RAJASTHAN ELECTRICITY REGULATORY COMMISSION, JAIPUR

Transcription

1 RAJASTHAN ELECTRICITY REGULATORY COMMISSION, JAIPUR Suo-Motu In the matter of Determination of Benchmark Capital Cost for Solar PV and Solar Thermal Power Projects for FY and resultant Generic Levellised Tariff. Coram : Shri D.C. Samant, Chairman Shri S.K. Mittal, Member Shri S. Dhawan, Member Date of hearing: Date of Order: ORDER BACKGROUND 1. In accordance with the provisions of Electricity Act, 2003 and National Tariff Policy notified by Govt. of India (GoI), the Commission under its RERC (Terms and Conditions for Determination of Tariff) Regulations, 2009 had incorporated the enabling provisions for determination of generic tariff for solar power projects. 2. Commission had issued the last Tariff Order on , wherein, Commission had determined generic tariff for solar power plants, which was applicable for solar PV plants (SPV), where PPA was signed on or before and getting commissioned on or before and solar thermal plants, where PPA was signed on or before and getting commissioned on or before The tariff as per the above mentioned Order is given in the following table: Page 1 of 27

2 Table-1: Solar Tariffs in Rajasthan as per Tariff Order dated S. No. Particulars Tariff (`/kwh) if AD benefit is not availed Tariff (`/kwh) if AD benefit is availed Solar Photo Voltaic (PV) Power Plants commissioned by Solar Thermal Power Plants commissioned by Roof Top Solar PV installations and other small solar PV power generation plants covered in MNRE s scheme or Rajasthan Solar Energy Policy to be commissioned by Small Solar Thermal Power generation plants covered in MNRE s scheme or Rajasthan Solar Energy Policy to be commissioned by CERC has issued Order on (Petition No. 243/SM/2012 (Suo-Motu) in the matter of determination of generic levellised generation tariff for FY of various RE sources which include the category of Solar Photo Voltaic (PV) and Solar Thermal Power Projects. CERC in the above Order has determined a generic tariff of `8.75 per unit (`7.87 per unit if AD benefit is availed) in respect of solar PV projects and a generic tariff of `11.90 per unit (`10.69 per unit if AD benefit is availed) for solar thermal projects whose PPAs would be signed by and which is to be commissioned on before in the case of solar PV projects and on or before in the case of solar thermal projects. Draft Tariff Order 4. The Commission undertook an exercise to determine Benchmark Capital Costs for Solar PV and Solar Thermal Power Projects and resultant Generic Levellised Tariff for the MW scale solar plants where PPAs would be signed on or before and to be commissioned on or before in the case of solar PV plants and to be commissioned on or before in the case of solar thermal plants. Page 2 of 27

3 5. In the draft tariff order issued on , Commission considered it appropriate to retain the financial norms, as stipulated in Part III of RERC Tariff Regulations, 2009 i.e. debt : equity ratio, RoE, depreciation and O&M escalation that are applicable for the tariff determination of other RE sources like wind/bio-mass and were used for tariff order dt for both Solar PV and Solar thermal projects. Parameters like auxiliary consumption, CUF and de-ration were proposed to be retained as adopted in the Tariff Order dated The summary of Norms and Parameters considered in the draft order is as under: Table-2: Summary of key normative parameters for solar PV projects in the draft Tariff Order. S.No. Parameter Value Capital cost `7.60 crore per MW for FY Capacity Utilization Factor 20% with a deration of 0.5% every (CUF) year after second year. 3 Interest on term loan 13.00% p.a 4 Interest on working capital 12.50%p.a. 5 O&M Expenses `11.63 lakhs/mw for FY with an escalation of 5.72% p.a. plus 0.3% of depreciated project cost in each year towards insurance. 6 Auxiliary consumption 0.25% Table-3: Summary of key normative parameters for solar thermal projects in the draft Tariff Order. S.No. Parameter Value Capital cost ` crore per MW for FY Capacity Utilization 23% with a deration of 0.25% every Factor (CUF) year after fourth year. 3 Interest on term loan 13.00% p.a 4 Interest on working 12.50% p.a. capital 5 O&M Expenses ` lakhs /MW for FY with an escalation of 5.72% p.a. plus 0.3% of depreciated project cost in each year towards insurance. Page 3 of 27

4 S.No. Parameter Value Auxiliary consumption 6.5% Applicable Tariff for Solar PV and Solar Thermal Projects (as in draft order) 6. As per the draft tariff order on , the generic tariff levellised for 25 years for two different technologies (Solar PV & Solar thermal) and for Roof Top and small solar plants worked out as per the said norms is summarized as follows: Table- 4: Summary of Tariff for Solar PV and Solar Thermal projects in the draft Tariff Order. S. No. Particulars Tariff (`/kwh) if AD benefit is not availed Tariff (`/kwh) if AD benefit is availed Solar Photo Voltaic (PV) Power Plants commissioned by Solar Thermal Power Plants commissioned by Roof Top Solar PV installations and other small solar PV power generation plants to be commissioned by Small Solar Thermal Power generation plants to be commissioned by Publication of Draft Order and stakeholder s comments/suggestions 7. A public notice was published in the following newspapers inviting comments/suggestions of stakeholders on the Draft order dated and the said order was also placed on Commission s website: (1) The Times of India published on (2) Dainik Bhaskar published on (3) Dainik Navjyoti published on In response to the same, written comments/suggestions were received from the following stakeholders: (1) Rudraksh Energy, (2) Power & Energy Consultants (PEC), Page 4 of 27

