JERC M&M Generic Tariff Order(5th Jan,2015)

JOINT ELECTRICITY REGULATORY COMMISSION FOR MANIPUR & MIZORAM

 

Petition No. SM/1/2014 (Suo-Motu)

 

                                                                                Coram: Shri A.Chhawnmawia, Member

 

 

Date of Order:   5^th January, 2015

 

 

IN THE MATTER OF

 

Determination   of   generic  levellised  generation   tariff   for  the  FY   2014-15  under Regulation 8 of the Joint Electricity Regulatory Commission for Manipur & Mizoram (Terms and Conditions for Tariff determination from Renewable Energy Sources) Regulations, 2010 and under the Joint Electricity Regulatory Commission for Manipur & Mizoram (Terms and Conditions for Tariff determination from Renewable Energy Sources) (First Amendment) Regulations, 2014.

ORDER

 

1.        The Commission has notified the Joint Electricity Regulatory Commission for Manipur & Mizoram (Terms and Conditions for Tariff determination from Renewable Energy Sources) Regulations, 2010 (hereinafter referred to as “the RE Tariff Regulations”), on 31.05.2010 and the Joint Electricity Regulatory Commission for Manipur & Mizoram (Terms and Conditions for Tariff determination from Renewable Energy Sources) (First Amendment) Regulations, 2014 (hereinafter referred to as “the RE Tariff (First Amendment) Regulations”, on  05.08.2014. These regulations provide for terms and conditions and the procedure including various technical norms for determination of tariff of the following categories of Renewable Energy (RE) generating stations:

(a) Wind Power Project;

(b) Small Hydro Projects;

(c) Biomass Power Projects with Rankine Cycle technology;

(d) Non-fossil fuel-based co-generation Plants;

(e) Solar Photo voltaic (PV);

 

(f) Solar Thermal Power Projects;

 

(g) Biomass Gasifier based Power Projects; and

 

(h) Biogas based Power Project.

 

 

 

2.        Clause (1) of Regulation 8 of the RE Tariff Regulations provides that “the Commission shall determine the generic tariff on the basis of suo-motu petition at least six months in advance at the beginning of  each year of the Control period for renewable energy technologies for which norms have been specified under the Regulations”. Generic Tariff is different from the project specific tariff for which a project developer has to file petition before the Commission as per the format provided in the RE Tariff Regulations.  The Commission, however, did not determine the generic tariff as per RE Tariff Regulations in the past for want of various detail technical norms.

 

 

3.        The Commission issued Order proposing “Determination of generic levellised generation tariff  for  the  FY2014-15  under  Regulation  8  of  the  Joint Electricity  Regulatory Commission for Manipur & Mizoram (Terms and Conditions for Tariff determination from Renewable Energy Sources) Regulations, 2010” (Petition No. SM/1/2014) dated 2^nd December, 2014 for inviting comments/suggestions from the stakeholders. A Public Notice was issued on the same day for inviting comments/suggestions/objections. Last date of submission of comments/suggestions was kept on 18^th December, 2014.

 

4.        In response to the same, written comments /suggestions have been received from following stakeholders:

(i).    M/s Eternity Partners LLP   

(ii).   Mr. Ginzalala, Bawngkawn, Aizawl.

 

5.        The commission has analyzed the views/comments/suggestions of the stakeholders and the Commission’s decisions are as below:

 

Comments received from M/s Eternity Partners LLP

1. It is requested to consider a higher tariff for solar and small hydro projects.
2. It is requested to allow preferential tariff for renewable power projects to incentivize development and capacity addition.
3. It is requested to consider cost escalation of 10-15% in view of increase of prises.

 

1. Mr. Ginzalala,Bawngkawn, Aizawl

1. It is suggested to consider the difference in Global Horizontal Irradiation from the national level or CERC reference for determining tariff for energy generated from SPV technologies in order to attract investment in this sector.
2. It is requested to consider 250 days per annum for calculation of energy generation from SPV technologies.
3. It is requested to work out a separate Cost Index for Mizoram .

 

Analysis and Decision

 

The above comments/suggestions have been noted. These comments/suggestions on normative parameters specified in the RE Tariff Regulations, 2010 and it amendment are not the subject matter of  present  regulatory  process  which  has  been  initiated  for  determination  of generic tariff for FY 2014-15. However, in respect of Capital Cost indexation mechanism, the latest data available on monthly wholesale price Index for Electrical Machinery and Steel from the site of Office of Economic Adviser are   considered   for    capital   cost   indexation   for   various   renewable   energy technologies.

