The Central Electricity Regulatory Commission (CERC) has notified the tariff regulations for electricity generated from renewable energy sources. These regulations assume special importance in view of the National Action Plan on Climate Change which stipulated that minimum renewable purchase standards may be set at 5% of the total power purchases in 2010 and thereafter should increase by 1% each year for 10 years. The new tariff regulations are expected to promote new investments so that renewable electricity supply could expand to meet the goals stipulated in the National Action Plan.

The tariff permitted to a project under these regulations would apply for the whole tariff period which is 13 years. The tariff period for solar power has been kept as 25 years and for small hydro below 5 mw, it has been kept as 35 years in view of the special considerations required for these technologies. This feature of upfront tariff for whole tariff period is a major initiative to ensure regulatory certainty.

Tariff model adopted is levellised tariff in order to avoid front loading of tariff while at the same time ensuring adequate project IRR. At present, of the 14,000 mw of RE (renewable energy) installed in the country, 10,000 mw of wind power is confined to Tamil Nadu and Rajasthan while 4,000 mw of capacity comprises micro hydel, co generation, solar and bio mass plants.

The regulations provide normative capital costs for projects based on different renewable technologies. These capital costs are to be revised every year for incorporating the relevant escalations. The norms themselves would be reviewed in the next control period, which will start after a period of three years.

However, the regulations has enabling provisions to review the capital cost norms for solar power projects every year in view of the fact that the costs for these technologies are expected to decline more rapidly.

These regulations also provide that in case of solar power which is comparatively an evolving technology and also for other new technologies such as municipal waste based generation, the project developer can also approach the CERC for a project specific tariff.