5 (3) Sh. Shanti Prasad, (4) Torrent Power Limited (TPL), (5) Reliance Power Limited (RPL), and (6) First Solar Power India (P) Limited (FSPIL). 9. A public hearing on the Draft Order was held on Sh. Shanti Prasad, one of the stakeholders, has offered the comments in respect of terms and conditions for roof top PV installations. He has stated that his comments being in respect of net sale of solar power to Discom may not be directly related to draft order, but are relevant in promoting roof top solar installations. He observed that if deemed fit, the same may be considered through Suo-motu approach paper to enable stakeholders to offer comments. 11. His comments, not being related to draft order, have not been considered in this order. The comments/suggestions received from other stakeholders have been dealt with in the following paras. Capital Cost Stakeholder s comments/suggestions 12. Sh. D.S.Agarwal, on behalf of Rudraksh Energy, submitted that they agree with the capital cost of ` 7.60 Cr/MW, however, requested Commission to clarify/confirm whether this MW cost excludes the cost of transmission line from the Solar Plant to RVPN s 132 kv or 220 kv GSS, receiving power. Further, he also requested to clarify whether this MW cost is for 1 MWP i.e. installed modules capacity or 1 MW AC output of the solar plant requiring about 1.1 MW capacity of Modules. 13. Power & Energy Consultants have submitted that both types of lands i.e. Private and Government land are being used for solar PV projects in Rajasthan. In case of Government land, although initial Page 5 of 27

6 cost of land (10% of DLC) is low, however it takes quite long time and therefore, additional cost of follow up is incurred till possession of the land is taken. In addition to this, the developer has to pay annual lease rental to Government of Rajasthan which has not been considered in annual expense. Further, the land development and infrastructure cost in case of revenue land is also higher. Therefore, cost of land and land development should be considered as minimum of ` Lakh/MW. They also submitted that with present exchange rate of Rs. 59 per US$ (in place of Rs per US$), the cost of 1 MW PV Module may be taken as Rs. 354 Lakhs or higher. As the US $ is expected to further appreciate, the stakeholders observed that after including Rs Lakh per MW as grid connectivity charges, the total capital cost for Solar PV project should be considered as Rs. 817 Lakh per MW. 14. Reliance Power Ltd. submitted about the key difference between RERC and CERC Order in respect of capital cost saying that as per RERC Order, land is reckoned cheaper in Rajasthan and de-ration of module has not been considered as part of capital cost. These two factors in their view, will not result in reduction of capital cost from ` 8.00 Cr/MW (CERC) to ` 7.60 Cr/MW (RERC). They have further submitted that the DLC rate considered by RERC for cost of land varies from place to place. Hence, it would be appropriate to consider land cost as per CERC norms. 15. Reliance Power Limited also requested to consider the registration charges payable by Developer to RRECL as part of Project Cost. They further submitted that Solar PV and Solar Thermal sites are generally located in remote area with little basic amenities available in the vicinity. For developers developing large capacities (>25 MW) it becomes imminent to develop suitable living conditions at the site by developing a township with Page 6 of 27

7 appropriate amenities for attracting staff during project construction and also during O&M period. Hence, it is recommended to have Townships also as part of the Capital Cost. Reliance Power Limited also submitted that in case of Solar PV, module price is noted in USD/Wp and hence, exchange rate variation has significant impact on the overall project cost. Since Rupee has experienced depreciation in the past few months and has reached the level of Rs /USD and is not expected to regain the levels of Rs /USD, hence Rs /USD may be considered as exchange rate for working out capital cost for FY The module cost, at exchange rate of Rs. 60/USD, may be considered as Rs. 360 Lakhs. In light of above, Reliance Power Ltd. requested for benchmark Capital cost for Solar PV projects as Rs Cr./MW. 16. Torrent Power in their written comments have submitted that PV insights report on Solar Module spot price (last updated on ), reveals that the Average price for Silicon Solar Module is USD per Watt (against USD per Watt of draft Tariff Order) and Average price for Thin Film Solar Module is USD per Watt ( against USD per Watt of draft Tariff Order) as under: Table-5: Solar Module weekly Spot Price (USD per Watt) Item High Low Average Avg. Chg Avg. Chg % Silicon Solar Module % Thin Film Solar Module % (The average change in the table is being carried out after comparison with Table-5 in the Draft Order) Torrent Power based on above, requested to consider the average price of PV module as USD per watt for working out the Capital cost. Torrent Power submitted that as per Reserve Bank of India, last six months average of USD to INR is Rs per USD compared to Rs per USD. Further, the current USD to INR exchange rate is near to Rs. 60 per USD, which has significantly Page 7 of 27

