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Rajasthan Electricity Regulatory Commission, Jaipur

In the matter of determination and declaration of tariff for Solar Power Generation Plants covered under GoI Policy and to promote solar power generation in the State.

Quorum: Mr. K. L. Vyas, Member (in Chair) Dated of Order : 2.4.2008 1. With a view to declaration of tariff for solar power generation plants

covered under GoI Policy and to promote harnessing of solar power generation available in the State, the Commission brought-out a concept paper for determination and declaration of promotional tariff from solar power generation plants. Since the tariff to be declared by the Commission is a promotional tariff, with incentive built-in, it shall not be considered as a benchmark for the purpose of determination of tariff from solar power plants in future.

2. Public notice in this respect was issued on 15.2.08 and published in

following news papers inviting comments from interested parties/ various stakeholders in the field : 1. Dainik Bhaskar 16.2.08 2. Rashtradoot 16.2.08 3. Hindustan Times 17.2.08

3. In response to the public notice, the comments/suggestions from

the following were received : 1. Shri Shanti Prasad, Ex-Chairman, RERC, Jaipur. 2. Shri D.S.Agarwal, Rudraksh Energy, Jaipur 3. Moser Baer Photo Voltaic Ltd., Greater Noida. 4. Surya Chambal Power Ltd., Kota 5. Rajasthan Renewable Energy Corporation Ltd., Jaipur (RREC) 6. Reliance Industries Ltd., (RIL), Gurgaon 7. PAR SOLAR, Mumbai. 8. Dr.K.L.Jain, RCCI, Jaipur. 9. Jai Subrahmanyam, Scott Lawrence, Prashant Vijay & Yash

Sehgal 10. Energy Department, Government of Rajasthan, Jaipur.

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4. The public hearing in the matter was held on 4.3.08 wherein the following were present and expressed their views : 1. Shri Shanti Prasad, Ex-Chairman, RERC, Jaipur (only present) 2. Shri D.S.Agarwal, RCCI & Rudraksh Energy 3. Shri Y.K.Raizada, Director (Tech), RVPNL 4. Shri B.K.Makhija, SE (NPP), RVPNL 5. ShriC.M.Meena, CMD, RREC, Jaipur (only present) 6. Shri A.K.Pathak, E.D., RREC 7. Shri Anil Patni, RREC (only present) 8. Dr.T.C.Tripathi, Advisor, Ministry of New & Renewable Energy 9. Shri Gagan Vermani, Moser Baer 10. Shri Birku Singh, Moser Baer (only present) 11. Shri D. P. Sharma, RIL, (only present) 12. Shri Manoj Maheshwari, RIL (only present) 13. Shri Kshetrapal, RIL (only present) 14. Shri G.S.Bharara, RIL 15. Shri S.D.Joshi, Eurostar (only present) 16. Shri Girish Agarwal, Sathyam Power Pvt.Ltd. (only present)

5. Secretary, RERC explained the background and details of the

concept paper and invited views. 6. Shri D.S.Agarwal stated that the tariff proposal in the concept paper

is generally in order and submitted that whenever other specific proposal in any capacity are received, the tariff may be determined based on the Regulations in force and on case to case basis. He also stated that the incentive policy notified by the GoI appears to be peculiar because if the Commission specifies lower tariff then more incentive would be available to the producer but with this specified tariff no project would become viable. On the other hand if higher tariff is specified by the Commission then there would be higher implication on the consumers but incentive available from the GoI will be lower or negligible. In either case promotional efforts for the project development is affected adversely. He, therefore, suggested that a reasonable tariff be determined by the Commission so that investor interest is protected and the distribution company should be suitably compensated by way of incentive for purchasing higher cost of solar power. Shri Shanti Prasad also suggested that for working out of the incentive under GoI policy, the maximum 5% of the power purchase cost by Discom should be considered and that the incentive should be passed on to the Discom instead of the developer.


7. The Commission endorses the above proposal inprinciple and holds the view that suitable recommendations may be made to MNRE that for the purpose of availing incentive, the highest tariff from conventional power plants under long term power purchase agreement by the Discoms as allowed by the Commission in their ARR be considered by MNRE to work out the difference from notional tariff. The Commission has considered the rate of Rs.3.50 per kWh (corresponding to Tehri hydel) while allowing the multi year ARR for 2008-09. The incentive should preferably be routed through the Discom so that the developer gets full assured rate from the buyer making its project financially viable through-out the period of 10 years.

