CERC Proposes Tariff Determination Regulations for Renewable Energy (2024-2027)

Introduction

The Central Electricity Regulatory Commission (CERC) in India has proposed draft regulations for determining tariffs from Renewable Energy Sources (RES) for 2024-2027. These regulations aim to promote renewable energy, particularly from Municipal Solid Waste (MSW) and Refuse Derived Fuel (RDF). Key changes include incentives for MSW/RDF projects, revised definitions, and new tariff mechanisms. However, stakeholders have raised concerns and suggestions regarding the clarity and implementation of these regulations.

Explanation (Key Points)

1. Promotion of MSW and RDF Projects: The draft regulations prioritize the growth of MSW and RDF-based power projects by offering incentives such as a reduced useful life of 20 years and the removal of certain clauses like station heat rate and gross calorific value from tariff determination. This aims to simplify the tariff structure and encourage investment in these projects.
2. Compensation for Over-generation: The regulations propose compensating renewable energy projects for generating excess energy beyond the specified capacity utilization factor (CUF) or plant load factor (PLF). The excess energy will be purchased at 100% of the applicable tariff for that year. However, there are discussions on the definition of excess energy and the appropriate compensation mechanism, as some stakeholders suggest different tariffs for excess energy based on the type of renewable energy source.
3. Tariff Determination: The regulations outline the normative Return on Equity (RoE) for renewable projects and small hydro power projects, along with depreciation rates and loan tenure. These parameters are crucial for determining the tariffs for renewable energy projects. However, there are suggestions for refining the methodology for capital cost benchmarking and interest rate determination to ensure fair and efficient tariff setting.
4. Concerns and Suggestions: Stakeholders have raised concerns about the clarity of terms like “prevailing market trends” used in the regulations. They suggest developing a robust methodology for capital cost benchmarking, considering cost efficiencies for MSW-based plants, and clarifying the definition and treatment of excess generation. These suggestions aim to enhance the transparency and effectiveness of the regulations.
5. Hybrid Renewable Energy Projects: The regulations introduce provisions for renewable hybrid energy projects, which combine different renewable energy sources. However, there are concerns about the definition of Capacity Utilization Factor (CUF) for hybrid projects, the minimum CUF requirements, and the optimal combination of rated capacity for different technologies in hybrid projects. These issues need to be addressed to ensure the proper integration and utilization of hybrid renewable energy systems.

Conclusion

The draft CERC regulations for tariff determination from Renewable Energy Sources are a significant step towards promoting renewable energy in India. However, addressing the concerns and suggestions raised by stakeholders is crucial for the successful implementation and effectiveness of these regulations. Clear definitions, robust methodologies, and a balanced approach to tariff determination will be essential to ensure the sustainable growth of the renewable energy sector while ensuring fair compensation and cost recovery for project developers.