Himachal Pradesh Increases Levelized Tariffs for Solar Projects Up to 5 MW for FY 2022-23

The Commission had invited suggestions from stakeholders on the draft in March


The Himachal Pradesh Electricity Regulatory Commission (HPERC) has issued a generic levelized tariff for solar projects of up to 5 MW for the financial year (FY) 2022-23, a 10-11% increase compared to the previous financial year.

The Commission had sought suggestions from key stakeholders on the draft, including the state government, Directorate of Energy, Himachal Pradesh Energy Development Agency (HIMURJA), Himachal Pradesh State Electricity Board, Himachal Pradesh Power Corporation, Himachal Pradesh Power Transmission Corporation, consumer representatives, and industries associations. The stakeholders were asked to submit their suggestions on or before March 15, 2022.

The generic tariffs have been issued for four separate categories.

Projects in areas other than industrial and urban

For solar projects of capacity up to 1 MW set up in areas other than urban and industrial areas, HPERC has set the normative capital cost at ₹43.23 million (~$568,325)/MW. The capital cost of projects above 1 MW and up to 5 MW is considered as ₹42.59 million (~$560,472)/MW. This is a 13% increase compared to the previous year.

Projects in industrial and urban areas

For solar projects of capacity up to 1 MW set up in urban and industrial areas, the normative capital cost of ₹44.24 million (~$581,603)/MW is considered and ₹43.59 million (~$573,632)/MW. The cost has been increased by 12.7% compared to the year before.

Himachal Pradesh Capital Costs of Solar Projects Considered for Determining Levelized Tariffs

On the capital cost, Commission assumed that with the advancement of the technology, the increased efficiency is bound to result in cost savings. As far as de-gradation impact on the useful project life span is concerned, the same is expected to be met through operational and maintenance (O&M) expenses. However, the normative capital cost considers the initial spares to be procured. The Commission also felt that with the advancement of technology in the future, the requirement of such running maintenance spares will also get reduced considerably.

Concerning the suggestion to consider the separate normative cost of mono PERC modules in the tariff determination, the Commission said that the generic levelized tariff is determined by considering normative parameters, including normative capital cost. The issue relating to the setting of separate tariffs for individual technology can be addressed in the case of project-specific tariff determination only.

The Commission stated that an enhancement of 30% on the normative cost of solar modules is being considered by the Commission, out of which a 15% escalation will be subject to adjustment on account of changes in the tax rate.

Himachal Pradesh Normative Capital Cost for Solar Projects Above 1 MW to 5 MW

Regarding the suggestion relating to providing break-up of increased module cost due to Goods and Services Tax (GST) and Basic Customs Duty (BCD), the Commission stated it is inclined to reflect the GST and BCD component under a separate item which will also facilitate adjustment in case of variation in the GST and BCD.

The normative capital cost will take into account the impact of the additional taxes, which is the GST increase from 5% to 12% and the replacement of 14.5% safeguard duty with 40% BCD.

The Commission considered the normative capacity utilization factor (CUF) as 21% to determine the tariff, in line with the Central Electricity Regulatory Commission’s (CERC) regulations. The auxiliary consumption has been considered separately as 0.75% as per the CERC norms.

The Commission said the interest rate of 9% per year had been considered per the provisions specified in Renewable Energy (RE) Tariff Regulations, 2017. The Commission stated that it is beyond the scope of this proposal to consider any other rate.

For calculating the tariff, the Commission approved the debt-equity ratio of 70:30 and the return on equity at 14%.

The depreciation rate for the first 15 years was considered 4.67%, and the rate of depreciation from the 16th year onwards would be spread over the balance of the useful life.

The O&M charges for FY 2022-23 was set at ₹943,000 (~$12,397)/MW. The O&M charges will also be escalated at 3.84% per annum over the tariff period.

Generic tariff

For solar projects of capacity up to 1 MW set up in areas other than urban and industrial areas, HPERC has set the tariff at ₹3.75 (~$0.049)/kWh. For solar projects of capacity up to 1 MW set up in urban areas and industrial areas, the tariff is ₹3.82 (~$0.050)/kWh.

Himachal Pradesh Generic Levelized Tariffs for Solar Projects

The following provisions will govern the applicability of tariffs:

  • In cases where the joint petition for approval of PPA is submitted to the Commission on or after April 01, 2022, but no later than March 31, 2023, this tariff will be applicable for capacity commissioned on or before March 31, 2024.
  • This tariff will not be applicable in cases where the distribution licensee procures power through Solar Energy Corporation of India (SECI) or competitive bidding at its level as per Section 63 of the Electricity Act, 2003.
  • The tariff will also not be applicable if consumers install ground-mounted or rooftop solar projects within their premises under the net metering program.

The increase in the levelized tariffs comes as a relief to the state’s renewable project developers to help cope with the rising module prices, GST rates, and upcoming BCD implementation.

In a recent order, HPERC had set ₹2.49 (~$0.033) as the average power purchase cost for the financial year 2021-22 under the renewable energy certificate mechanism.

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