order.

The Commission said the interest rate of 9% per year has been considered in line with the provision specified in Renewable Energy Tariff Regulations, 2017.

On the categorization of solar projects, the Commission stated that it had already categorized solar projects into three different categories. The first category includes projects up to 1 MW, the second includes projects with a capacity between 1 MW and 5 MW, and the third category was for over 5 MW capacity. The Commission also declined to create a separate category for projects up to 250 kW and 500 kW.

In its order, the Commission allowed a normal period of one year to two years for construction and commissioning of solar projects depending upon the power purchase agreement (PPA)’s approval date. It retained the useful life of solar projects at 25 years in line with Renewable Energy Tariff Regulations, 2017.

Himachal Pradesh-Normative Capital Cost for Solar PV Projects Above 1 MW to 5 MW

The normative capital cost for the solar PV projects up to 1 MW was proposed to be determined by allowing an increase of about 1.5%. Accordingly, the Commission set the normative capital cost for the solar PV projects up to 1 MW as ₹38.228 million ($51,454)/MW.

The capital cost considered for FY 2021-22 is ₹38.66 million (~$519,297) for projects to be set up in urban areas and industrial areas, and ₹37.663 million (~$505,866) for projects to be set up in other areas.

In the previous financial year, the capital cost for projects above 1 MW and up to 5 MW was $37.90 million (~$519,744)/MW.

 

Himachal Pradesh-Capital Cost of Solar PV Projects Considered for Determining Levelized TariffsIn its order, the Commission set operation and maintenance charges for FY 2021-22 at ₹908,000 (~$12,195)/MW, which would be escalated at the rate of 3.84% annually over the tariff period in line with the Renewable Energy Tariff Regulations, 2017. In FY 2020-21, it was set at 874,000 (~$11,961)/MW with an escalation rate of 3.84%.

For calculating the tariff, the Commission considered the debt-equity ratio of 70:30 and the return on equity at 14%. The depreciation rate for the first 15 years was considered 4.67% and the rate of depreciation after 15 years would be 1.995%.

For solar projects of capacity up to 1 MW set up in areas other than urban localities and industrial hubs, the Commission has set the tariff at ₹3.38 (~$0.0454)/kWh, a nominal decrease compared to the last year’s tariff of ₹3.41(~$0.458).

For solar projects of capacity up to 1 MW set up in urban and industrial areas, the tariff is ₹3.45 (~$0.046) as compared to ₹3.48 (~$0.046) last year.

Himachal Pradesh-Generic Levelized Tariffs for Solar Projects

The applicability of tariff will depend on the details below:

  • In cases where the joint petition for approvals of PPA has been submitted to the Commission on or before April 1, 2021, but no later than March 31, 2022, the tariffs will be applicable for the capacity commissioned on or before March 31, 2023.
  • In cases where the joint petition for PPA approval was submitted to the Commission on or before March 31, 2021, the tariffs will be applicable for capacity commissioned during FY 2021-22.
  • The tariff will not be applicable when DISCOM procures power through the Solar Energy Corporation of India (SECI) or competitive bidding. The tariff will also not be applicable if consumers install ground-mounted or rooftop solar projects within their premises under the net metering program.

In January 2021, HPERC issued generic levelized tariffs for solar projects for FY 2020-21.

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