Tribunal disapproves retrospective reduction in solar PV tariffs

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TariffThursday, September 04, 2014: India is one of the most attractive markets for solar power. Some recent regulations issued by several European countries to cut tariffs for solar power projects were supposed to affect the growth of the industry in India. But a recent order has reinstated the fact that India is still one of the largest solar energy markets in the world.

The Indian Appellate Tribunal for Electricity (Aptel) has passed an order that the initial solar power projects, which will be commissioned in India, will not face any retrospective reduction in tariffs after the utilities purchase power from these projects. Aptel has claimed that the tariffs were determined using higher than actual capital costs to the project developers. The utilities have signed power purchase deals with 88 projects in the state of Gujarat, and these projects represent over 970MW of solar power capacity. These utilities have claimed that the capital cost for projects were assumed to determine the tariffs in 2010 and they were quite higher than the actual investment cost. PPAs have been signed by project developers to sell their power at Rs 15 per unit for the first 12 years and then for the next 13 years it would cost Rs 5.

This tariff rate was calculated on the basis of the capital cost investment of Rs 165 million per MW. Many of these projects were commissioned during 2011-12 and at that time the Central Electricity Regulatory Commission assumed that capital cost for solar PV projects were Rs 144.2 million per MW. These projects in India were commissioned under the National Solar Mission and some of these were initiated by then Chief Minister of Gujarat Narendra Modi. These Modi-pioneered projects are part of the Gujarat Solar Park which is located in the Patan district. The existing tariff systems were objected by the utilities as the solar PV tariffs have dipped severely since 2010. Since last few years CERC has been reducing tariffs by almost 20 per cent per year. These tariffs were recommended to the state regulators and states have the option either to follow them completely or implement also the part as suggested by CERC.

These projects in Gujarat were not distributed through competitive bidding and as they were allocated by other states and the central government, now they are getting allocated through competitive bidding. The project developers are also ready to quote tariffs as low as Rs 5 per unit.