8 impacted the module price. They requested to consider module price of Rs. 439 Lakhs/MW ( USD per Watt * XRs per USD) due to upward change in spot prices and exchange rate. 17. Torrent Power has submitted that Directorate General of Antidumping and Allied Duties (DGAD) has initiated an investigation on imports of Solar cells whether or not assembled partially or fully in Modules or Panels or on glass or some other suitable substrates, originating in or exported from Malaysia, China PR, Chinese Taipei and United States of America in November 2012 to determine the existence, degree and effect of any alleged dumping and to recommend the amount of anti-dumping duty, which if levied, would be adequate to remove the injury to the domestic industry and hence, there are chances of increase of price of module. 18. First Solar Power India (P) Ltd have submitted that Commission has provided reference to the cost of power conditioning unit approved by CERC in its Order for However, CERC in its explanatory Memo for benchmark capital cost norms for solar technology for had decreased the PV inverter cost from ` 98 Lakh/MW in to ` 60 Lakh/MW for which was a sharp decease of 39%. However, the current spot market prices of power conditioning units (inverters) are higher than the prices specified by CERC. The stakeholder has also submitted the table showing spot prices and contract prices for PV inverters as follows: Table-6: PV Inverter prices Item High Low Avg Chg Chart PV Inverter Price (Per Watt) (0 %) (Source: Page 8 of 27

9 Further, they have submitted that the average spot price for PV inverter on June 26, 2013 was $0.21/W. It is noteworthy that the average contract price for inverters during the last six months has been in the range of $0.21/W to $0.23/W. Therefore, even if lowest spot price of $0.15/W is considered for determination of inverter prices in , it works out as ` 90 Lakh/MW. Thus, they requested to increase the cost of inverter from ` 60 Lakh/MW to ` 90 Lakh/MW. 19. First Solar Power India(Private) Limited submitted that Commission while determining the benchmark capital cost for Solar PV projects for the year , did not consider inverter replacement cost. Photovoltaic inverters come with a typical 5 year warranty, with a provision for a 10 year extended warranty. Therefore, it is imperative to replace the inverter after years of operation. Considering a replacement after completion of 12 years, the present value of replacement comes at approx. Rs 25 Lakh/MW which should be considered while determining the capital cost of the project. 20. Torrent Power submitted that Commission in the Draft Order has considered the one time cost of the Power conditioning unit at Rs. 60 Lakh per MW in the Capital cost of the Solar PV Project. The power conditioning unit/inverter generally comes with a warranty of 5 years and also various EPC contractors recommend that inverters are to be replaced during 12 th to 15 th year of operation to ensure proper transmission of Power. Further, GERC in its Solar Tariff Order dated has considered cost of inverter replacement at 3.81% of the capital cost during 13 th year. They requested Commission to consider additional Power conditioning unit replacement cost of Rs. 60 Lakhs per MW during the 13 th year of operation while working out the tariff. Page 9 of 27

10 21. Power Energy Consultants also submitted that capital cost of Solar Thermal Project should also be revised based on recent Exchange Rate of ` per US$ ( in place of ` as per US$). 22. Reliance Power Limited submitted that only one solar thermal project has been commissioned in India as per media reports (Godavari Green Energy Limited: Project cost of ` 790 Crores for 50 MW i.e. ` 15.8 Cr/MW). The capital cost for FY should not be less than ` Cr/MW (capital cost FY ). Apart from the above, capital cost should be minimum ` Cr/MW for FY (=` Cr/MW+` 0.25Cr/MW towards township). Commission s Analysis and Decision 23. Commission clarifies that benchmark capital cost specified by the Commission excludes the cost of transmission line from solar plant to RVPN s 132 kv or 220 kv GSS, receiving power, which is to be borne by a Solar developer. As regards the clarification about Capital cost benchmark, whether Capital cost per MW is for 1 MWp i.e. installed module capacity or 1 MW AC output of a solar plant, it is stated that capital cost benchmark for a solar PV plant refers to cost per MW of the output. 24. Regarding the comments of the stakeholders to consider the cost of land as Rs Lakh/MW same as considered by CERC, Commission would like to state that it is also mentioned in the draft order that Capital Cost arrived by CERC is in All India Context. However, the situation varies from State to state. The land used by Solar developers for setting up their Solar Projects in the State is mostly Govt. land; which is being allotted at concessional rate of 10% of the DLC rate (agriculture land) as per the provisions of Rajasthan Land Revenue (Allotment of Land for setting up of Power plant based on Renewable Energy Sources) Rules, 2007 as Page 10 of 27

11 amended from time to time. In addition to this, the land used by Solar developer for setting up their Solar projects is mostly a wasteland virtually having negligible commercial utility. Therefore, in view of the above, Commission considers it appropriate not to make any changes in Capital cost norm for a Solar plant on account of land cost. 25. One of the developers has requested for considering township as a part of the Capital cost for both Solar PV and Solar Thermal. Commission would like to clarify that capital cost norms for Solar projects (both Solar PV and Solar thermal) are generic norms and are applicable for both small and large scale projects and small projects do not need a separate colony. The large projects on the other hand have the benefit of economies of scale. In view of the above, Commission, therefore, is not inclined to accept the said contentions. 26. One of the stakeholders has furnished the solar module spot price (updated on ) showing higher average prices for Silicon Solar module (0.731 $/Watt against 0.667$ considered in the draft order) and thin film solar module ($ 0.664/W against 0.620$/W considered in the draft order) referred in the Commission s draft order. It is clarified that the price information was analyzed to capture the cost trend of PV modules. It is mentioned that PV insight reports (last updated on ) indicates average price for Silicon Solar module as $/W and average price for thin film solar module as $/W, which are lower than suggested by the stakeholder. It is clarified that while specifying the benchmark capital cost, the future spot price trends cannot be lost sight of. Considering that solar module prices were almost at the same level even as on as indicated in the draft Page 11 of 27

