Kerala Regulator Sets Tariff of ₹6.81/kWh for a Municipal Solid Waste-to-Energy Project

The Kerala State Electricity Regulatory Commission (KSERC) set a tariff of ₹6.81 (~$0.093)/kWh without considering accelerated depreciation and ₹6.31 (~$0.086)/kWh with accelerated depreciation for procurement of power from a 6 MW municipal solid waste (MSW) project in Kozhikode. The Commission noted that the tariff would be applicable for 25 years. The tariff for the excess generation over the normative plant load factor (PLF) would be 75% of the approved levelized tariff.

Malabar Waste Management, an integrated waste management company with a 6 MW waste-to-energy project filed a petition with the state Commission requesting it to adopt the levelized tariff of ₹8.13 (~$0.111)/kWh for 25 years from the project’s commissioning date. The company requested the Commission to direct the Kerala State Electricity Board Limited (KSEB) to buy power more than the levels mentioned in the power purchase agreement (PPA) at the levelized tariff approved by the Commission. It also requested the Commission to direct KSEB to treat the project as a must-run project and the project to be exempted from the ‘Merit of Dispatch’ of KSEB and the state load despatch center (SLDC) of the state.

Background

The Kerala State Industrial Development Corporation (KSIDC) invited bids to develop a waste-to-energy project of a minimum of 300 TPD processing capacity for the Kozhikode Cluster for 27 years. The bidding process was initiated on November 22, 2018. Zonta Infratech, as the lead member, was awarded the contract. As per the tender, a special purpose vehicle (SPV), Malabar Waste Management, was incorporated to develop the project.


Commission’s Analysis

The state regulator adopted the following parameters for the calculation of tariff for the proposed MSW project:

KSERC Updated -9

The Commission said that the project developer should avail the central financial assistance (CFA) for this project. This benefit should be passed on to the state’s electricity consumers by reducing the cost of electricity produced from this project.

Further, the Commission said that based on the calculation, the project’s levelized provisional tariff came to ₹6.81 (~$0.093)/kWh without considering the benefit of accelerated depreciation. The accelerated cost of depreciation for the project was fixed as ₹0.50 (~$0.006)/kWh.

The Commission added that the project’s useful life would be 25 years as proposed by the petitioner, and the provisional tariff determined will be uniform and without any escalation. It noted that since the return on equity and O&M costs were already factored in the tariff calculation, the tariff of the units generated over the plant load factor (PLF) should be purchased by KSEB at 75% of the approved levelized tariff mentioned in the order.

Regarding the project’s must-run status, the regulator said that the project should be treated as a must-run power project and should not be subjected to the ‘Merit Order Dispatch’ principles.

Further, the Commission noted that the provisional tariff was determined considering the viability gap funding (VGF) available for all MSW projects. The developer should necessarily avail any other incentive or subsidy offered by the central and state government, and an appropriate reduction in the provisional tariff now determined will be affected.

“The petitioner, if they so desire, may file a fresh petition for tariff determination after the declaration of the commissioning date with full details. However, if the developer does not file any fresh petition for tariff determination within 180 days from the date of declaration of the commissioning date, the provisional tariff determined in this order shall be treated as the final tariff,” the Commission noted.

In June last year, the Ministry of New and Renewable Energy (MNRE) announced that its waste-to-energy program would be extended beyond March 31, 2020. The program aims to promote setting up projects for generating biogas, bio-CNG, or power from urban, industrial, and agricultural waste. It also aims to promote projects for recovering energy from municipal solid waste fed back into the grid to meet captive power, thermal, and vehicle fuel requirements.

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