KARNATAKA ELECTRICITY REGULATORY COMMISSION
No.9/2, 6th & 7th Floor, Mahalaxmi Chambers,
M.G. Road, Bangalore-560 001
Present: Shri. M.K. Shankaralinge Gowda Chairman
Shri. H.D. Arun Kumar Member Shri. D.B. Manival Raju Member
In the matter of:
Determination of tariff and other norms for Solar Rooftop and Small Photovoltaic Power Plants.
S/03/1 Date: 2nd May, 2016
The Commission in its Tariff Order dated 10th October, 2013 had determined the tariff for grid connected solar photovoltaic, solar thermal power plants and rooftop solar photovoltaic and other small solar power plants. The tariff determined in this Order based on the prevalent capital cost and other parameters was applicable for the projects entering into power purchase agreement on or after 1st April, 2013 and upto 31st March, 2018 but excluding those projects in respect of which the tariff is discovered through competitive bidding process.
The Commission, in its Order dated 30th July, 2015 has revised the tariff applicable to megawatt scale Solar Photovoltaic and Solar Thermal power plants taking into account the significant reduction in capital cost especially of utility scale Solar Photovoltaic plants. The tariff determined in respect of rooftop solar Photovoltaic and other small solar power plants were left undisturbed as no significant reduction in their capital cost was observed.
However, in view of the subsequent discovery of substantially lower tariff in respect of solar plants wherever bidding / tendering was adopted by procurers and also the need to revise certain norms specified earlier, the Commission had issued a discussion paper for re-determination of tariff for Grid-Interactive Rooftop and Small kilowatt scale solar photovoltaic plants, based on revised capital cost and other parameters and also for revision of other norms relating to such plants on 16th November, 2015 inviting comments / suggestions from the stakeholders, to be submitted to the Commission on or before 16th December, 2015. In response to the said discussion paper, various stakeholders, including some of the ESCOMs have submitted their written comments / suggestions.
The Commission also held a public hearing on 20th April, 2016 wherein, stakeholders made their oral submissions.
The List of the stakeholders who have made oral submissions in the public hearing is given in the Annexure to this Order.
The Commission proceeds to examine all the relevant facts and issues concerning the matter.
2. Initiatives by the Government to promote solar power generation:
For the reasons well known to all, the State and Central Governments have been taking initiatives to promote and sustain solar power projects. The Government of Karnataka (GoK) has notified the Karnataka Solar Policy 20142021 on 22nd May, 2014 which, envisages achieving of a minimum of 400 MW of grid connected solar rooftop plants and 1600 MW of grid connected utility scale solar projects in the State by 2018.
Minimum program targets (MW):
|Roof-top (grid connected and off-grid)||100||100||100||100|
The Government of India (GoI), vide Resolution dated 1st July, 2015, has revised the National Solar Mission targets from 20,000 MW to 1, 00,000 MW to be achieved by the year 2021-22. This targeted capacity is proposed to be achieved through deployment of 40,000 MW of Rooftop solar projects and 60,000 MW of large and medium-scale solar projects.
The year-wise revised targets of rooftop-solar power plants proposed to be achieved under the National Solar Mission to accomplish the scaled-up target of 40,000MW is as under:
|Category||Year-wise target (MW)|
The targeted capacity of rooftop-solar power plants proposed to be achieved by Karnataka under the National Solar Mission is as under:
|Category||Year-wise target (MW)|
Further, the Ministry of New and Renewable Energy (MNRE) in its guidelines dated 26th June, 2014 on grid interactive Rooftop and small Solar Power Plants, has given emphasis to capacity addition of solar power ranging from 1KWp to 500KWp rooftop and small solar power plants. The guidelines suggest that net metering and tariff determination by regulators such that, the tariffs are attractive to investors and also do not put too much burden on the ESCOMs. The MNRE would provide incentives which, includes 15% subsidy for selected categories, accelerated depreciation benefits for industrial and commercial buildings, bank loans at interest rate of housing loan from public sector Banks, Customs Duty concessions and Excise Duty exemptions etc.
3. Renewable Purchase Obligation (RPO):
The revised Tariff Policy has been notified by the Ministry of Power, Government of India on 28th January, 2016. As per this revised Tariff Policy the State Regulatory Commissions are required to reserve a minimum percentage for purchase of solar energy such that it reaches 8% of the total consumption of the State by March, 2022 or as notified by the Central Government from time to time. In this regard, the Ministry of New and Renewable Energy (MNRE) in its letter dated 30th March, 2016 has proposed the following targets of solar installed capacity in MW for next five years:
Figures in MW
The Commission clarifies here that in this Order the issue of RPO is not being dealt and the references made to the RPO are only for the purpose of underlining need for encouraging rapid investments in solar power plants in the State. Following is the data of the PPAs, approved for large megawatt scale solar plants and Solar rooftop PV plants of above 500kW category:
Ø Megawatt scale Solar Plants: 994 MW
Ø Solar rooftop PV Plants (above 500kW and upto 1MW): 538 MW
Ø Solar rooftop PV Plants (below 500kW): 787MW
The present installed capacity of MW scale plants in the State is 134 MW as on
31st March, 2016(Source: KREDL Website).
