KERC Proposes New Solar And Rooftop Tariff Norms With Innovative Metering Models For FY2026 In Karnataka

Introduction

Including rooftop photovoltaic (SRTPV) systems, the Karnataka Electricity Regulatory Commission (KERC) has released a thorough discussion paper suggesting updated tariff structures and operational guidelines for solar power projects, for the financial year 2026 (FY26).^[1] Designed to hasten Karnataka’s shift to renewable energy, the draft rules bring creative metering ideas, improved financial guidelines, and removal of current obstacles to solar acceptance. Though limited rooftop adoption (686.04 MW) and Karnataka’s installed solar capacity already at 9,153.86 MW (mostly ground-mounted) the proposals seek to incentivize smaller consumers, improve grid stability, and match tariffs with current market trends. Up until April 15, 2025, the Commission has invited comments from stakeholders before deciding on the rules.

Explanation (Key Points)

• Proposed Tariff Rates for FY26
  • Ground-mounted MW-scale projects: Benchmark tariff reduced to ₹2.92/unit (from ₹3.04/unit in FY25), reflecting lower capital costs (₹300.53 lakhs/MW).
  • Rooftop Solar (SRTPV):
    • 1–10 kW (domestic): ₹3.47/unit (without subsidy), up from ₹3.79/unit in FY25.
    • Up to sanctioned load (non-domestic): ₹3.08/unit (without subsidy), down from ₹3.20/unit.
    • Subsidized rates under PM Surya Ghar:
      • 1–2 kW: ₹2.30/unit
      • 2–3 kW: ₹2.48/unit
      • Above 3 kW: ₹2.93/unit
• Financial and Operational Parameters
  • Debt-Equity Ratio: Maintained at 70:30 for all projects to ensure investor confidence.
  • Interest Rates:
    • Debt: 11.10% (linked to SBI’s MCLR + 200 bps).
    • Working Capital: 11.50% (SBI MCLR + 250 bps).
  • Depreciation: 5.667% for ground-mounted projects; 5.38% for SRTPV.
  • Return on Equity (RoE): Fixed at 14% to align with CERC norms.
  • Capacity Utilization Factor (CUF): Retained at 19% due to limited historical data but aligned with industry standards.
• Innovative Metering Models
  • Virtual Net Metering (VNM): Allows energy generated from a single solar plant to be shared across multiple consumers (same category) within a distribution licensee’s area. Minimum plant size: 5 kW.
  • Group Net Metering (GNM): Enables surplus energy from a solar plant to offset consumption across multiple service connections of the same consumer (e.g., apartment complexes).
  • Key Features:
    • Priority adjustments during billing cycles.
    • Surplus energy credits carried forward or purchased by discoms at 75% of generic tariff.
    • Mandatory smart meters for VNM/GNM participants.
• Addressing Barriers to Solar Adoption
  • High upfront costs: Lower capital costs for SRTPV (₹30,000–35,000/kW) and subsidized tariffs under central schemes.
  • Grid stability: Time-of-Day (ToD) adjustments for surplus energy credits.
  • Awareness gaps: Simplified online applications for SRTPV (1–150 kW) and expanded eligibility for non-residential consumers.
• Stakeholder Consultation
  • KERC invited public feedback till April 15, 2025, emphasizing transparency in finalizing norms.

Conclusion

The strategic turn KERC’s FY26 proposals represent toward Karnataka’s acceptance of distributed solar energy. The Commission wants to democratize solar access by lowering tariffs for bigger projects, providing subsidies for domestic consumers, and starting flexible metering models like VNM and GNM, so guaranteeing grid stability. Together with simplified financial rules, these steps could greatly increase rooftop installations—a major void in Karnataka’s renewable energy profile. Effective implementation of the reforms will not only help the state to achieve its sustainability objectives but also empower consumers to take active part in the energy change. Refining these policies to balance investor viability and consumer affordability will depend mostly on the forthcoming stakeholder consultations.

^[1] https://kerc.karnataka.gov.in/uploads/media_to_upload1742281579.pdf