8. Shri Gagan Vermani of Moser Baer stated that they have already

signed MoU with Govt. of Rajasthan (5 MW) and registered with the RREC for setting-up of 10 MW capacity solar power projects and submitted that proposed tariff is reasonable however, this tariff should be for longer period so as to achieve viability of the project and the depreciation as applicable to the renewable energy projects under the Income Tax rules should be made admissible to solar power projects also. Similar submissions were made by Shri Bharara of RIL besides in respect of term of tariff, depreciation etc., whereas Surya Chambal Power Ltd., submitted in written submission to consider tariff of Rs.33 /kWh and get the issue discussed with IREDA. PAR SOLAR in its submission have stated that on conservative estimate the levelised cost works out between Rs.20-30/kWh and requested to extend the applicability date of promotional tariff for plants commissioned up to March, 2012.

9. It is stated that presently the promotional tariff for solar power

project is for ten years only but the PPA can be executed for 20 years or life of the plant. The tariff after 10 years shall be determined for the next tariff control period as per the prevailing regulations at that time. However, to protect the interest of the investor, the return on equity/investment shall be ensured while determining the tariff for subsequent period.

10. The promotional tariff is to attract solar power generation, therefore,

has to be for a limited capacity and for limited period. For setting up of solar power project, the developer may get the provisional tariff determined on case to case basis i.e. for site, technology and financial package specific so that the tariff can be determined within the financial parameters of the RERC tariff determination Regulations or there can be competitive bidding. The developer


can claim accelerated depreciation as admissible under the rules for the plants, not covered under GoI policy. For the plants covered under GoI policy all terms & conditions of the policy shall be applicable. As stated above the period for which the tariff is specified, shall be the same as the GoI policy as incentive lasts for 10 years. As stated above, after expiry of 10 years period, the project developer may approach the Commission for determination of tariffs for subsequent years.

11. Shri Y.K.Raizada, Director, RVPN stated that there is no restriction on

allowing the open access to conventional and non-conventional power stations, Shri Raizada suggested that looking to large land requirement for wind power & solar power plants, it would be prudent to integrate the solar power at the places where wind power development had taken place. The evacuation capacity already created can be optimally utilized. Shri Raizada further assured on behalf of the State Transmission Utility that no problem is envisaged for evacuation of power from such power plants.

12. Shri A.K.Pathak representing RREC stated the need for harnessing

huge solar power potential in the State and supported the proposal contained in the concept paper and requested that preferential tariff may be declared for the projects governed under GoI schemes and mechanism for determination of solar power tariff upto 50 MW capacity.

13. Shri Tripathi representing Ministry of New & Renewable Energy, GoI

elaborated about the background of launching incentive schemes by GoI so that grid interactive solar power generation through modular units can be developed and the policy for generation based incentive has been kept for 50 MW across the country to begin-with. Based on the responses and the interest shown by the various developers, this can be put up before the Ministry for review as appropriate. He stated that the issues raised during the hearing have been noted and shall be taken-up with the Ministry for giving due consideration. He, however, expressed the opinion that the promotional tariff proposed in the concept paper is quite reasonable, commercially viable and very good as compared with proposals under consideration in West Bengal at Puralia. He was hopeful of good response which may lead path for future development for solar power in right earnest. As regards impact on retail consumers, he was of the view that with the increase in cost of conventional power in the coming years and widening gap between demand & supply, very small impact on retail tariff should


not be a matter of concern as future technology and replication of modular concept would lead to commercial viability of solar power to compete with conventional power.

14. Shri Shanti Prasad while giving his views on the proposal pointed out

ambiguity about the capacity of solar power plants for GoI policy and for promotional purpose under different category conceived in the concept paper. He suggested that the impact on all category of retail consumers should be applied because concession to any category of consumers has to be regulated under Section 65 of the Act.

15. It is stated that the promotional tariff is for solar power plants with a

minimum of 1MW capacity to be connected to 33KV system on first come first served basis and those registered with the State nodal agency (RREC) and commissioned before the target date of 31.12.2009 or 31.3.2010 as applicable.

