Summary
As reported by the Press Information Bureau( PIB) India, the Central Electricity Regulatory Commission, CERC India has recently notified the tariff regulations for electricity generated from renewable energy sources, with the target of increasing the proportion of renewable energy power in the generation mix to 5% by 2020, from the lowly 3% as at present. News follows the implement ion of Renewable Energy Certificate (REC) mechanism as alternative for fulfilling renewable purchase obligations.
Analysis
The Central Electricity Regulatory Commission (CERC) has announced a higher rate of return on investments made in new renewable projects as part of measures to attract investors to the sector.
The Commission, which regulates power tariffs of inter-State projects in the country, said companies investing in renewable energy projects will get 19 per cent pre-tax return on investments for the first 10 years of generation and 23 per cent thereafter. This is higher than the cap of 18.4 per cent on pre-tax returns on investment for thermal power units, which use coal and gas.
Presently only only three per cent power in the country is generated through renewable sources. The target is to produce 5 per cent of the total generation from renewable sources by 2010 and 15 per cent by 2020. as a deliverable for the National Action Plan on Climate Change. With this the tariff for wind-based projects has been fixed for 13 years, for solar power plants 25 years and for small hydro plants of up to 5 MW for 35 years.
The guiding principle behind the newly announced tariff regulations by CERC India is to give a preferential tariff to the projects based on renewable technologies during the period of debt repayment.The tariffs will be revised every three years to adjust for changes in input costs for new projects.The Central Electricity Regulatory Commission (CERC) has announced a higher rate of return on investments made in new renewable projects as part of measures to attract investments.
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 Commission for a project specific tariff.
The Forum of Regulators has also agreed to implement Renewable Energy Certificate (REC) mechanism which will be an alternative route for fulfilling renewable purchase obligations.
This mechanism is mainly aimed at addressing the mismatch between renewable resources availability in the local region and the renewable purchase obligations. CERC would play a supportive role for designing and regulating national level REC registry and REC market.
Himadri Banerji consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
