KERC Proposes INR 2.65/unit Solar Tariff for 2026–29 Control Period

The Karnataka Electricity Regulatory Commission (KERC), has issued a detailed discussion paper for determining tariff and regulatory norms for solar power projects, including Distributed Solar Photovoltaic (DSPV) systems with net-metering and gross-metering arrangements, for the control period from 1 July 2026 to 30 June 2029.

The Commission said that the framework is being prepared under the provisions of Sections 86(1)(e), 61 and 62(1)(a) of the Electricity Act, 2003, which mandate promotion of renewable energy and empower tariff determination for electricity generation and supply.

KERC noted that its earlier tariff order dated 9 July 2025 had fixed levelised solar tariffs for projects commissioned between 1 July 2025 and 30 June 2026 at INR 2.30 per unit for 1–2 kW systems, INR 2.48 per unit for 2–3 kW systems, and INR 2.93 per unit for capacities above 3 kW. That order remains valid for a 25-year project life but will expire at the end of June 2026, necessitating a fresh tariff framework for the next control period.

The Commission highlighted that Karnataka had an installed solar capacity of 6,354.74 MW under PPA mode as of 30 April 2026, including 920.74 MW of DSPV projects. It observed that large consumers dominate DSPV adoption, while participation from smaller consumers, especially households, remains limited despite significant rooftop solar potential in the state.

For the upcoming control period, KERC has proposed a comprehensive cost-plus tariff structure based on revised market and financial benchmarks. The Commission has fixed a capital cost of INR 306.90 lakh per MW for ground-mounted solar projects, with INR 138 lakh per MW allocated for modules, INR 126 lakh per MW for balance-of-system components, and INR 36 lakh per MW towards land cost. The assumptions also factor in revised GST rates of 5 percent on solar equipment and a dual GST structure for EPC services.

KERC has retained a 70:30 debt–equity ratio, with normative debt of INR 214.83 lakh per MW and equity of INR 92.07 lakh per MW. The Commission has assumed a 19 percent capacity utilisation factor, 10.80 percent interest on debt, 13-year repayment tenure, and a 14 percent  return on equity. Working capital interest has been set at 11.20 percent, while auxiliary consumption has been fixed at 0.25 percent for utility-scale projects.

On operational norms, the Commission has proposed annual O&M expenses of INR 3.069 lakh per MW with an escalation rate of 5.72 percent. Depreciation has been pegged at 6.1 percent for MW-scale projects, while the discount rate has been set at 11.76 percent based on weighted average cost of capital. These parameters collectively result in a levelised tariff of INR 2.65 per unit for solar projects under the proposed framework.

For DSPV systems, KERC has proposed differentiated capital costs to encourage rooftop solar adoption. Domestic consumers installing 1–10 kW systems will be eligible for a capital cost of INR 35,000 per kW, while other consumer categories will have a benchmark of INR 27,090 per kW. The Commission said the higher support for households is aimed at boosting adoption among small consumers, where penetration remains low despite strong potential.

KERC has invited stakeholders to submit comments and suggestions on the discussion paper before finalising the tariff order for the 2026–29 control period. The new framework will replace the existing order expiring on 30 June 2026 and will guide solar tariff determination across Karnataka for the next three years.