HPERC Finalizes Solar Tariffs For FY 2025–26 To Promote Solar Projects Up To 5 MW In Himachal Pradesh

Posted On - 12 May, 2025 • By - King Stubb & Kasiva

Introduction

For the financial year 2025–26 the Himachal Pradesh Electricity Regulatory Commission (HPERC) has finalised the generic levelised tariffs for solar photovoltaic (PV) projects up to 5 MW capacity.[1] Outlined in its order dated March 27, 2025, this decision seeks to balance the interests of developers, distribution licensees, and consumers while supporting smaller solar projects all around the state. Sortable by project size and location, the tariffs represent inputs from stakeholders, technology developments, and market dynamics. This action seeks to increase solar acceptance in both rural and urban areas and fits with the renewable energy targets set by Himachal Pradesh under the RE Tariff Regulations, 2017.

Explanation (Key Points)

1. Regulatory Framework and Stakeholder Consultations

The Himachal Pradesh Electricity Regulatory Commission (Promotion of Generation from Renewable Energy Sources) Regulations, 2017, changed most recently in September 2023 and generally follow Following protracted consultations, HPERC produced draft proposals for newspapers (The Tribune, Dainik Bhaskar) and sought comments from private developers, HPSEBL (state distribution licensee), and HIMURJA (state renewable energy agency). Concerns including capital costs, capacity utilization factors (CUF), and tariff competitiveness were covered at a public hearing scheduled for February 19, 2025.

2. Project Categorization

To incentivize smaller solar installations, HPERC introduced three categories:

  • Category I: Projects up to 1 MW
  • Category II: Above 1 MW and up to 3 MW
  • Category III: Above 3 MW and up to 5 MW

Higher tariffs are set for urban/industrial areas to account for land and infrastructure costs.

3. Normative Capital Cost Adjustments

Stakeholders contested the proposed reduction in solar PV module costs (from ₹132.56 lakh/MW to ₹87.62 lakh/MW), citing rising prices due to anti-dumping duties and exchange rate fluctuations. HPERC revised the capital cost upward after considering:

  • PV module costs: ₹92.06 lakh/MW (escalated by 40% from a base of ₹65.76 lakh/MW).
  • Other components: ₹243.13 lakh/MW (5% higher than FY 2024–25).
  • Location-specific adjustments: Additional ₹7.5 lakh/MW for urban/industrial areas.

The total normative capital cost ranges from ₹335.19 lakh/MW (Category III, non-urban) to ₹359.82 lakh/MW (Category I, urban).

4. Capacity Utilization Factor (CUF)

HPERC kept 21% CUF, citing Central Electricity Regulatory Commission (CERC) standards and technological developments despite opposition arguing a lower CUF (16–19%) based on historical generation data. Gross generation was deducted 1.45% auxiliary losses.

5. Tariff Structure and Components

The levellised tariff incorporates:

  • Debt-equity ratio: 70:30.
  • Return on Equity (RoE): 14% (grossed up to 16.81% for the first 20 years and 19.4% thereafter).
  • Interest rate: 10.98% (SBI MCLR + 200 basis points).
  • Depreciation: 4.67% annually for 15 years, then 1.995%.
  • Working capital: Includes O&M expenses, receivables, and maintenance spares.

6. Final Tariff Rates

Project CategoryNon-Urban/Industrial Areas (₹/kWh)Urban/Industrial Areas (₹/kWh)
Up to 1 MW3.453.50
1 MW–3 MW3.383.44
3 MW–5 MW3.323.38

7. Royalty and Subsidy Adjustments

A 5 paise/kWh royalty levied by the state government (post-September 2023) will be added to bills for projects >1 MW. Tariffs exclude subsidies, but adjustments (e.g., ₹0.07–0.08/kWh reduction per ₹10 lakh/MW subsidy) are permitted.

8. Applicability

Tariffs apply to projects commissioned by March 31, 2027, with PPAs approved between April 1, 2025, and March 31, 2026. Excludes net-metered systems and competitively bid projects.

Conclusion

The tariff plan of HPERC for FY 2025–26 balances consumer interests protection with solar energy adoption. The commission wants to decentralize solar development while guaranteeing cost-effectiveness by grouping projects and modifying costs for urban/industrial zones. Though issues like anti-dumping taxes and exchange rate volatility still exist, the retention of a 21% CUF and upward capital cost changes answers developer concerns. This sequence is expected to hasten the shift to renewable energy by Himachal Pradesh, so supporting India’s more general climate targets and improving energy security in the Himalayan region.

[1] https://hperc.org/new1/File/sm01-25solarGLT.pdf