 

THE GENERIC LEVELLISED GENERATION TARIFF FOR VARIOUS RENEWABLE ENERGY TECHNOLOGIES, FOR FY 2014-15

 

 

 

6.     The generic levellised generation tariff for various renewable energy technologies, for FY 2014-15 are discussed below:

 

 

USEFUL LIFE

 

7.     Clause (aa) of sub-Regulation (1) of Regulation 2 of the RE Tariff (First Amendment) Regulations  defines ‘useful life’ in relation to a unit of a generating station (including evacuation system) to mean the  following duration from the date of commercial operation (COD) of such generation facility:

 

 

CONTROL PERIOD

 

8.     Regulation  5  of  the  RE  Tariff  Regulations and subsequent amendment provides  that  the  control  period  for determination of tariff for renewable energy projects (RE projects) shall be of five years. The first year of the control period was from FY 2012-13. The Provision to the said regulation stipulates that the tariff determined for the RE projects commissioned during the control period shall continue to be applicable for the  entire  duration of the tariff period as specified in Regulation 6 of the RE Tariff Regulations.

 

TARIFF PERIOD

 

9.     In terms of Regulation 6 of the RE Tariff Regulations, the tariff period in respect of the RE projects is as under:

 

 

 

 

 

 

* The useful life provided in the RE Tariff (First Amendment) Regulations is considered for the purpose of generic tariff determination.

 

 

 

In terms of clauses (4) and (5) of the said regulation, the tariff period specified above shall be reckoned from the date of commercial operation of the RE projects and the tariff determined under the regulations shall be applicable for the duration of the tariff period.

TARIFF STRUCTURE

 

10.    Clause (1) of Regulation 9 of the RE Regulations stipulates that the tariff for RE projects shall be single part tariff consisting of the following fixed cost components:

(a) Return on equity;

 

(b) Interest on loan capital;

(c) Depreciation;

(d) Interest on working capital;

 

(e) Operation and maintenance expenses;

 

For renewable energy technologies having fuel cost component, like biomass power projects and non-fossil fuel based cogeneration, single part tariff with two components, fixed cost component and fuel cost component, is to be determined.

TARIFF DESIGN

 

11.    In terms of Regulation 10 of the RE Tariff Regulations, the tariff design for renewable energy generating stations is as under:

"(1) The generic tariff shall be determined on levellised basis for the Tariff Period.

 

Provided that for renewable energy technologies having single part tariff with  two  components,  tariff  shall  be  determined  on  levellised  basis considering  the  year  of  commissioning  of  the  project  for  fixed  cost component while the fuel cost  component shall be specified on year of operation basis.

(2) For the purpose of levellised tariff computation, the discount factor equivalent  to   Post  Tax  weighted  average  cost  of  capital  shall  be considered.

(3) Levellisation shall be carried out for the ‘useful life’ of the Renewable Energy project while Tariff shall be specified for the period equivalent to ‘Tariff Period.”

 

 

LEVELLISED TARIFF

 

12.    Levellised  Tariff  is  calculated  by  carrying  out  levellisation  for  ‘useful  life’  of  each technology considering the discount factor for time value of money.

 

 

 

DISCOUNT FACTOR

 

13.    The  discount  factor  considered  for  this  purpose  is  equal  to  the  Post Tax  weighted average cost of the capital on the basis of normative debt: equity ratio (70:30) specified in the Regulations. Considering the normative debt equity ratio and weighted average of the post tax rates for interest and equity component, the discount factor is calculated. Interest Rate considered for the loan component (i.e.70%) of Capital Cost is 12.70% (as explained later).  For equity component (i.e.  30%) rate of Return on Equity (ROE) considered at Post Tax ROE of 16% considered. The discount factor derived by this method for all technology is 10.67% i.e ((12.70% × 0.70 × (1 – 33.99%)) + (16.0% × 0.30)).