12 order, Commission is, therefore, of the view that no change is required in the Capital cost benchmark norm on this account. 27. One of the stakeholders apprised that on insistence of Solar manufacturers Association, Directorate General of Antidumping and Allied Duties (DGAD) has initiated an investigation of imports of Solar cells and expressed that, if any antidumping duty is levied, there are chances of increase of price of modules. Any change in the capital cost bench mark purely based on speculation of imposition of antidumping duty can not be agreed. 28. One of the stakeholders has requested to increase the inverter price from ` 60 Lakh/MW to ` 90 Lakh/MW in view of spot prices revealed by PV energy trend. Some stakeholders have submitted that since Photo voltaic inverters come with a typical five year warranty, with a provision for a ten year extended warranty, it is, therefore, to be replaced after years of operation for which present value of replacement cost of approximately ` 25 Lakh/MW may be considered in capital cost. CERC in their order dated in the matter of determination of the benchmark capital cost norm for solar PV and Solar thermal power projects applicable during FY , has also observed that some of the inverter manufacturers have started manufacturing in the country. CERC even after considering the replacement cost of inverter after 12 to 15 years, has considered ` 60 Lakh/MW as reasonable cost. Therefore, in view of the above, no change is required in the Capital cost benchmark norm on this account. 29. Several stakeholders have requested that capital cost for solar PV and solar thermal may be revised on account of foreign exchange rate variation. Commission would like to state that though Commission has not specified the breakup of capital cost Page 12 of 27

13 benchmark, however, the capital benchmark norms specified are broadly based on benchmark specified by CERC for FY CERC in their order has considered average currency exchange rate of past six months for arriving at the module cost instead of considering the prevailing exchange rate. Accordingly, they had considered exchange rate at ` 54.32/US $. Further, it is mentioned that the variation in exchange rate is affected by the prevailing general economic scenario, therefore, is amenable to change either way in future course. Sometimes exchange rates also exhibit abnormal variations. Thus, the suggestions of stakeholders of considering prevailing exchange rate for arriving at module cost cannot be accepted. Commission has, on the other hand, considered average rate of exchange for past six months of Rs 57.62/US$ (1 st March 2013 to 30 th August 2013), which is the most recent trend of six months period, to smoothen out abnormal exchange rate variations and accordingly, the cost of PV Module increases by ` Lakh (= [(57.62/ )*325.92). In light of this, total capital cost for solar PV Projects has been increased by Rs Lakh by rounding off. 30. One of the stakeholders has cited that based on media reports, the capital cost of a commissioned solar thermal project i.e. Godavari Green Energy Ltd., is coming to ` 15.8 Cr./MW. They have also submitted that capital cost for FY should not be less than ` Cr./MW (capital cost for FY ), it should be minimum ` Cr./MW. Commission would like to state that presently Commission is determining the generic capital cost benchmark, where, unless a significant reliable and validated data relating to cost of the commissioned projects is available, it would not be appropriate to change the benchmark norm based on data of a specific project. In view of this, Commission considers it appropriate to retain the capital cost benchmark norm for solar Page 13 of 27

14 thermal projects as proposed in the draft order i.e. ` Cr./MW for FY , including connectivity charges of ` 2.00 Lakh/MW. Capacity Utilisation Factor (CUF) Stakeholder s comments/suggestions 31. Rudraksh Energy in their written submissions requested that it may be clarified whether the CUF of 20% considered for solar projects is with the module capacity of 1 MWP (installed Module capacity) or 1 MW AC output corresponding to about 1.1. MW DC. 32. Reliance Power Limited submitted that based on 21 prominent locations in Rajasthan where projects are being executed, they have calculated the average CUF, considering GHI data based on Meteonorm. The average CUF for these locations is 19% for thin film and 18.30% for crystalline. They have requested that CUF should be considered as 19% as per CERC (Terms and Conditions for Tariff determination from Renewable Energy Sources) Regulation, Reliance Power Limited, regarding CUF of Solar Thermal, has submitted that CUF of 23% has been considered on resource DNI map published by MNRE in Based on actual DNI data collected at sites across India, all Solar Thermal developers are experiencing approximately 15% drop in DNI in comparison to the data published earlier by MNRE. Based on actual DNI data collected, the Commission should consider revising the CUF from 23% to 20%. Commission s Analysis and Decision 34. As far as CUF of solar PV plants is concerned, it is mentioned that CUF of plants operating in the state is lower than 20% at some locations and more than 20% at other locations. Further, Page 14 of 27

15 Commission also observes that throughout the country geographic and climatic conditions vary and it is difficult to expect the same CUF norm for different locations in the country. Commission considers it appropriate to retain the benchmark norm of CUF as 20%. In case of solar thermal plants, in absence of actual data of full one year, Commission is of the views that no change is required for benchmark CUF and accordingly, benchmark CUF of 23% would continue to remain applicable. De-ration Stakeholder s comments/suggestions 35. PEC submitted that as per the international guarantees/warrantees given by the manufacturers, degradation up to 90% is allowed by tenth year and 80% by 25 th year. Considering this, the de-rating should be taken as 1% per annum from 2 nd to 11 th year and thereafter, 0.70% per annum till 25 th year. 36. Reliance Power Limited submitted that most of the PV module manufacturers provide a warranty of 1% degradation from 2 nd year onwards. Hence, the same may be considered in the tariff determination. Commission s Analysis and Decision 37. Commission would clarify that in the initial 3-4 years of operation, there is no considerable de-ration to be accounted for, as the same is more or less covered in the manufacturer s guaranteed output of the solar modules. Therefore, Commission considers it appropriate to retain de-ration of 0.50% per annum after two years for solar PV modules. Page 15 of 27

