Telangana Sets Levelized Tariff of ₹3.13/kWh for KUSUM Solar Projects

The Telangana State Electricity Regulatory Commission (TSERC) has set a levelized tariff for solar projects under Component-A of the Pradhan Mantri Kisan Urja Suraksha evem Utthan Mahabhiyan (PM KUSUM) program.

In the order, the TSERC set a levelized tariff of ₹3.13 (~$0.043)/kWh for solar projects between 500 kW and 2 MW in size under Component-A of the PM-KUSUM program. The tariff is applicable from January 2, 2021. It arrived at the tariff based on the following parameters:

Telangana KUSUMThe regulator had proposed norms for solar projects under the Ministry of New and Renewable Energy’s (MNRE) program in October and had invited feedback from stakeholders in the state.

Under Component-A of the program, the MNRE plans to set up 10 GW of decentralized ground-mounted, grid-connected solar projects with individual project sizes limited to 2 MW.

Stakeholder Comments:

TSERC also responded to some suggestions from stakeholders. One such suggestion was for considering a capital cost of ₹38.4 million (~$526,843)/MW, including land costs. This request was rejected on the ground that the capital cost of ₹36 million (~$493,915)/MW was set based on the MNRE’s benchmark cost for grid-connected rooftop solar, which assumed a cost of ₹36 (~$0.5)/W and explained that it was not feasible to consider land cost in the tariff.

Stakeholders had also suggested including repayment of equity while calculating the tariff since farmers will have to depend on partners for equity investments, which usually have to be repaid with interest. They had asked the regulator to urge state and central governments to help farmers get interest-free term loans under the KUSUM program through agencies like the National Bank for Rural Development,  Indian Renewable Energy Development Agency, MNRE, and Power Finance Corporation.

Stakeholders had submitted that since equipment costs had gone up due to the COVID-19 pandemic and domestic manufacturing constraints, a tariff of ₹4.28 (~$0.058)/kWh be considered instead of ₹3.13 (~$0.043)/kWh.

In response,  TSERC said that the cost of solar projects has reduced year-on-year, as evidenced by the decline in MNRE’s benchmark cost for grid-connected rooftop solar projects. The tariff was designed based on component costs like interest on loans, returns on equity, and interest on working capital, and that the tariff of ₹4.28 (~$0.058)/kWh was not feasible. It held that a tariff of ₹3.13 (~$0.043)/kWh was the most prudent.

Stakeholders had suggested that if interest-free term loans were not feasible, TSERC  should recommend to the state and central governments to provide a 30% capital subsidy akin to what was available under Components B and C of the KUSUM program.

In response, TSERC said such recommendations were beyond the scope of the current order. It directed the stakeholders to approach the state and central authorities or even state distribution companies for free term loans and subsidies.

Among other suggestions, stakeholders had also asked the Commission to consider a capacity utilization factor (CUF) of 21% in line with the Central Electricity Regulatory Commission’s standards instead of the proposed 19%. To this, the TSERC said that a CUF of 19% was appropriate.