 

CAPITAL COST

 

14.    Regulation 12 of the RE Tariff Regulations stipulates that the norms for the capital cost as specified in the technology specific chapter shall be inclusive of all capital works like plant and machinery, civil  works, erection and commissioning, financing and interest during construction, and evacuation  infrastructure up to inter-connection point. The Commission has specified the normative capital cost,  applicable for the first year of control period i.e. FY 2012-13, for various RE technologies viz. Wind Energy, Small Hydro Power, Biomass Power, Non-Fossil Fuel based Cogeneration, Solar PV, Solar  Thermal, Biomass Gasifier and Biogas based power projects.

 

 

15.    In order to determine the normative capital cost for the remaining years of the control period, the regulations stipulate the indexation mechanism, Wind Energy, Small Hydro Power,  Biomass  Power,  Non-Fossil  Fuel  based  Cogeneration,  Biomass  Gasifier  and Biogas based power projects. However, the Capital Cost norms for Solar PV and Solar Thermal Power Projects shall be reviewed on annual basis. The indexation mechanism shall take into account adjustments in capital cost with the changes in Wholesale Price Index of Steel  and Wholesale Price Index of Electrical Machinery as per formulation stipulated under the RE Tariff Regulations, which is reproduced below.

CC(n) = P&M(n)* (1+F1+F2+F3)

 

P&M(n) = P&M(0) * (1+d(n))

 

d(n) = [a*{(SI(n-1)/SI(0))– 1} + b*{(EI(n-1)/EI(0)) – 1}]/(a+b)

Where,

CC (n)               = Capital Cost for nth year

 

P&M (n) = Plant and Machinery Cost for nth year

 

P&M (0) = Plant and Machinery Cost for the base year

 

Note: P&M (0) is to be computed by dividing the base capital cost (for the first year of the control period) by (1+F1+F2+F3). Factors F1, F2, F3 for each RE technology has been specified separately, as summarized in following table.

d (n)        = Capital Cost escalation factor for year (n) of Control Period

 

SI (n-1)  = Average WPI Steel Index prevalent for calendar year (n-1) of the Control Period SI (0)                = Average WPI Steel Index prevalent for calendar year (0) at the beginning of the Control Period

EI (n-1)  = Average WPI Electrical Machinery Index prevalent for calendar year (n-1) of the Control Period

 

EI(0)      = Average WPI Electrical Machinery Index prevalent for calendar year (0) at the beginning of the Control Period

a           = Constant to be determined by Commission from time to time, (for weightage to Steel Index)

b          = Constant to be determined by Commission from time to time, (for weightage to Electrical Machinery Index)

F1           = Factor for Land and Civil Works

 

F2           = Factor for Erection and Commissioning

 

F3           = Factor for IDC and Financing Cost

 

The default values of the factors for various RE technologies as stipulated under the said RE Regulations, is summarized in the table below,

 

The Commission has relied on the following sources for relevant information on various indices:

 

• Source for WPI (electrical & machinery and iron and steel), WPI ( all commodities), WPI (Price  of  HSD):   Office  of  Economic  Advisor,  Ministry  of  Commerce  &  Industry (www.eaindustry.nic.in)
• Source for IRC (Average Annual Inflation rate for indexed energy charge component in case of captive coal mine source): CERC (www.cercind.gov.in)

Technology specific capital cost of RE projects is discussed here in under:

 

 

Technology specific capital cost of RE projects is discussed herein under:

 

 

(A)    Capital Cost of Wind Energy for FY 2014-15

 

16.    Regulation 24 provides that the capital cost for wind energy project shall include wind turbine generator including its auxiliaries, land cost, site development charges and other civil  works,   transportation  charges,  evacuation  cost  up  to  inter-connection  point, financing charges and IDC.

 

 

17.    The Commission under amended Regulation 24 (2) has specified the normative capital cost for wind energy  projects as ` 575 Lakh/MW for FY 2012-13 which shall be linked to the indexation mechanism  specified under Regulation 25 of the RE Tariff (First Amendment) Regulations. In accordance with the above referred Regulation, the normative capital cost of the Wind energy Projects shall be ` 603.929 Lakh/MW for FY 2014-15.  The detailed computations of the  indexation  mechanism and  determination of the capital cost for FY 2014-15 thereof, has been enclosed as Appendix-1 of this Order.

 

(B) Capital cost of Small Hydro Projects for FY 2014-15

 

18.    Small Hydro Projects for the purpose of the RE Tariff Regulations cover those projects which are located at the sites approved by the State Nodal Agencies/State Governments using new plant and machinery and with installed power plant capacity lower than or equal to 25 MW.