16 Auxiliary Consumption Stakeholder s comments/suggestions 38. Reliance Power Ltd submitted that auxiliary power is required for air-conditioning in inverter and control rooms, cleaning water softening and pumping system, security night lighting and general office lights and fans. Also, based on experience of operational plants, the observed auxiliary consumption is between 1% to 2%. Hence, Auxiliary consumption may be considered at a nominal value of 1% of gross generation. Commission s Analysis and Decision 39. Commission recognizing the requirement of solar plant has allowed auxiliary consumption of 0.25%. Further, Commission has also considered de-ration separately to account for the reduction in generation with passage of time and also, in absence of reliable actual operational data, Commission presently, is not inclined to make any change in auxiliary consumption benchmark for solar PV projects on this account. Operation and Maintenance (O& M) Expenses Stakeholder s comments/suggestions 40. Reliance Power Ltd submitted that the key reason for escalation in O&M expenses is attributable to the manpower costs and the general scenario of a higher inflation. The escalation of 5.72% considered by the Commission in O&M expenses is not reflective of the actual price rise due to higher WPI and increased manpower cost. Lack of skilled manpower availability within the country and consequently hiring of experts during O&M of the plants results in higher O&M expenses for solar thermal projects. Thus, due to higher escalation and expert requirement, O&M expenses should be increased to Rs 18 Lakh/MW from Rs Lakh/MW. Page 16 of 27

17 Commission s Analysis and Decision 41. Commission observes that there is hardly any operational experience of MW scale thermal power projects in India to establish the norms for O&M expenses. Commission, therefore, considering an annual escalation of 5.72% over O&M Expenses of Rs Lakh/MW approved for FY with 0.3% towards insurance cost every year on the depreciated value of the assets, arrived at the figure of Rs Lakh/MW for FY in the draft order. Accordingly, Commission does not consider it appropriate to make any change in the O&M expenses benchmark for solar thermal projects. Applicability of Rate of Surcharge Stakeholder s comments/suggestions 42. Torrent Power submitted that in the Fiscal Budget 2013, the surcharge rate on MAT and Corporate tax for AY (FY ) has been increased from 5% to 10% for those companies whose total income exceeds Rs 10 Crore rupees, therefore, the surcharge rate of 10% may be considered for the corporate tax and MAT during the useful life of the project. Commission s Analysis and Decision 43. As regards the suggestion of applying surcharge rate of 10% for corporate tax and MAT, it may be mentioned that the most of the plants getting commissioned in the State for supply of power to distribution companies are typically of size 5 to 10 MW and annual taxable income of such plants relevant for levellised tariff would be less than 10 Crores. Therefore, these would not be subjected to said increased surcharge rate of 10%. In light of the above, Commission considers it appropriate to retain a surcharge rate of 5% in the tariff computations of generic tariff for FY Page 17 of 27

18 Other issues 44. The stakeholders have also furnished comments on the issues not covered as above. The same have been covered in the following paras. Other issues-transmission Charges Stakeholder s comments/suggestions 45. Reliance Power Ltd submitted that Rajasthan has high solar irradiation and barren land, which offers good potential to be utilised by Developers to set up solar power projects for sale to other States. In case of interstate sale of power, the developer has to use the transmission system of the host State to connect to PGCIL network. While CERC has exempted Solar Power from transmission charges and losses on the CTU network, whereas the inter-state developer has to bear the transmission charges. Since CUF of solar plants is lower (20% for PV, 23% for Solar Thermal as per RERC) as compared to 80%-90% of thermal power plats, the impact on per unit basis is high for solar power plants. These charges and losses form a significant portion. In order to encourage solar power plants in the State of Rajasthan, the matter may be taken up to issue an Order to waive off the transmission charges and losses in line with CERC. In absence of this, it is likely that the project will be set up in the host states, where the demand is, which will deprive the State of Rajasthan from investments and associated benefits. Commission s Analysis and Decision 46. As regards the waiving off the transmission charges and losses for solar power projects in line with CERC, Commission would like to observe that this matter relates to amendment in tariff regulations and falls outside of the purview of this order. Page 18 of 27

