The Karnataka Electricity Regulatory Commission (KERC) has set the ceiling tariff for wind power projects for the control period from financial year (FY) 2027 to FY 2029.

The Commission also clarified that the approved tariff of ₹3.60 (~$0.0379)/kWh would apply to payments for banked energy procured by distribution licensees.

The order will remain in force from April 1, 2026, to March 31, 2029.

Background

The Commission initiated the process for determining a new ceiling tariff after the earlier tariff expired on March 31, 2026.

A discussion paper was issued proposing a ceiling tariff of ₹3.24 (~$0.0341)/kWh, and comments were invited from stakeholders. The earlier ceiling tariff was ₹3.34 (~$0.0351)/kWh for FY2023-24 to FY2025-26.

On capital costs, while the Commission proposed ₹65 million (~$684,476)/MW, stakeholders argued for significantly higher costs due to larger turbine sizes, higher hub heights, and rising logistics and installation challenges.

The Indian Wind Power Association and the Indian Wind Energy Association suggested a capital cost range of ₹80 million (~$842,432)/MW to ₹90 million (~$947,736)/MW.

Regarding the Capacity Utilization Factor (CUF), the Commission proposed 33%, but stakeholders presented varying views, with some supporting a higher CUF based on improved technology and others suggesting lower ranges of 29-30% to account for site variability across Karnataka.

Regarding operation and maintenance (O&M) expenses, the Commission proposed ₹1 million (~$10,530)/MW for FY 2027 with an annual escalation of 5%. In contrast, stakeholders indicated that actual costs were higher, ranging from ₹1.4 million (~$14,742)/MW to ₹1.8 million (~$18,955)/MW.

Loan interest rates were proposed at 9.5%, with stakeholders suggesting adjustments to reflect current market lending conditions. For tariffs, stakeholders proposed a higher range of ₹3.80 (~$0.040)/kWh to ₹4.20 (~$0.0442)/kWh, citing concerns about financial viability.

Commission’s Analysis

After examining the suggestions, the Commission finalized key parameters for tariff determination.

The capital cost was set at ₹72.5 million (~$762,676)/MW, balancing stakeholder concerns with historical benchmarks and prevailing market trends.

The CUF was retained at 33% based on available data, while O&M expenses were set at ₹1.13 million (~$11,899)/MW in FY27 with an annual escalation of 4.5%.

The interest rate on term loans was maintained at 9.5%, and the return on equity was retained at 14%. Interest on working capital was fixed at 11%.

The Commission noted that recent tariffs discovered in the Solar Energy Corporation of India’s auctions ranged from ₹3.60 (~$0.0379)/kWh to ₹3.70 (~$0.0389)/kWh, indicating that stakeholder-proposed tariffs were above prevailing market-discovered levels.

Based on the finalized parameters, the Commission arrived at a levelized tariff of ₹3.60 (~$0.0379)/kWh to serve as the ceiling tariff for competitive bidding.

India added 6.3 GW of wind power capacity in 2025, an 85.2% year-over-year increase from 3.4 GW in 2024, according to Mercom India Research. The additions marked the highest annual wind installations in the country. India’s wind power market improved in 2025, supported by increased tender activity, stronger bidder participation, and more competitive tariffs.

Subscribe to Mercom’s real-time Regulatory Updates to ensure you don’t miss any critical updates from the renewable industry.