19.    The Commission under amended Regulation 28 (1) has specified the normative capital cost for small hydro projects for FY 2012-13 as under:

 

 

 

 

 

20.    In  line  with  the  indexation  mechanism,  specified  in  Regulation  29  of  the  RE  Tariff (First Amendment) Regulations, the normative capital cost for FY 2014-15 for Small Hydro Projects shall be as under,

 

 

 

The detailed computations of the indexation mechanism and the determination of the capital cost for FY 2014-15 thereof, has been enclosed as Appendix-2 of this Order.

 

 

(C)     Capital Cost of Biomass based Power Projects for FY 2014-15

 

21.    The Commission under Regulation 34 of the RE Tariff (First Amendment) Regulations has specified the normative capital cost for the biomass power projects based on Rankine cycle technology application for FY 2013-14 as under:

a.         ` 540  lakh/MW  for  project  [other  than  rice  straw  and  Juliflora (plantation)  based project] with water cooled condenser;

b.         ` 580  lakh/MW  for  Project  [other  than  rice  straw  and  Juliflora  (plantation)  based

 

project] with air cooled condenser;

 

c.         ` 590 lakh/MW for rice straw and Juliflora (plantation) based project with water cooled condenser;

d.         ` 630 lakh/MW for rice straw and Juliflora (plantation) based project with air cooled condenser.

 

 

22.    In  line  with  the  indexation  mechanism,  specified  in  Regulation  35  of  the  RE  Tariff (First Amendment) Regulations, the normative capital cost for FY 2014-15 for Biomass Projects determined considering capital cost specified in the RE Tariff (First Amendment) Regulations for FY 2013-14 as base year  capital cost. Average WPI Steel  Index and average  Electrical Machinery  Index  prevalent  for  calendar  year  2013  considered for  SI (n-1)  and  EI (n-1) respectively.  Average  WPI  Steel  Index  and  average  WPI  Electrical  Machinery  Index prevalent for year 2012 for SI (0) and EI(0) respectively. Accordingly, the normative capital cost for FY 2014-15 for Biomass Projects shall be as under,

 

 

23.    The detailed computations of the indexation mechanism and the determination of the capital cost for FY 2014-15 thereof, has been enclosed as Appendix-3 of this Order.

 

(D)     Capital Cost of Non-fossil fuel based Cogeneration Projects for FY 2014-15

 

24.    Non-fossil based cogeneration has been defined as the process in which more than one form of energy is produced in a sequential manner by using biomass. As per Regulation 4(4)  of  the  RE  Tariff  Regulations,  a  project  to  qualify  as  the  non-fossil  based  co- generation project must be using new plant and machinery with topping cycle mode of operation which uses the  non-fossil fuel input for power generation and utilizes the thermal  energy  generated  for  useful  heat  applications  in  other  industrial  activities simultaneously, and where the sum of useful power output and half of useful thermal output is greater than 45% of the plant’s energy consumption during the season.

 

 

25. The Commission under amended Regulation 47 has specified the normative capital cost for the Non-Fossil Fuel  Based Cogeneration Projects as ` 420 Lakh/MW for FY 2012-13 which shall be linked to the indexation  mechanism specified under amended Regulation 48 of the RE Tariff  Regulations.  In  accordance  to  the  above  referred  Regulation,  the  normative capital cost of  Non-Fossil Fuel based Cogeneration power projects shall be ` 440.708 Lakh/MW for FY 2014-15.The detailed computations of the indexation mechanism and determination  of  the  capital  cost  for  FY  2014-15  thereof,  has  been  enclosed  as Appendix-4 of this Order.

 

(E)    Capital Cost of Solar PV based Power Projects for FY 2014-15

 

26.    Solar  Photo  Voltaic  (PV)  power  projects  which  directly  convert  solar  energy  into electricity using the crystalline silicon or thin film technology or any other technology as approved by the Ministry of New and Renewable Energy and are connected to the grid, qualify for the purpose of tariff determination under the RE Tariff Regulations as amended from time to time.

 

27.    The Commission under amended Regulation 57 specified the normative capital cost for the Solar PV power projects as ` 1000 Lakh/MW for the FY 2012-13.

 

28.    The CERC vides its suo-motu Order (Petition No.  SM/353/2013) dated 15/5/2014 determined  the  normative  capital  cost  for  the  Solar  PV  power  projects  as  ` 691 Lakh/MW for the FY 2014-15 which is considered by the Commission for determination of generic tariff.

