The Uttar Pradesh Electricity Regulatory Commission (UPERC) has allowed Greater Noida Industrial Development Authority (GNIDA) to recover its capital investment on a 1 MW solar project through an extension of its power purchase agreement (PPA) with Noida Power Company (NPCL).

The Commission approved a tariff of ₹7.06 (~$0.084)/kWh for the extended period up to the end of the financial year (FY) 2029. It also directed tariffs beyond this period to align with competitively discovered prices of solar projects.

Background

The PPA between NPCL and GNIDA was signed on February 9, 2015, for procuring 1 MW solar power at a proposed tariff of ₹8 (~$0.096)/kWh for 20 years. The Commission approved the procurement for a period of 10 years, commencing on March 1, 2015, and set the tariff at ₹7.06 (~$0.084)/kWh. It clarified that any extension beyond this period would require its approval and that the tariff for such an extension would not exceed ₹7.06 (~$0.084).

With the 10-year period expiring on February 28, 2025, NPCL sought the Commission’s approval for a new 10-year extension, effective March 1, 2025, and requested a determination of a revised tariff.

NPCL justified the extension on grounds of its renewable purchase obligation (RPO) requirements, citing the Ministry of Power notification, which mandates an increase in RPO from 29.91% in FY 2025 to 43.33% by FY 2030.

It argued that prevailing market conditions and lower solar tariffs warranted a tariff below ₹7.06 (~$0.084)/kWh. GNIDA, in its reply, sought continuation at ₹7.06 (~$0.084), noting that actual revenue from the project between commissioning and February 2025 was ₹64.8 million (~$775,111), which was less than 50% of the installation cost of ₹127.8 million (~$1.45 million).

NPCL submitted that the average annual revenue of approximately ₹6.48 million (~$77,511) was insufficient and that a tariff reduction would prevent cost recovery and disincentivize further investments.

GNIDA attributed underperformance to poor air quality at the project site and lack of module replacement, which reduced the capacity utilization factor (CUF) from the designed 20% to around 12% to15%.

Commission’s Analysis

The Commission noted that the actual generation from commissioning to February 2025 was 120.29 million units (MU), compared to the originally estimated 173.06 MU, resulting in a shortfall of 52.77 MU. It found that the realized CUF was about 12%, well below the designed 20%, and held that such underachievement was due to GNIDA’s performance and cannot be passed on to consumers.

However, it also recognized that GNIDA had recovered only ₹64.7 million (~$773,871) against the original project cost of ₹127.8 million (~$1.45 million). Balancing these factors, UPERC allowed GNIDA to recover its initial capital expenditure by applying the originally estimated annual generation and a tariff of ₹7.06 (~$0.084)/kWh until the end of FY 2029.

The payback period at this tariff works out to 12 to 13 years, compared to the originally envisaged nine to ten years at ₹8 (~$0.096).

For the period after FY 2029, the Commission directed that tariffs be determined annually as the weighted average tariff of solar projects with a capacity of at least 5 MW. These would be discovered through competitive bidding and adopted by the appropriate commission in the preceding financial year or the latest year in which such procurement took place.

The Commission clarified that the risk of underperformance remains with the generator and that consumers could not be burdened with lower output.

In July this year, UPERC approved a tariff of ₹3.84 (~$0.044)/kWh for the procurement of 300 MW wind-solar hybrid power by Noida Power Company.

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