The Andhra Pradesh Electricity Regulatory Commission (APERC) has issued the Andhra Pradesh Electricity Regulatory Commission (Terms and Conditions for Tariff Determination from Renewable Energy Sources) Regulation, 2025.

The regulation lays down the framework for determining tariffs for renewable energy projects under Section 62 of the Electricity Act, 2003, and applies to all grid-connected renewable energy-based generating stations commissioned during the control period.

The Andhra Pradesh government has requested APERC to determine tariffs for solar, wind, hybrid, pumped storage, and small hydro projects for a five-year period without imposing ceilings on capacity utilization factor (CUF) or plant load factor.

Scope and Applicability

The regulation mandates that licensees must preferably procure renewable power through competitive bidding under Section 63 of the Act.

Eligibility

The conditions specify that all projects must use new plant and machinery. Wind projects must use new turbine generators located at sites approved by the state nodal agency.

The government must approve small hydro and biomass projects. Cogeneration plants must operate in the topping cycle mode using non-fossil fuels, with a minimum overall efficiency of 45% during the crushing season.

Solar, solar thermal, and floating solar projects must employ technologies approved by the Ministry of New and Renewable Energy. Floating solar projects co-located with other renewable projects will be treated as hybrid projects. For hybrid projects, one renewable source must contribute at least 25% of the rated capacity of the other source.

Financial Principles

The capital cost includes land, pre-development expenses, civil and electrical works, financing costs, and evacuation infrastructure up to the interconnection point. The debt-equity ratio is fixed at 70:30. Equity beyond 30% will be treated as a normative loan, while equity below 30% will be considered as actual equity. Any grant or subsidy must be deducted from the total project cost before computing debt and equity.

The loan tenure will be for 15 years, and the interest on the loan is set at 200 basis points above the average one-year State Bank of India marginal cost of funds-based lending rate for the last six months.

The depreciation rate is 4.67% per annum for the first 15 years, up to 90% of the capital cost, excluding the grant portion, with 10% salvage value. The return on equity is fixed at 14% for all renewable projects except small hydro projects, which are allowed 15%.

The generator can claim actual income tax paid upon submission of proof.

The working capital requirement varies by project type. For wind, solar, small hydro, and waste-to-energy projects, the costs include one month’s operation and maintenance (O&M) expenses, 45 days of receivables, and 15% for maintenance spares.

Payment and Rebate

A rebate of 1.5% is allowed if payment is made within seven days via Letter of Credit or electronic transfer, and 1% if payment is made within one month.

Payments delayed beyond 45 days will attract a late payment surcharge as per the Ministry of Power’s Electricity (Late Payment Surcharge and Related Matters) Rules, 2022.

Technology-Specific Parameters

For solar, floating solar, and solar thermal projects, capital costs will be project-specific. The minimum CUF is fixed at 21% for solar, 23% for solar thermal, and 19% for floating solar. Maximum auxiliary consumption is capped at 0.75% for solar and floating solar, and 10% for solar thermal.

For wind projects, the CUF norms are based on wind density: up to 220 W/m²—22%, 221–275 W/m²—24%, 276–330 W/m²—28%, 331–440 W/m²—33%, and above 440 W/m²—35%. Wind measurement at hub height (100 m or higher) must be validated by the National Institute of Wind Energy.

For small hydro projects, the normative capital cost for FY 2025-26 will be ₹89 million (~$1.01 million)/MW for projects below 5 MW and ₹102.7 million (~$1.17 million)/MW for projects between 5 MW and 25 MW.

The CUF must be project-specific but not less than 40%, with auxiliary consumption of 1%. O&M expenses are ₹4.17 million (~$47,475)/MW (below 5 MW) and ₹3.02 million (~$34,408)/MW (5–25 MW).

For renewable hybrid energy projects, the minimum CUF is 40% at the interconnection point. The tariff will be a composite levelized tariff covering the useful life of the combined technologies.

For renewable energy with storage projects, the minimum battery efficiency is 85%, whereas for pumped storage projects, it is 80%. Both categories will have project-specific capital costs and differential tariffs based on time-of-day or round-the-clock supply agreements.

In August this year, the Andhra Pradesh Electricity Regulatory Commission proposed introducing virtual net metering, allowing groups of consumers, such as housing societies and residential complexes, to export solar power to the grid through a gross meter.

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