19 Other issues-applicable Tariff for Solar PV Plants Stakeholder s comments/suggestions 47. Rudraksh Energy submitted that in order to give relief to the Discoms/ Consumers during the initial years of the Tariff period, the alternate tariff (back loaded) with lesser tariffs of about Rs 6.25 and Rs 5.5 per unit for the first year with an annual escalation of about 3% (with and without AD) may be specified. Commission s Analysis and Decision 48. Commission observes that tariff design should be such which may ensure adequate cash flow stream to the developers in the initial years of the project when debt servicing cost is higher and at the same time, the interests of utility and consumers are protected by avoidance of cost burden during these years. Commission, therefore, has been specifying the levellised tariff for solar power projects commissioned during earlier years. Commission, therefore, considers it appropriate to continue with the past practice of specifying the levellised tariff. Other issues-tariff Based bidding Stakeholder s comments/suggestions 49. M/s Rudraksh Energy requested that: (1) Discoms and RREC, who may be purchasing Solar Power through Tariff based bidding may be directed to consider discount on both the tariffs i.e. with and without availing AD benefits as was done earlier under National Solar Mission (NSM) so that the competition is wider and not limited to the Companies availing AD benefits. (2) Discoms/ RREC while inviting Tariff based bidding, can ask for the Discount on such lower tariffs (6.25 and 5.5) with an annual escalation of about 3%. This tariff Model has been Page 19 of 27

20 adopted recently by TANGEDCO, Tamilnadu with an escalation of 5% for first 10 years. Commission s Analysis and Decision 50. Commission observes that both issues raised by the stakeholder related to the bidding said to be conducted by RREC. RREC, being a trading licensee, therefore, falls outside the domain of regulatory control of the Commission in respect of directions as suggested by the stakeholder. Therefore, Commission is unable to accept the suggestion of the stakeholder at this stage. Other issues-penal charges for recovery of wrongly claimed AD benefit Stakeholder s comments/suggestions 51. Rudraksh Energy submitted that the percentage mentioned for recovering the additional amount of wrongly claimed AD benefit by a power generator, the penal charges may be considered as 2.0% per month in place of proposed 1.50% per month. Commission s Analysis and Decision 52. Commission would like to state that penal charges of 1.50% per month for recovering the additional amount of wrongly claimed AD benefit by a power generator have been specified for wind power projects (order dated ) and therefore, Commission considers it appropriate to continue with the same for Solar power projects also. Metering Stakeholder s comments/suggestions 53. Rudraksh Energy requested the Commission to clarify as to how the transmission losses shall be accounted for, in case Metering for billing purpose is done at RVPN s GSS/Discom s Sub-station. Page 20 of 27

21 Commission s Analysis and Decision 54. As the metering is now to be done at Generator s bus bar, the issue of accounting for losses in case of metering at RVPN/Discom s sub-station doesn t arise. Interest on Term Loan Stakeholder s comments/suggestions 55. Reliance Power submitted that while interest rate reflects the current market scenario, Banks also charge a one time upfront/processing fee of around 1.50% of debt amount, which may be considered instead of 1% of capital cost considered by CERC. RERC has considered 1% in line with CERC and same may be considered as part of Financing Charges and thus, part of Project Cost. Commission s Analysis and Decision 56. Commission would like to state that Capital cost has been specified only on the lumpsum basis broadly based on total capital cost specified by CERC keeping in view the overall situation and no break up was specified. In light of this, the contention of the stakeholders is not acceptable. Rooftop and Small Solar PV and thermal systems: Applicable Tariff (as in draft Order) Stakeholder s comments/suggestions 57. Rudraksh Energy in their written suggestions have submitted that Roof top PV and small solar projects are generally installed as distributed generation projects, throughout the state in every district with varying solar radiation (from 18 to 20% CUF). Besides this the capital cost per MW is higher and the grid availability is lower. In view of this, a higher tariff may be provided for smaller projects and at least two separate tariff for the State, as provided in the case of Wind Projects, so that Solar Plants are installed in Page 21 of 27

22 Districts other than Jodhpur, Jaisalmer, Bikaner, Nagore also, which will save Transmission cost as well as losses. 58. First Solar Power India (P) Ltd submitted that for roof top projects, capital cost is higher than the capital cost considered for grid connected solar PV projects on account of battery cost involved in small rooftop systems. MERC has provided Rs 0.5/kWh for solar rooftop plants over and above the tariff approved for grid connected solar power plants. Therefore, Commission may notify increased benchmark capital cost and tariff for small solar rooftop projects taking into account the cost of battery. Commission s Analysis and Decision 59. Commission would like to state that for setting up of a MW scale power plant, a set of preliminary works are required to be done, which also include land acquisition and development etc. For a typical green field grid connected solar PV MW scale project, the cost components towards land, civil and general works, preliminary and preparative expenses taken together come in the vicinity of 15-17%. For roof top solar PV systems such expenses would be lower. However, CUF for roof top PV systems would be lower as such systems may be located predominantly in the areas having lesser solar radiation when compared with western Rajasthan, which has better solar radiation potential and also due to impact of shading of trees/adjoining buildings. In view of such consideration, Commission has been specifying the same tariff for Rooftop PV Systems as applicable to the MW scale projects. In light of the above position, Commission considers it appropriate to continue with the past practice of specifying same tariff for both roof top PV and small solar plants and MW scale PV projects. Page 22 of 27

