The Central Electricity Regulatory Commission (CERC) has approved a levelized tariff of ₹4.01 (~$0.0455)/kWh for Solar Energy Corporation of India’s (SECI) 100 MW solar power project integrated with a 40 MW/120 MWh battery energy storage system (BESS) in Rajnandgaon, Chhattisgarh.

The tariff is applicable for 25 years from the project’s commercial operation date, which is February 1, 2024. The approved tariff accounts for the increase in project cost arising from the Goods and Services Tax (GST) hike and land-related changes.

The Commission has directed the Chhattisgarh State Power Distribution Company (CSPDCL) to procure power from this project at the approved rate.

Background

SECI conceived the Rajnandgaon solar-plus-storage facility as a pilot to demonstrate the commercial feasibility of large-scale energy storage in India. The project traces back to a 2019 memorandum of understanding with CSPDCL that envisaged a 100 MW solar project with BESS to meet peak demand. A power purchase agreement (PPA) was signed in February 2020 with a ceiling tariff of ₹4 (~$0.0454)/kWh for 25 years. The agreement was amended multiple times as project capacity and land availability changed. The final configuration stood at 100 MW with 155.02 MWp of solar generation supported by 40 MW/120 MWh of storage. Tata Power Solar Systems was the EPC contractor.

SECI sought the Commission’s approval for a higher tariff, citing cost escalations. It argued that the GST rate on renewable devices had been raised from 5% to 12%, which qualified as a change in law event under the power purchase agreement.

This increase added over ₹370 million (~$4.19 million) to the project cost. SECI also cited additional civil works required due to changes in the land parcel, which raised costs by about ₹29.9 million (~$338,922). These adjustments translated to an extra burden of ₹0.22 (~$0.0025)/kWh, comprising ₹0.20 (~$0.00227) for GST and ₹0.02 (~$0.00023) for land works. SECI requested that the tariff be fixed at ₹4.22 (~$0.0478)/kWh against the ceiling of ₹4 (~$0.0454)/kWh.

CSPDCL opposed the claim, asserting that the tariff could not exceed the ceiling agreed under the PPA. It argued that SECI had claimed an artificially high interest rate on loans while the actual World Bank borrowings were at much lower rates. CSPDCL also objected to SECI’s assumption of a normative debt-equity ratio of 70:30 when the actual ratio at commissioning was closer to 1:99.

It maintained that the project was delayed by eight months without justification, that interest during construction arising from this delay should be disallowed, and that auxiliary consumption was overstated. The distribution utility insisted that the project cost overruns should not be passed on to consumers.

Commission’s Analysis

CERC examined the financial and technical aspects of the project under the 2020 Renewable Energy Tariff Regulations. It noted that while SECI had deployed significantly more equity than debt due to the timing of World Bank disbursements, the regulations allowed the Commission to treat equity beyond 30%  as normative debt. Accordingly, a debt-equity ratio of 70:30 was applied for tariff determination.

Regarding the matter of return on equity, the Commission held that for the first 20 years of the tariff period, the normative return of 14% must be grossed up using the minimum alternate tax rate, resulting in a return of 16.9%. For the balance period, the corporate tax rate applied, producing a return of 21.52%.

The Commission accepted that the GST hike from 5% to 12% constituted a change in law under the PPA and allowed recovery of the associated costs. It also accepted SECI’s claim of additional expenditure due to land changes, though at a reduced impact compared to the original claim. The issue of auxiliary consumption was decided in SECI’s favor, given the technical requirements of operating a large battery system.

On the delay in commissioning, the Commission acknowledged that part of it was linked to delays in land handover by CSPDCL and pandemic-related supply chain issues. It did not impose disallowances for this period.

After considering the capital cost, financing structure, grants, subsidies, and other parameters, CERC determined that the appropriate levelized tariff for the Rajnandgaon project would be ₹4.01 (~$0.0455)/kWh.

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