RERC Sets Benchmark Tariff for Solar PV Projects in Rajasthan

The Rajasthan Electricity Regulatory Commission (RERC) has fixed ₹3.93 (~$0.06)/kWh as the generic tariff for solar PV projects without accelerated depreciation (AD) in Rajasthan. The tariff is levelized for 25 years. The AD component of the tariff has been fixed at ₹0.27 (~$0.004)/kWh. The new benchmark tariff with AD is ₹3.66 (~$0.056)/kWh.

This tariff will apply to all solar PV projects with signed power purchase agreements (PPA) on or before March 31, 2018, and commissioned on or before March 31, 2019.

RERC Solar Tariff Order for FY 2017-18

The RERC also stated in its tariff order that for rooftop solar PV systems covered under RERC Net Metering Regulations 2015, net excess energy (more than 50 units) exported to the grid by the consumer would be payable at the tariff rate of ₹3.93 (~$0.06)/kWh until the next tariff order is issued by the commission.

This tariff would be payable to all rooftop solar systems developed under the net metering policy during financial year (FY) 2017-18 and earlier, and would be irrespective of any capital grant subsidies or AD benefits.

The RERC has stated that for utility-scale solar projects with capacity more than 5 MW, the generic tariff will act as the upper tariff ceiling for participants of state tenders.

The new benchmark tariff of ₹3.93 (~$0.06)/kWh without AD is 27 percent less than the benchmark tariff of ₹5.40 (~$0.083)/kWh without AD set by RERC in FY 2016-17. In FY 2016-17, the benchmark tariff with AD was ₹4.85 (~$0.074)/kWh, 25 percent more than the new benchmark tariff with AD of ₹3.66 (~$0.056)/kWh.

Module and project cost not based on reality: When calculating the project cost of a solar generation project, the RERC has considered operation and maintenance (O&M) expenses, depreciation, interest on long-term loans, interest on working capital, and return on equity as fixed cost components. The RERC has fixed ₹35.84 million (~$0.55 million)/MW as the benchmark capital cost for solar PV projects in Rajasthan for FY 2017-18. This fixed cost takes into consideration module costs of just $0.25 (~₹16.4)/W. With current module prices in the $0.35-$0.38/W range, these cost considerations are simply not realistic.

“The benchmark tariff setting exercise is not based on reality. For the same time period, Rajasthan has taken a module price consideration of ₹0.25/W while Karnataka has considered its module costs based on ₹0.35/W. They just want to get to a number that is comfortable to them,” said Raj Prabhu, CEO of Mercom Capital Group.

Break-Up for Capital Cost for Solar Projects for FY 2017-18

Deemed Generation/Must Run Provision: The commission rejected deemed generation for solar and considers it appropriate that the “must run” status must continue and should not be subject to the merit order dispatch principle. However, must run status will not apply in the case of a system operational constraint, which creates an easy way to circumvent the must run status.

There was no consideration given to additional costs associated with GST while calculating capital costs.

Mercom reported in April 2017 that both Tamil Nadu (₹4.50/kWh) and Karnataka (₹4.36/kWh) have set the solar benchmark tariff for FY 2017-18.

According to Mercom’s India Solar Project Tracker, Rajasthan has ~2.1 GW of installed large-scale solar capacity as of September 2017, and almost 1.2 GW under development.

Image credit: Flickr