 

(F)     Capital Cost of Solar Thermal based Power Projects for FY 2014-15

 

29.    In order to qualify for tariff determination under the RE Tariff Regulations, Solar Thermal Power  Project  shall  be  based  on  concentrated  solar  power  technologies  with  line focusing or point focusing as may be approved by the Ministry of New and Renewable Energy  and  which  uses  direct  sunlight  to  generate  sufficient  heat  to  operate  a conventional power cycle to generate electricity.

 

30.    The Commission under amended Regulation 61 has specified the normative capital cost for the Solar Thermal power projects as ` 1300 Lakh/MW for the FY 2012-13.

 

31.    The CERC vides its suo-motu Order (Petition No.  SM/353/2013) dated 15/5/2014 determined the normative capital cost for the Solar Thermal power projects as ` 1200 Lakh/MW for the FY 2014-15 which is considered by the Commission for determination of generic tariff.

 

(G)    Capital Cost of Biomass Gasifier Power Projects for FY 2014-15

 

 

32.    The Commission under amended Regulation 66 has specified the normative capital cost for the Biomass Gasifier power projects based on Rankine cycle as ` 550.00 Lakh/MW for the FY 2012-13 and after taking into account of capital subsidy of ` 150.00 Lakh/MW, net project cost shall be ` 400.00 Lakh/MW for the FY 2012-13 which shall be linked to the indexation mechanism specified under Regulation 67 of the RE Tariff (First Amendment) Regulations. In accordance to the above referred Regulation, the normative capital cost of Biomass gasifier power projects shall be ` 577.118 Lakh/MW for FY 2014-15. After taking into account of capital subsidy of ` 150.00 Lakh/MW, net project cost shall be ` 427.118 Lakh/MW for the FY 2014-15. The detailed computations of the indexation mechanism and  determination of the capital cost for FY 2014-15 thereof, has been enclosed as Appendix-5 of this Order.

 

(H) Capital Cost of Biogas based Power Projects for FY 2014-15

33.    In  order  to  qualify  for  tariff  determination  under  the  RE  Tariff (First Amendment) Regulations,  grid connected  biogas  based power projects that uses 100% Biogas fired engine, coupled with  Biogas  technology for  co-digesting  agriculture  residues,  manure and  other  bio waste as may be approved by the Ministry of New and Renewable Energy shall be considered.

 

 

34.    The Commission under amended Regulation 76 has specified the normative capital cost for the Biogas based power projects as ` 1100.00 Lakh/MW for the FY 2012-13 and after taking into account of capital subsidy of ` 300.00 Lakh/MW, net project cost shall be ` 800.00 Lakh/MW for the FY 2012-13 which shall be linked to the indexation mechanism specified under Regulation 77 of the RE Tariff (First Amendment) Regulations. In accordance to the above referred Regulation, the normative capital cost of Biogas based power projects shall be `1154.236 Lakh/MW for FY 2014-15. After taking into account of capital subsidy of ` 300.00 Lakh/MW, net project cost shall be ` 854.236 Lakh/MW for the FY 2014-15. The detailed  computations of the indexation mechanism and determination of the capital cost for FY 2014-15 thereof, has been enclosed as Appendix-6 of this Order.

 

 

35.    The capital cost for the second year (i.e. FY 2014-15) of the control period in respect of the renewable energy power generating stations is summarized as under:

 

 

DEBT-EQUITY RATIO

 

36.    Sub-Regulation (1) of Regulation 13 of the RE Tariff Regulations provides that the debt- equity ratio of  70:30 is to be considered for determination of generic tariff based on suo-motu petition.

37.    Based  on  the  debt  equity  ratio  of  70:30,  the  debt  and  equity  components  of  the normative capital cost for determination of tariff for the RE projects have been worked out as under:

 

 

 

 

 

RETURN ON EQUITY

 

38.    Sub-Regulation (1) of amended Regulation 16 of the RE Tariff Regulations provides that the value base for the equity shall be 30% of the capital cost for generic tariff determination. Sub-Regulation (2) of the said Regulation stipulates the normative return on equity (ROE) as under:

(a) 20% per annum for the first 10 years, and

(b) 24% per annum from the 11th year onwards.