16. Since RREC has indicated huge potential of solar power and have

already signed MoU with various interested parties it is considered appropriate and in the interest of developer that they get the tariff determined on project specific basis. It is also decided that the RREC should identify suitable sites for solar power development and initiate or provide necessary inputs to project feasibility to the Discoms who as procurer can initiate the process of competitive tariff bidding as per GoI guidelines with suitable deviation, if any, approved from the Commission. As regards impact on retail tariff excluding agriculture category of consumer it is clearly stated in the concept paper that the purpose for which agriculture supply is excluded is being environment friendly and under section 62(3) of the Act such consumption can be differentiated for tariff determination.

17. Shri Shanti Prasad has also commented on the methodology to be

based and worked out on the latest developmental details available with him the tariff as Rs.15.12 per kWh and Rs.12.96 per kWh for solar photo-voltaic and solar thermal power plants respectively with provision of CDM credit passed on for the Discoms to the extent of 25% only.

18. It is stated that the tariff determination process as per the specified

regulations shall be followed so far as financial parameters are concerned i.e. general principles of computing costs and return at Part-II and other features of Part VIII, however, since the technology


is rapidly changing, hence prudence check on the latest available technology actually proposed to be used shall be done by the Commission for site specific and technology specific proposal. It is expected to replicate them on modular basis once the pilot projects, on promotional basis are proven. The tariffs so worked out by Shri Shanti Prasad compare favourably well with the proposed tariff in the concept paper thus considered to be reasonable. The developer has to share the 25% of the CDM credit with the Discoms as per the regulations in force. It is, however, reiterated that for solar power projects covered under GoI policy the conditions of policy shall only prevail for all purpose including CDM credit, if any.

19. Shri Jai Subramanayam, Scot Lawerence, Sh.Prashant Vijay and

Sh.Yash Sehgal from USA/UK have sought various clarifications on the implementation of solar power promotional tariff. For any such clarification on specific problem in implementation, they should approach the RREC. It is stated that some of the issues so raised have already been covered in the preceding para and the rest are clear from the RERC (Terms & Conditions for Determination of Tariff) Regulations, 2004 as amended from time to time. All other solar power plant proponents may approach the Commission for final determination of applicable tariff or in the case longer commissioning schedule to overcome uncertainty in execution may come initially for in-principle determination of capital cost/tariff, based on which PPA can be executed with the distribution company and then final tariff is determined at the time of commercial operation of the plant in accordance with the aforesaid regulations. The regulations state that the minimum solar energy purchase obligation shall be specified only after 50 MW solar power is connected to the grid and operational when the required technology, its cost economics are known better. Till then all the three Discoms namely JVVNL, AVVNL & JdVVNL shall purchase whole of the solar energy on equitable basis. The payment terms under the PPA is settled mutually between the project developer and the Discoms in the same manner as in all other case in line with the relevant provisions of the regulations.

20. The State Government while forwarding the proposal of RREC has

requested that in view of immense potential to support solar projects in Rajasthan and in view of guidelines for generation incentive issued by GoI, to fix interim tariff for solar energy demonstration project in Rajasthan to be set up under the scheme.


21. RREC has further stated that they have already received expression of interest by 6 companies for 200 MW in the State and pleaded for setting-up of multiple demonstration solar power projects which would give hands an experience for future when large scale investment becomes viable. RREC thus requested to declare two different tariffs for the plants covered under GoI scheme and for others. However, subsequently RREC has conveyed the decision requesting that in the context of grid interactive solar PV power generation projects, the pilot projects in Rajasthan at this stage should be limited to 10 MW only for which generation based incentive for the first 10 years would be available under the MNRE guidelines. The Commission agree to their request, however, it is stated that the limit of 10 MW if enhanced by GoI then the new limit shall be applicable for the projects covered under GoI incentive scheme.

22. The MNRE in their letter dated 25.3.2008 have commented and

clarified further that the main purpose of incentive is :

“5. to encourage project developer the main objectives the generation based incentive programme are (i) to encourage project developers to set up solar power plants in the country to demonstrate their viability (ii) to collect field performance data on power generation vis-à-vis solar radiation (iii) to assist the Regulatory Commission in determination of suitable tariff for solar power (iv) to generate awareness among utilities about need to purchase high tariff based solar power keeping in view its long term benefits. These measures are expected to result in reduction in the cost of generation of solar power in the country.

