Himachal Pradesh Sets New Generic Tariffs for Solar PV Projects for FY 2025-26

Posted On - 8 April, 2025 • By - King Stubb & Kasiva

Explanation (Key Points)

1. Tariff Categorization and Structure

Projects are categorized based on capacity and location:

  • Category I: Up to 1 MW
  • Category II: Above 1 MW to 3 MW
  • Category III: Above 3 MW to 5 MW

Additional differentiation is made for projects in urban/industrial areas, which receive marginally higher tariffs due to higher capital costs.
Final Tariff Rates (₹/kWh):

image 45

2. Normative Capital Cost Adjustments

The Commission raised capital costs to account for market realities, including rising PV module prices due to anti-dumping duties on solar glass and currency fluctuations.

Key Components:

Solar PV modules: ₹92.06 lakh/MW (40% escalation over base cost).
Balance of system (BOS): ₹243.13 lakh/MW (5% increase from FY 2024-25).
Urban/industrial projects incur an additional ₹7.5 lakh/MW due to land and infrastructure challenges.

3. Capacity Utilization Factor (CUF) Retained at 21%

Despite opposition from stakeholders like HIMURJA and Barot Valley Hydro Power, who presented actual CUFs of 16–18%, the Commission maintained CUF at 21%, according to CERC norms. This is considering high-efficiency technologies and future-proofing projects.

4. Stakeholder Feedback and Commission’s Response

Capital Cost Concerns: Stakeholders argued for higher module costs (₹150 lakh/MW vs. ₹87.62 lakh/MW proposed). The Commission acknowledged market volatility but emphasized competitive tariffs and PLI schemes to offset costs.
Degradation and O&M: Degradation impacts were deemed manageable through escalation clauses in tariffs.

5. Royalty Adjustment Mechanism

A 5 paise/kWh royalty for projects >1 MW, mandated by the state government, will be added to tariffs and passed through to consumers. This ensures transparency and avoids financial strain on developers.

6. Subsidy and Incentive Adjustments

Tariffs exclude subsidies (e.g., central/state grants), which are adjusted separately at ₹0.07–0.08/kWh per ₹10 lakh/MW subsidy.

Conclusion

HPERC’s FY 2025-26 tariff order is a delicate balance between encouraging solar adoption and safeguarding consumer interests. The Commission aims to induce investments while providing for cost affordability. The order upholds Himachal Pradesh’s commitment to renewable energy and sets it on the path as a trendsetter in India’s move towards sustainable energy.

However, balancing normative CUF with ground realities and managing input cost volatility will have to be watched over continuously. The tariffs will apply to projects awarded till March 31, 2027, and will give a clear direction to developers while aligning with national renewable energy goals.