Himachal Pradesh Revises Solar PV Tariffs

The Himachal Pradesh Electricity Regulatory Commission (HPERC) has finalised the generic levelised tariffs for solar photovoltaic (PV) projects for the financial year 2024-25 after extensive consultations with industry stakeholders.

The decision follows concerns raised over project costs, capacity utilisation, and financing parameters, with adjustments made to ensure fair pricing while promoting solar power development in the state.

One of the key changes in the tariff determination process was the revision of capital cost assumptions. Stakeholders pointed out that the module cost in the draft proposal was lower than market rates. After reviewing the inputs, the commission increased the module cost to INR 132.56 lakh per MW, with the total capital cost revised to INR 364.11 lakh per MW for projects ranging between 1 MW and 5 MW. For projects up to 1 MW, the cost was slightly higher at INR 367.75 lakh per MW. Additional allowances were granted for projects located in urban and industrial areas, increasing their capital cost further.

The commission has also announced the finalized tariffs based on these updated cost estimates. For projects up to 1 MW in non-urban areas, the tariff was set at INR 3.50 per kWh, while for projects between 1 MW and 5 MW, it was fixed at INR 3.47 per kWh. In urban and industrial areas, where costs are typically higher, the tariffs were set at INR 3.55 per kWh for projects up to 1 MW and INR 3.52 per kWh for projects between 1 MW and 5 MW.

On the issue of Capacity Utilisation Factor (CUF), several stakeholders argued that the 21 percent assumption was too optimistic, citing actual generation data indicating a 16 percent CUF. However, the commission decided to retain the 21 percent CUF, stating that it aligns with central regulatory guidelines and reflects expected improvements in technology.

Financing parameters were also a crucial aspect of the tariff determination. The interest rate was maintained at 10.60 percent, factoring in the average marginal cost of funds-based lending rate of the State Bank of India (SBI) over the last six months, with a 200 basis point addition. Depreciation was set at 4.67 percent annually for the first 15 years, followed by 1.995 percent thereafter. The operation and maintenance (O&M) expenses were fixed at INR 10.16 lakh per MW, with an annual 3.84 percent escalation.

The new tariff structure applies to grid-connected solar PV projects, and it does not include any subsidies or incentives. However, adjustments will be made if developers avail government support. The commission expects these tariffs to promote small and medium-sized solar projects across Himachal Pradesh, contributing to the state's renewable energy goals and energy security while ensuring fair returns for developers and reasonable pricing for consumers.