TNERC proposes Rs. 5.78 per kWh for solar PV projects

TNERC recently released a consultative paper which proposes to set the tariff for solar projects in Tamil Nadu. The consultative paper details the methodology involved in arriving at the tariff as well as the various assumptions that were made for the different variables in terms of cost for solar projects such as CAPEX, OPEX etc. The paper not only discusses these for solar PV projects, but also for solar thermal (CSP) based projects too. Since the economies of scale plays an important role in solar power projects, a different tariff has also been determined for small scale (kW scale) projects.

The assumptions made for the calculation of the tariff have been highlighted in the table below

The assumptions for the various parameters were arrived at using references from assumptions made in other tariff determination papers such as those by CERC, GERC etc. The final tariffs realised for solar PV, solar thermal and small scale solar PV systems amount to Rs. 5.78 per kWh, Rs. 8.34 per kWh and Rs. 8.15 per kWh respectively. It can be seen that the small scale tariff is about 40% higher than large scale (utility) solar PV systems.

It is important to note that accelerated depreciation benefit (AD) has not been used to determine an alternate tariff which takes into account the benefits of AD as the methodology employs straight line depreciation of assets up to a maximum of 90%. The tariff arrived at for solar PV systems is just about comparable to the lowest quoted tariff (Rs. 5.97 per kWh) under the tendering process for the allocation of projects under the Tamil Nadu Solar P0licy and is one of the lowest tariffs realised in the country. It should be noted however that under the TN solar policy, the project life is considered to be 20 years (as opposed to 25 in this paper) and more importantly the TN solar policy proposes an annual escalation of 10% for the first 10 years (there is no escalation proposed in this document).

It remains to be seen if the current set of projects allocated under the TN solar policy will be affected by this paper in any way. The PPA to be signed by the developers would have to be approved by TNERC and it will be interesting to see what TNERC’s take on the previous tariffs would be.

The consultative paper can be accessed on TNERC’s website.

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1 thought on “TNERC proposes Rs. 5.78 per kWh for solar PV projects”

  1. It’s not a workable financial model, wherein IRR is not justifiable in Renewable Industry Investments. Further, payment security mechanism of TN is still questionable.
    CA Yogesh Birla
    Birla Wealth & Project Management Co.

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