The Andhra Pradesh Electricity Regulatory Commission (APERC) recently ruled that the levelized tariff of ₹2.64 (~$0.032)/kWh would apply to 7.55 MW of wind power projects in the state from the 11^th year to the 20^th year of the commissioning of the projects.

It also said the  Southern Power Distribution Company of Andhra Pradesh (APSPDCL) would have the right to refuse the purchase of power beyond the 20^th year of operation from the commercial operation date.

Further, the Commission noted that any energy injected from the two wind power projects that exceeded the capacity utilization factor (CUF) of 23.5% in a given financial year would be considered inadvertent and would not be eligible for payment.

New and Renewable Energy Development Corporation of Andhra Pradesh (NREDCAP) had filed a petition for the approval of a tariff for 7.55 MW of wind power projects.

Background

According to the petition, the wind power generator owns two wind power projects, one with a capacity of 5.95 MW in the Anantapur district and another with a capacity of 1.6 MW in the Kurnool district.

The Commission had initially determined a tariff of ₹3.43 (~$0.041)/kWh for 20 years. However, it revised the tariff for the first ten years at ₹3.50 (~$0.042)/kWh. It also decided that the tariff for the 11^th to the 20^th year would be revisited after the completion of the first ten years.

After the order was passed in 2009, the wind power generator entered into power purchase agreements (PPAs) with APSPDCL.

The 5.95 MW project completed ten years of operation on March 27, 2022, and the 1.6 MW project on March 29, 2022.

However, due to the COVID-19 pandemic and internal approval processes, the petitioner could not approach the Commission before the expiration of the ten years to seek an extension of the tariff.

To address this, the wind generator sent a letter to the Commission on January 5, 2023, requesting approval of the existing tariff of ₹3.50 (~$0.042)/kWh. In response, the Commission issued a letter instructing the wind power generator to file a petition to determine the tariff from the 11th year onwards.

The generator argued that changing or reducing the levelized tariff of ₹3.43 (~$0.041)/kWh would introduce uncertainty and discourage potential investors. Also, such a step would render wind power projects financially unviable.

Therefore, the Commission should consider continuing the already approved levelized tariff of ₹3.43 (~$0.041)/kWh, as determined in the earlier order, or even higher for the remaining ten-year period.

In its earlier order in 2014, the Commission had said it would be unfavorable to review and implement a new methodology or approach for tariff determination midway, particularly after the completion of ten years.

The Commission had stated that the tariff of ₹3.37 (~$0.040)/kWh, initially applied to the wind power plants for the first ten-year period, would continue until the PPAs expire.

The wind generator requested the Commission to approve the tariff of ₹3.43 (0.041)/kWh or higher for the sale of power from the 11^th year onward.

APSPDCL argued that the tariff was set higher during the first ten years, and reducing the tariff for the second ten years was necessary.

The distribution company (DISCOM) said that during the determination of the levelized tariff at ₹3.50 (~$0.042)/kWh by the Commission in 2009, the projects’ useful life was considered 20 years, allowing for the spreading of returns on the capital investment. However, based on experience, it was evident that wind projects typically have a life span of 25 to 30 years.

APSPDCL added that throughout the history of the Commission, starting from 1995, when the first wind power projects were established in Andhra Pradesh, a consistent approach to determining a single-part tariff was adopted. This generalist stance was maintained in various tariff determinations.

The DISCOM added that the petitioner’s interpretation of the validity of the tariff for the first ten years, suggesting either its maintenance or an increase for providing impetus to the generator, was based on a misconception. If that were the case, the Commission would not have allowed the review of the tariff after the initial ten-year period and would have instead applied the levelized tariff for a continuous 20-year duration.

APSPDCL put forth a proposed levelized tariff of ₹2.046 (~$0.025)/kWh for the period spanning the 11^th to the 20^th year of the PPAs.

Commission Analysis

The Commission examined all the issues raised in the petition and determined a generic levelized tariff of ₹2.64 (~$0.032)/kWh for the 11th to 20th year of operation of wind projects.

Earlier, APERC had ruled that the PPAs signed between two wind developers and APSPDCL were not binding on the state DISCOM. The Commission had asked the DISCOM to pay for the power received from the developers up to the date of disconnection at ₹2.93 (~$0.039)/kWh as compensation.

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