4. Need for midcourse revision of tariff:
As per the Commission’s Order dated 10th October, 2013, the tariff determined therein shall be applicable to all solar rooftop and small solar plants entering into Power Purchase Agreements (PPAs) on or after 1st April, 2013 and upto 31st March, 2018 i.e for the control period of five years commencing from 1st of April 2013. While the five-year control period was envisaged to ensure to the prospective investors Regulatory certainty through assured returns and adequate time to plan, design and commission the projects more efficiently and effectively, it was also to facilitate the ESCOMs concerned to procure adequate solar energy at the promotional Tariff so as to meet the Renewable Purchase Obligation (RPO) as specified by the Commission from time to time. It was assumed that the capital cost reckoned for determination of tariff would not vary substantially during the control period.
However, during FY14 & FY15, the Commission has noticed substantial decline in the prices of solar panels and allied equipment resulting in considerable reduction in cost of solar power generation leading to investors / developers offering to supply power from solar plants at rapidly declining rates. The growth of investments in renewable energy generation particularly in the solar generation has shown encouraging upward trend necessitating moderation of the promotional tariff offered earlier to attract investments. As a result of rapid solar capacity addition, most of the ESCOMs have been able to achieve the present RPO targets.
In view of these developments, the Commission, in order to protect the interest of the consumers and also to ensure financial stability of ESCOMs considers it necessary to take up mid-course revision of the tariff determined in 2013 in respect of solar rooftop and small Photovoltaic power plants.
The Commission also considers it necessary to ensure that only those diligent investors who take expeditious effective steps to commission projects benefit from fixed generic tariff regime during the control period and not those who merely express their intention to do so without taking any effective steps for commissioning projects.
Under Clause 9 of the KERC (Procurement of Energy from Renewable Sources) Regulations, 2011, this Commission has been conferred with the power to modify the tariff anytime either suo-moto or on application filed by any of the generator or distribution licensee.
Therefore, as proposed in the discussion paper, the Commission deems it necessary to curtail the control period of the generic tariff determined for solar rooftop and small solar projects in the Order dated 10th October, 2013 and redetermine the tariff prospectively. While doing so, the Commission has also considered it necessary to ensure that, such an exercise does not cause undue hardship to those who have already committed to invest in solar projects based on the tariff determined in the Order dated 10th October, 2013, with projects being in advanced stage of implementation.
Now, in exercise of powers conferred under Section 62(1)(a) read with Section 64 and Section 86(1)(e), Clause 9 of the KERC (Procurement of Energy from Renewable Sources) Regulations, 2011 and other enabling provisions of the Electricity Act 2003, after duly considering the comments/suggestions of stakeholders, the Commission hereby passes the following Order
5. Applicability of the Order:
The Commission, in supersession of its Order dated 10th October, 2013, decides that the norms and tariff determined in this Order shall be applicable to all new grid connected solar rooftop and small solar photovoltaic power plants, entering into Power Purchase Agreement (PPA) and commissioned on or after 2nd May, 2016 and upto 31st March, 2018.
In respect of plants for which PPAs that have been entered into prior to 1st May, 2016 and are commissioned within the period of time as stipulated by the
ESCOMs concerned or the Commission prior to the date of issue of this Order,
the tariff as per the Commission’s Order dated 10th October, 2013 shall be applicable. Such plants shall be eligible for the revised tariff as per this Order if they are not commissioned within the stipulated time period and there shall be no extension in time period for commissioning them after the effective date of this Order.
The Commission notes that even if it considers a liberal solar power capacity addition target for the State, the investments made in the solar power generation so far indicates that such target is almost achieved and hence it may not be prudent to allow further capacity addition. The Commission deems it necessary to specify that the tariff determined in this order shall be limited only to an aggregate capacity addition of 400 MW by all the ESCOMs in the State for the effective period of this Order. Further out of such 400MW capacity, 300MW capacity shall be reserved for domestic, hospital and educational institutions which would be eligible for gross metering, as detailed in the later part of this Order.