23 Summary of Norms for Solar Thermal projects 60. Considering the stakeholder comments and the Commission s analysis and decisions on the same, the summary of the final main parameters for Solar PV and Solar thermal tariff determination are given below: Table-7: Summary of key normative parameters for solar PV projects S.No. Parameter Value Capital cost `7.80 crore per MW for FY Capacity Utilisation Factor 20% with a deration of 0.5% every (CUF) year after second year 3 Interest on term loan 13.00% p.a. 4 Interest on working capital 12.50% p.a. 5 O&M Expenses `11.63 Lakh/MW for FY with an escalation of 5.72% p.a. plus 0.3% of depreciated project cost in each year towards insurance. 6 Auxiliary Consumption 0.25% The complete tariff parameters/assumptions along with detailed computations for the generic tariff for solar PV tariff are given at Annexure-1. Table-8: Summary of key normative parameters for solar thermal projects S.No. Parameter Value Capital cost ` Crores per MW for FY Capacity Utilisation Factor (CUF) 23% with a deration of 0.25% every year after fourth year. 3 Interest on term loan 13.00% p.a. 4 Interest on working capital 12.50% p.a. 5 O&M Expenses ` Lakh /MW for FY with an escalation of 5.72% p.a. plus 0.3% of depreciated project cost in each year towards insurance. 6 Auxiliary Consumption 6.5% Page 23 of 27

24 The complete tariff parameters/assumptions along with detailed computations for the generic tariff for solar thermal tariff are given at Annexure-2. Applicable Tariff for Solar PV Plants 61. Considering the parameters discussed above, the generic tariff for Solar PV plants is being determined as ` 8.33/kWh, as per calculation sheet placed at Annexure-1. This tariff is levellised tariff for 25 years and applicable for plants commissioned without availing benefit of AD. The tariff would be lower by ` 1.02/kWh if AD benefit is availed i.e. the tariff would be ` 7.31/kWh. This tariff would be applicable for solar PV plants where PPA is signed on or before and which get commissioned on or before Applicable Tariff for Solar Thermal projects 62. Considering the parameters discussed above, the generic tariff for the solar thermal power plants is being determined as ` 11.37/kWh, as per calculation sheet given at Annexure-2. This tariff is levellised for 25 years and applicable for plants commissioned without availing benefit of AD. The tariff would be lower by ` 1.40/kWh if AD benefit is availed i.e. the tariff would be ` 9.97/kWh. This tariff would be applicable for solar thermal plants where PPA is signed on or before and which get commissioned on or before Guidelines for Metering, Billing and other Requirements 63. The guidelines laid down as per order dtd as regards (i) Metering and Billing arrangement; (ii) Technical requirements; and (iii) General Terms and Conditions are being retained and would be suitably incorporated in the PPA. Conclusion Page 24 of 27

25 64. The generic tariff levellised for 25 years for two different technologies (solar PV & solar thermal) and for Roof Top and small solar plants is summarized as under: Table- 9: Summary of tariff for Solar PV and Solar Thermal projects S. No. Particulars Tariff (`/kwh) if AD benefit is not availed Tariff (`/kwh) if AD benefit is availed Solar Photo Voltaic (PV) Power Plants commissioned by Solar Thermal Power Plants commissioned by Roof Top Solar PV installations and other small solar PV power generation plants to be commissioned by Small Solar Thermal Power generation plants to be commissioned by Both the tariff mentioned in the above table i.e. with or without availing AD benefit would be a valid tariff for purchase of Solar Power by distribution licensees from solar generation plants set up in Rajasthan. 66. For a solar power generator claiming the higher tariff worked out as above for projects not availing Accelerated Depreciation benefit, Commission considers it appropriate to lay down modalities as under: (1) The PPA should include an undertaking of the solar power generator that Accelerated Depreciation benefit would not be availed for the generating plant/unit; (2) The first bill raised by the solar power generator shall be accompanied by an undertaking that Accelerated Depreciation benefit shall not be claimed. Based on this, the applicable tariff would be allowed; Page 25 of 27

26 (3) The claims of energy charges as per applicable tariff may be entertained based on the said undertaking upto the due date of filing of Income Tax Return of the relevant financial year. This would mean 30 th September, 2014 for payment for the financial year and for the first six months (upto 30 th September) of financial year and so on; (4) After filing of Income Tax Return a certificate from a Chartered Accountant (CA) that Accelerated Depreciation has not been claimed would have to be submitted or in the alternative a copy of Income Tax Return filed with Income Tax Department wherein Accelerated Depreciation has not been claimed along with verification of Tax Consultant may be furnished; (5) As Income Tax Return is required to be filed in the next year, the payment of amount corresponding to non-availment of Accelerated Depreciation in respect of energy supplied in the month of October onwards of the financial year following the financial year of commissioning of the plant would be made only after the said certificate/copy of Income Tax Return is furnished; (6) For the energy supplied in the months of October onwards, the methodology as given in sub-paras (4) & (5) above be followed. Commission also considers it appropriate that undertaking of the power generator in PPA saying that benefit of Accelerated Depreciation would not be availed should also include an undertaking that in case it is found that benefit of Accelerated Depreciation has been claimed, the licensee would be entitled to Page 26 of 27

27 recover the additional amount wrongly claimed by power generator along with penal 1.50% per month. 67. A solar power generator not availing CDM benefit would need to give an annual undertaking that CDM benefit has not been availed. However, if CDM benefit is availed, it would have to be shared with distribution licensee as envisaged in Regulation 42 of RERC Tariff Regulations Grid connectivity charges are governed by regulation 89(2) of current MYT Regulations and therefore, Connectivity ` 2.00 Lakh per MW, would be payable. 69. If the capacity in excess of RPO is to be contracted, the licensee must obtain prior approval of the Commission based on reasons and full justification before contracting for capacity in excess of RPO requirement. 70. The metering shall be at the generator premises as provided in CEA Metering Regulations. 71. Copy of this Order be sent to the State Government, Central Electricity Authority (CEA), MNRE,RREC, Distribution Licensees and be also placed on the Commission s web site. (S. Dhawan) Member (S.K. Mittal) Member (D.C. Samant) Chairman Page 27 of 27

