The Rajasthan Electricity Regulatory Commission (RERC) has allowed the annual change in tariff for biomass projects in the state based on the increase or decrease in variable charges like fuel costs.

Under the proposed “Rajasthan Electricity Regulatory Commission (Terms and Conditions for Tariff determination from Renewable Energy Sources) (Second Amendment) Regulations, 2023,” the tariff for biomass projects determined in the financial year (FY) 2023-24 will apply for the FY 2024-25 and FY 2025-26.

The stakeholders referred to the prevailing increase of 5% in tariffs and sought for it to be upheld by the Commission.

The Commission, after considering the suggestions, added the clause to the existing regulation that an annual increase or decrease in variable charges, as the case may be, in Rs /kWh over the variable charges of the previous year, keeping FY 2023-24 as the base year for the respective technology, will apply.

It also ruled that for projects whose power purchase agreements (PPA) have expired, a tariff equivalent to 85% of last year’s PPA duration tariff would apply with similar annual adjustments in variable charges.

The Commission also made a few observations in respect of stakeholders’ concerns about the recently formulated regulations. The final comments will now be formulated into a regulation and notified by it.

The draft regulations, accompanied by the explanatory memorandum and public notices, were made available on the Commission’s website for public feedback until October 16, 2023.

Seventeen stakeholders provided their feedback on the draft regulations and explanatory memorandum, which the Commission considered in finalizing the Regulations.

Concerns Addressed and Regulations Amended

Scope of Regulations

The stakeholders raised questions on the applicability of terms and conditions other than tariffs related to renewable captive power plants (both co-located and supplying power under open access), Renewable Energy plants supplying power to a third party under Open Access, and Renewable Energy plants installed behind the meter.

The Commission clarified that the regulations would apply for the entire scope across the state as specified and during the entire tariff determination period from April 1, 2020, to March 31, 2026.

It said the proposed provision, affirming the extension of the regulations until March 31, 2026, would prevail.

Control Period

The stakeholders had raised concerns about the control period of the tariff regulations. They explained that in the case of a wind power project, the gestation period is around 12 to 18 months, and the sunset period on the regulations, as per the draft, will be March 31, 2026. They insisted on extending the control period till March 31, 2027.

After considering the suggestions, the Commission dropped the proposed provision of the applicability of tariff on projects to be commissioned up to March 31, 2024, and kept the control period the same for six financial years, from April 1, 2020, to March 31, 2026.

Tariff for Biomass Projects

Concerns were also raised about the applicability of the tariff regulation to biomass projects. They suggested that the projects for which PPAs had already been approved and were set to be commissioned be exempted from the regulation. They also recommended that the Commission take note of different factors involved in the biomass projects, where the fuel price can be inconsistent over a period of time, and that a price escalation must be allowed every two years.

Stakeholders sought an annual escalation of 7% to 10% in fuel costs as the biomass sector across the country is facing significant inflation.

The Commission amended the regulation to exempt the projects already commissioned or for which PPAs have been approved before the date of notification of the new regulations.

The regulator also broadened the scope of generic tariff from projects commissioned up to March 31, 2024, to projects that are already commissioned or for which the Commission has approved the PPAs before the date of notification of these regulations.

To accommodate the request for fuel price escalations, the Commission noted that the fuel price will stay consistent for biomass projects that are already commissioned or for which the PPAs have been approved before the date of notification of these regulations and also for the plants commissioned during the control periods FY 2009-15 and FY 2015-20.

The fuel prices will be per the bidding documents for projects yet to be commissioned.

Use of Fossil Fuel or Solar Power in Biomass Projects

The stakeholders proposed that all biomass projects commissioned up to March 31, 2024, must be allowed the standard 15% usage of coal or solar power for operations so all the projects operate at a level playing field. They also requested that the provision be extended to allow solar power to be procured from projects commissioned on or before March 31, 2026, the effective period of the regulations.

The Commission said it had decided to allow the use of 15% fossil fuel or solar power to the existing biomass power projects only, i.e., projects that had already achieved commissioning before the current regulations came into effect.

It, however, allowed for the solar power supplied to the biomass plants to be procured from projects commissioned up to March 31, 2026, extending it from the previous March 31, 2024, timeline.

Banking Period

The proposed regulations for banking were set to apply till March 31, 2023, to all existing projects as well as projects commissioned up to March 31, 2026.

Stakeholders argued that in a case where the project is commissioned in FY 2024-25, the developer would receive the banking facility only for five years. Failure to provide such facilities for the entire life of the project will inevitability result in operational and financial challenges, particularly in a captive project, they stated.

They also noted that the state DISCOMs were allowed to deduct 10% of the banked energy towards banking charges, and the Commission has now proposed not allowing these banking charges after March 31, 2030, which could be detrimental to DISCOMs.

The Commission clarified that the proposed regulation was intended to provide regulatory certainty, and the banking facility, including charges, would be applicable until March 31, 2030. After that date, the banking provisions would be governed by the regulations in force at that time.

Additional comments were not part of the original proposal and were noted for future consideration in amendments.

In September, RERC approved Rajasthan Urja Vikas Nigam (RUVNL) to extend the power purchase agreements (PPAs) with 12 wind power generators for five years.

Recently, RERC approved a ceiling tariff of ₹3.55 (~$0.043)/ kWh for solar power projects to be set up under Component C of the Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan program for feeder-level solarization.

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