The tariff determined and other norms specified in this Order shall be applicable for the term of the PPAs entered into in respect of projects covered by this Order. The Commission would take up review of this Order, if deemed necessary, before the end of the effective period of this Order.
6. Determination of Tariff Solar rooftop and small Photovoltaic power plants:
The Comments / suggestions of the stakeholders and the decisions of the Commission on the capital cost, operational and financial parameters for determination of tariff, for solar rooftop and small photovoltaic power plants are discussed below:
i) Life of the Plant:
The Commission, in its discussion paper, had proposed to consider 25 years as the life of the plant, for the purpose of determination of tariff.
Some stakeholders are of the view that the life of the plant is dependent on not only the solar modules but also the other equipments associated with the plant.
The Commission is also of the view that the life of the plant is to be assessed based on the life of the solar modules as well as the balance of system. However, for the present considering the life assured by the manufacturers/developers and the life considered by other Commissions in the country for the similar plants, the Commission decides to retain the life of plant as 25 years, for the purpose of determination of tariff.
ii) Term and Tariff design:
The Commission had proposed to continue with the levelized tariff for a period of 25 years, in order to ensure certainty of revenue streams to investors.
The Commission has not received any comments on this aspect.
The Commission notes that, owing to improvement in technology and change in market conditions, prices of the modules of the solar PV plants have significantly reduced over the years and such reduction in cost should be shared equitably with the consumers. To achieve this, the process of determination of tariff has been taken up by the Commission by cutting short the control period.
As discussed in the following paragraphs of this Order, the investments made in solar projects are proposed to be allowed to be recovered through tariff over a period of time. The debt recovery period is considered at 12 years. If the tariff period is reduced to less than 15 years, with the life of the plant being 25 years, the benefits of the investments made would not be completely absorbed. Further, reasonable returns for any investment needs to be allowed during the life of the plant.
Hence, the Commission decides to retain the levelized tariff for a period of 25 years.
iii) Capacity Utilisation factor:
The Commission had proposed capacity utilisation factor of 19% for solar rooftop and small solar photovoltaic power plants.
The stakeholders are of the view that, small scale solar PV plants linked to distribution network experience curtailment due to power cuts/outages on an average of 1-2 hours a day depending upon LT/HT circuit and that, this curtailment is not experienced by large-scale solar PV plants connected to grid. Further, due to urbanisation, increase in pollution and absence of professional cleaning of panels of residential SRTPV, the CUF of LT residential and LT commercial is less than utility scale solar power plants. Hence, a deration factor of 10% for the LT commercial and residential category consumers should be considered and CUF of 17.1% should be assumed.
Further, some stakeholders have suggested adopting CUF of 16.25% to 17-18%.
As per the data published, on the website of MNRE, the capacity utilization factor for solar PV plants considered by the CERC and most of the SERCs in the country is 19%. Since the Commission is determining the tariff on generic basis and not on location basis, the Commission, decides to adopt a single CUF for the entire State.
In the circumstances, the Commission decides to retain the CUF at 19% for Solar rooftop and small solar photovoltaic plants.
iv) Capital Cost:
The Commission had proposed to consider capital cost of Rs.75000 per Kw for Solar rooftop and small solar PV plants.
The BESCOM has suggested capital cost of Rs. 65,000 per kW for plants above 100 kW, Rs.70,000 per kW for plants of 10 to 100 kW and Rs.75,000 per kW for plants of 1 to10 kW.
The Federation of Karnataka Chambers of Commerce and Industry (FKCCI) has suggested adopting capital cost of Rs. 85,000 per kW.
The HESCOM has suggested that a capital cost of 75,000 per kW can be considered for projects of above 10kW capacity as the rates of PV panels are expected to reduce further. However, capital cost for projects between 1kW and 10kW capacity considering all other hidden expenditure is approximately Rs.1 Lakh/kWp.
The TERI has submitted that it is important to get performance data and life span of the low cost panels from the suppliers before considering the reduction in capital cost.
Karnataka Renewable Energy Systems Manufactures Association and MicroSun Solar Tech Pvt. Ltd. have suggested that the capital cost for 1kW to 10kW SRTPV is around Rs. 85,000/kW and that for SRTPV system having capacity higher than 100 kW, the capital cost of Rs. 75,000/kW may be considered.
The PRDCL have suggested adopting following capital cost:
i. Upto 5KW- Rs.1,00,000/-
ii. Above 5KW upto 50kw- Rs.90,000/-
iii. Above 50KW upto 100KW- Rs.80,000/- iv. Above 100KW- Rs.75,000/-
The Commission in its Tariff Order dated 10th October, 2013 had considered capital cost of Rs.90000 per kW for solar rooftop and small solar PV plants.