6. …………………………………………………………………………………………….. 7. The Commission has proposed the following tariff for solar power

generation :

Solar

Photovoltaic Power Plants

Concentrated Solar Power

Plants (a) Plants commissioned upto 31.12.2009 and (i) Covered under GoI Policy Rs.15.78 /kWh Rs.13.78 /kWh (ii) Not covered under GoI Policy

(Limited to 50 MW) Rs.15.60 /kWh Rs.13.60 /kWh

(b) Plants commissioned after 31.12.2009but by 31.3.2010, the above tariff shall be reduced by 60 P/kWh

In view of above, the Commission is requested to consider highest possible tariff for solar power, notwithstanding the notional tariff and incentives announced by the ministry. In fact the objective of announcing the incentive by the Ministry will be fulfilled, if the Commission fixes promotional tariff of Rs.15.78/kWh for SPV and Rs.13.78/kWh for solar thermal power.”


23. In view of the foregoing, the Commission acknowledges that there is enough solar power potential in the State and lot of interest has already been generated in the investors by signing MoU. RREC being nodal agency should evolve suitable mechanism for allocating solar power generation capacity within the State to a large number of interested investors of say 1 MW or above at different sites to begin with upto a maximum limit of 10 MW or as limited by GoI for grant of incentive and those who can bring the project faster to as large number of investor as possible. In addition to this initially 50 MW capacity can be brought to grid by determining their tariff on the basis of technical prudence check and financial parameters of the regulations which could give adequate comfort to the investors for project funding. It is also acknowledged that there is a continuous development on the technology front as well as on commercial front, therefore, the project which is specific to site, technology, funding etc. have to be on competitive bidding or examined on merit with due prudence as per the regulations in position on case to case basis.

24. It is felt that presently, there is no need to specify two different

promotional tariffs of grid connected solar power generation covered under GoI policy and outside GoI Policy for supply to the distribution company as proposed in the concept paper.

25. The total tariff, inclusive of generation incentive on solar power

payable by GoI to the solar power producer, shall be as under and all conditions of GoI policy shall be applicable on them. S.No. Particular SPV Technology CSP Technology

1. Solar power plants commissioned upto 31.12.2009

Rs.15.78 /kWh Rs.13.78 /kWh

2. Solar power plants commissioned after 31.12.2009 but by 31.3.2010

Rs.15.18 /kWh Rs.13.18 /kWh

The tariff shall be levelized (constant) for a period of ten years thereafter the tariff shall be determined by the Commission as per the regulations in force.

26. The project developer under GoI Policy shall enter into PPA with distribution company for 20 years and tariff payable by Discoms shall be difference of aforesaid tariff and incentive. The total tariff payable to the project developer through a suitable mechanism, in line with GoI policy, may be so devised by MNRE that the incentive



if routed through the Discoms then the full tariff is paid by Discom to the solar power supplier.

27. RREC as nodal agency for the State may support and promote by

allocating solar power capacity as per GoI guidelines to as large number of prospective developer/investors as possible so as to bring in capacity addition faster with varied technological inputs in the State under the pilot scheme.

28. The highest rate for 2008-09 as per multi year ARR projection is

Rs.3.50 /kWh corresponding to the tariff of Tehri Hydel Project shall be the tariff determined by the Commission as required in the policy of MNRE to work out generation incentive. Such tariff shall be determined by the Commission annually while approving the ARR/tariff of the Discoms.

29. All the three Discoms namely JVVNL, AVVNL & JdVVNL shall

purchase the entire generation from solar power plants of 50 MW capacity in addition to the generation from the plants covered under GoI scheme. This limit of 50 MW may be considered by the Commission for upward revision, if required, taking into account its impact on retail tariff.

30. RREC should identify technically feasible potential sites for solar

power development for which tariff can be determined on cost plus basis or through competitive bidding and work out a modality for preparation of competitive bidding documents for invitation of tariff bids for solar power plants as per GoI guidelines with suitable deviations with the approval of the Commission.

31. Copy of this Order be sent to all objectors, Discoms, RVPN, RVUN,

GoR, MNRE, IREDA & CEA.

Sd/- (K.L.Vyas) Member

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