The Kerala State Electricity Regulatory Commission (KSERC) has announced the proposed feed in tariff (FiT) for solar power plants in the state. This announcement is by no means the final tariff and has been announced with the intention of getting comments from the various stakeholders in the industry so as to refine the policy (and the tariff structure). The last date for sending the comments/suggestions is 5th December, 2012. It may be recalled that the Government of Kerala had announced an off-grid programme called 10,000 Solar PV Rooftop Scheme.
Kerala presently has a power requirement of about 3400 MW, of which about 2200 MW is being purchased from outside the state. The inter-State drawing capacity of the Kerala State Electricity Board(KSEB )is only 1,800 MW. The deficit of 400 MW is currently being overcome through a daily load shedding scheme wherein the consumers face an hour of power cut every day (split as half hour in the morning and half hour at night). Apart from that, Kerala has a Solar Renewable Purchase Obligation(Solar RPO) of 0.25% for the year 2012-13.
KSERC classifies the PV systems into Kilowatt scale projects(systems upto 1 MW) and Megawatt scale projects( systems above 1 MW). The kW scale projects get a tariff of Rs. 12.49/kWh whereas the MW scale projects get a tariff of Rs. 10.41/kWh. More tariff details are given below.
The Tariff proposed for the first year shall be applicable from the date specified by the Commission for projects synchronized before 31-3-2014 . The tariff computation has been done without taking into account any of the subsidies offered under the NSM. If Accelerated Depreciation(AD) is incorporated into the calculations, the tariff would drop by about Rs. 1 per kWh while including the 30% capital subsidy for small scale projects (<100 kW) drops the tariff by about Rs. 3 per kWh.
KSERC proposes the following connectivity conditions.
One interesting clause is that”the owner of the building and developer of roof top system need not be same person. The developer shall sign PPA with the Distribution utility with the consent of the owner.”
The state has opted to go for a FiT mechanism as opposed to a net metering concept for the initial stages of the policy. This has been done so as to avoid any issues that might arise due to a time differentiated drawal and injection of energy as there might be peak usage tariff charges that would have to be taken into consideration. This move is likely to benefit residential consumers who are not subject to stringent peak usage tariffs. Separate meters will be installed to measure energy injection and energy withdrawal. It should be noted however that the net metering concept has not been dismissed entirely and it is still under consideration to be implemented at a later date.
Solar Power to get Precedence
It is interesting to note that the solar power plants below 5 MW will be treated as ‘must run’ and shall not be covered under merit order principle. This means that the power plants are unlikely to be backed down in favour of other sources of power generation which is a boon to renewable energy power developers. In Tamil Nadu, for instance, the state electricity board backs down wind power generators first as opposed to the thermal power plants for grid balancing purposes.
Without a doubt the announcement of the solar policy as well as the tariff structure bodes well for the nascent solar sector in Kerala. If the tariff structure remains unchanged, Kerala could witness immense capacity addition as seen under the Gujarat State Policy. It is however unlikely that the tariffs would remain fixed since as mentioned previously, various factors such as subsidies have not been incorporated into the tariff.
Two assumptions considered for the Tariff calculation might require some review.
a. 19% CUF(Capacity Utilisation Factor) – The KSERC has considered the same CUF proposed by Central Electricity Regulatory Commssion(CERC). Even though Kerala has very good irradiation levels, the CUF is likely to be lower because the state has one of the highest rainfall in the country(average annual rainfall of about 3000 mm as against the national average of about 1200 mm) over long duration(typically 3-4 months).
b. Capital cost of the PV system – KSERC assumes a CAPEX of Rs. 10 Crores per MW and Rs. 1.2 Lakhs per kW for tariff calculations, whereas hat the most recent announcement by CERC pegs the capex for solar power plants at about Rs. 8 Crores per MW(Analysis of the CERC capex is available here).
The results of the initial discussions with the stakeholders might prove to be very interesting and could serve as a blue print for other states opting to go for the feed in mechanism route. Here’s to hoping the FiT mechanism gains traction across the country.
PS: The discussion paper can be downloaded here.