28 TARIFF DETERMINATION FOR SOLAR PHOTO VOLTAIC POWER PLANTS LOCATED IN RAJASTHAN Annexure-1 Levelised Tariff (Rs/kWh) without AD 8.33 Accelerated Depreciation benefit(rs/kwh) 1.02 Levelised Tariff (Rs/kWh) with AD 7.31 S. No. Assumption Head Sub-Head Sub-Head (2) Unit Base Case (SPV) 1 Power Generation Capacity 2 Project Cost Installed Power Generation Capacity MW 1 CUF % 20.00% Deration p.a. after 2nd year % 0.50% Auxiliary Consumption % 0.25% Tariff Period Years 25 Life of Power Plant Years 25 Capital Cost/MW Including Land & Connectivity charges Rs Lakh/MW Sources of Fund Debt: Equity Debt % 70.00% Equity % 30.00% Total Debt Amount Rs Lakh Total Equity Amout Rs Lakh Funding Options-1 (Domestic Loan Source-1) Loan Amount Rs Lakh Moratorium Period years 0 Repayment Period(incld Moratorium) years 12 Intrest Rate % 13.00% Funding Options-2 ( Equity Finance ) Equity amount Rs Lakh 234 Return on Equity % p.a 16.00% Discount Rate (CERC Notification ) 13.10% 4 Financial Assumptions Fiscal Assumptions Income Tax (11th year onwards) % 30.90% MAT Rate (for yr-1) yr-2 ) % 20.01% 19.06% MAT Rate (for yr-2 to yr-10) 19.06% 80 IA benefits Yes/No Yes Depreciation Depreciation Rate(upto 12-yrs) % 5.28% Depreciation Rate(after 12-yrs) % 2.05% Years for 5.28% SLM rate years 12 5 Working Capital For Fixed Charges O&M Charges Months 1 Maintenance Spare (% of O&M expenses) 15.00% Receivables for Debtors Months 1.5 Intrest On Working Capital % 12.50% 6 Operation & Maintenance Expenses Power plant Rs Lakh per MW Rs Lakh/MW Insurance charges % of depreciated capital cost % 0.30% O & M Expenses Escalation % 5.72%

29 Annexure-1 contd TARIFF DETERMINATION FOR SOLAR PHOTO VOLTAIC POWER PLANTS LOCATED IN RAJASTHAN Units Generation Unit Year---> Aux Consumption % 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% Installed Capacity MW Deration factor % 0.50% Generation MU Cost of generation Unit Year---> O&M Expenses Rs Lacs Depreciation Rs Lacs Interest on term loan Rs Lacs Interest on working Capital Rs Lacs Return on Equity Rs Lacs Total Cost of generation Rs Lacs Per unit Cost of generation Rs/kWh Levellised cost of generation (Rs/kWh) (25 yrs) 8.33 Note(s): 1. Levellised tariff has been worked out by carrying out levelisation over 25 years and Discount Rate has been considered as 13.10% as per CERC Notification Figures may not tally exactly on account of rounding off.

30 Determination of Accelerated Depreciation Benefit for Solar PV Power Projects Depreciation amount 90% Book Depreciation rate 5.28% Tax Depreciation rate 80% Additional depreciation rate applicable during first year 20% Income Tax 32.45% 30.90% Capital Cost Rs Lakh/MW Years > Unit Book Depreciation % 2.64% 5.28% 5.28% 5.28% 5.28% 5.28% 5.28% 5.28% 5.28% 5.28% 5.28% 5.28% 5.28% 5.28% 5.28% 5.28% 5.28% 2.88% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Book Depreciation Rs Lakh Accelerated Depreciation Opening % % 50.00% 5.00% 1.00% 0.20% 0.04% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Allowed during the year % 50% 45.00% 4.00% 0.80% 0.16% 0.03% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Closing % 50.00% 5.00% 1.00% 0.20% 0.04% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Accelrated Deprn. Rs Lakh Net Depreciation Benefit Rs Lakh (9.98) (34.94) (39.94) (40.93) (41.13) (41.17) (41.18) (41.18) (41.18) (41.18) (41.18) (41.18) (41.18) (41.18) (41.18) (22.46) Tax Benefit Rs Lakh (3.09) (10.80) (12.34) (12.65) (12.71) (12.72) (12.73) (12.73) (12.73) (12.73) (12.73) (12.73) (12.73) (12.73) (12.73) (6.94) Energy generation MU Per unit benefit Rs/Unit (0.18) (0.62) (0.72) (0.74) (0.75) (0.75) (0.75) (0.76) (0.76) (0.77) (0.77) (0.77) (0.78) (0.78) (0.79) (0.43) Discounting Factor,DF Applicable DF Levellised AD benefit 1.02 Rs/kWh Note(s): 1. In the above calculations, depreciation for the first year has been considered as 50%(=50% of (80%+20%) and for second year as 90%(=80%+50% of 20%) as per CERC methodology. 2. Generation for the first year has been considered as 50% of normative generation for second half of the financial year. 3. Figures may not tally exactly on account of rounding off.