The Central Electricity Regulatory Commission (CERC) has approved a reduced tariff of ₹3.36 (~$0.037)/kWh for NTPC Green Energy’s (NGEL) 40 MW solar project in Ayodhya, Uttar Pradesh.

CERC considered reduced capital cost, disallowed degradation and system losses, and partly accepted the cost, and operation and maintenance (O&M) claims proposed by NGEL for tariff calculations.

Background

NGEL signed a memorandum of understanding with the Uttar Pradesh government to set up 300 MW of solar projects for solarizing Ayodhya.

The state government decided to allot land to NGEL to develop 40 MW of the 300 MW solar capacity.

NGEL issued an engineering, procurement, and construction tender for setting up the 40 MW solar project. Jakson Green emerged winner in the auction.

The Uttar Pradesh New and Renewable Energy Development Agency approached the Uttar Pradesh Electricity Regulatory Commission (UPERC) to enable the power procurement from Jakson’s project. UPERC approved the power procurement, after which NGEL signed a power purchase agreement (PPA) with the Uttar Pradesh Power Corporation (UPPCL) to supply power from the 40 MW project.

The project’s first phase, with a capacity of 14 MW, was commissioned in January 2024, and the remaining 26 MW was commissioned in July of the same year.

NGEL filed a petition with CERC to determine project-specific tariffs. It revised its filing in light of the new Renewable Energy Tariff Regulations, 2024.

CERC held multiple hearings, receiving submissions from NGEL and UPPCL on capital, land, and transmission cost, module degradation, O&M expenses, and financial parameters.

NGEL submitted that it received no direct subsidy. However, NGEL had secured reimbursement of dedicated transmission line costs. It sought permission to add costs later if it did not receive the reimbursements. NGEL included ₹2.07 million (~$23,064) paid for relocating families from the solar project’s allotted land.

Under its tariff model, NGEL added the assumption that receivables should be counted for one and a half months of tariff while calculating working capital. Further, NGEL proposed a project capital cost of ₹53.24 million (~$593,089)/MW.

It proposed tariff inputs that included a capacity utilization factor (CUF) of approximately 24.73%, auxiliary consumption of 0.75%, module degradation of 0.7% per year, and an additional system transmission loss of 1.25%.

NGEL added that it fully financed the solar project from its equity funds. However, it requested that CERC apply the normative 70:30 debt–equity ratio when calculating the tariffs.

Additionally, NGEL claimed O&M expenses of ₹363,000 (~$4,043)/MW/year for the first three years and ₹413,000 (~$4,600)/MW/year from the fourth year onwards. These expenses would also include servicing the transmission lines.

It also asked that statutory charges, such as taxes, levies, and state and regional load dispatch centers, be billed separately. NGEL stated that UPPCL must refund the extra electricity costs for auxiliary needs when distribution company tariffs exceed PPA tariffs.

NGEL finally contended that the levelized tariff would be ₹3.98 (~$0.044)/kWh.

UPPCL submitted that the annual land lease cost must be excluded from the tariff calculation. It should be treated as a capital cost. Additionally, UPPCL sought disallowance of compensation for the relocation of families from the project land, as the RE Tariff Regulations, 2024, do not provide for it.

It added that NGEL wrongly assumed receivables for one and a half months. These should amount to 45 days under the RE Tariff Regulations, 2024, reducing the working capital and tariffs.

UPPCL also stated that NGEL did not justify its O&M claims and objected to the latter’s adding of the dedicated operation and maintenance services for the transmission lines to the costs.

It argued that no degradation factors should be considered, as the RE Tariff Regulations and the PPA did not provide for it. Applying the degradation factors would reduce the delivery against the committed CUF.

UPPCL further contended that an additional 1.25% system or transmission loss was not allowed under the RE Tariff Regulations and would lower the CUF below the committed levels.

Finally, UPPCL submitted that the levelized tariffs would amount to approximately ₹3.67 (~$0.041)/kWh.

Commission’s Analysis

The Commission accepted the normative 70:30 debt-equity ratio for calculating the tariffs. It limited working capital by considering receivables for 45 days instead of the one and a half months proposed by NGEL.

CERC reduced the net capital cost by limiting the reimbursements proposed by NGEL. It also did not allow certain components, such as supervision or loading costs for unfinished underground bays. Additionally, CERC approved ₹50.36 million (~$561,018)/MW as the final project cost, lower than the amount proposed by NGEL.

However, the Commission allowed ₹2.07 million (~$23,064) in compensation for relocating families from the project land to be included in the project cost.

It approved the 24.73% CUF and the 0.75% auxiliary consumption. However, it disallowed the 0.7% per year in module degradation and rejected the additional 1.25% in transmission loss.

The Commission accepted the O&M costs proposed by NGEL but rejected the dedicated costs for transmission line operation and maintenance due to a lack of regulatory backing and supporting evidence.

Based on its observations, the CERC computed and approved levelized tariffs of ₹3.36 (~$0.037)/kWh for the 40 MW Ayodhya Solar Project.

Recently, CERC dismissed a petition filed by SJVN seeking approval to allot 316 MW of unallocated renewable energy capacity under the greenshoe option in a firm-and-dispatchable renewable energy tender.

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