 

 

INTEREST ON LOAN

39.    Sub-Regulation (1) of Regulation 14 of the RE Tariff (First Amendment) Regulations provides that the loan tenure of 12 years is to be considered for the purpose of determination of tariff for RE projects. Sub-Regulation  (2)  of  the Regulations  provides  for  computation  of  the  rate  of interest on loan as under:

 

“(a) The loans arrived at in the manner indicated in the Regulation 13 shall be considered  as  gross  normative  loan  for  calculation  for  interest  on  loan.  The normative loan outstanding as on April 1st of every year shall be worked out by deducting the cumulative repayment up to March 31st of previous year from the gross normative loan.

(b) For the purpose of computation of tariff, the normative interest rate shall be considered as average State Bank of India (SBI) Base rate prevalent during the first six months of the previous year plus 300 basis points.

(c) Notwithstanding any moratorium period availed by the generating company, the repayment of loan shall be considered from the first year of commercial operation of the project and shall be equal to the annual depreciation allowed".

 

40.    The weighted average State Bank of India (SBI) Base rate prevalent during the first six months has been considered for the determination of   tariff, as shown in the table below:

 

Source: State Bank of India (www.statebankofindia.com)

 

41.    In  terms  of  the  above,  the  computations  of  interest  on  loan  carried  out  for determination of tariff in respect of the RE projects treating the value base of loan as 70% of the capital cost and the weighted average of Base rate prevalent during the first six  months  i.e.  9.70% plus 300 basis points (equivalent to interest rate of 12.70%).

 

 

 

DEPRECIATION

 

42.    Regulation 15 of the RE Tariff Regulations with its amendment provides for computation of depreciation in the following manner:

 

 

"(1) The value base for the purpose of depreciation shall be the Capital Cost of the asset admitted by the Commission. The Salvage value of the asset shall be considered as 10% and depreciation shall be  allowed  up to maximum of 90% of the Capital Cost of the asset.

 

(2) Depreciation per annum shall be based on ‘Differential Depreciation Approach' over loan period beyond loan tenure over useful life computed on ‘Straight Line Method’. The depreciation rate for the first 12 years of the Tariff Period shall be 5.83% per annum and the remaining depreciation shall be spread over the remaining useful life of the project from 13^th  year onwards.

(3)  Depreciation  shall  be  chargeable  from  the  first  year  of  commercial  operation. Provided  that  in  case  of  commercial  operation  of  the  asset  for  part  of  the  year, depreciation shall be charged on pro rata basis".

 

 

43.       In accordance with the above, the rate of depreciation for the first 12 years has been considered as 5.83% and the rate of depreciation from the 13th year onwards has been spread over the balance useful life of the RE project  as under:

 

 

INTEREST ON WORKING CAPITAL

 

44.       Regulation 17 of the RE Tariff Regulations with its amendment provides for the working capital requirements of the RE projects as under:

“(1) The Working Capital requirement in respect of wind energy projects, Small Hydro Power,  Solar PV and Solar thermal power projects shall be computed in accordance with the following:

Wind Energy / Small Hydro Power /Solar PV / Solar thermal

a) Operation & Maintenance expenses for one month;

b)  Receivables  equivalent  to  2  (two)  months  of  energy  charges  for  sale  of electricity calculated on the normative CUF;

c) Maintenance spare @ 15% of operation and maintenance expenses

 

(2) The Working Capital requirement in respect of biomass power projects and non-fossil fuel  based co-generation projects shall be computed in accordance with the following clause:

Biomass Power and Non- fossil fuel Co-generation

a) Fuel costs for four months equivalent to normative PLF;

 

b) Operation & Maintenance expense for one month;

 

c) Receivables equivalent to 2 (Two) months of fixed and variable charges for sale of electricity calculated on the target PLF;

d) Maintenance spare @ 15% of operation and maintenance expenses

 

(3) Interest on Working Capital shall be at interest rate equivalent to the average State  Bank  of  India  Base  Rate  prevalent  during  the  first  six  months  of  the previous year plus 350 basis points”.

 

 

45.       Receivables  equivalent  to  two  months  of  actual  fixed  cost  and  variable  cost,  (as applicable  for  biomass  power  and  non-fossil  fuel  based  co-generation)  have  been considered. As mentioned in the Para No.  36, interest rate considered as weighted average of State Bank of India Base Rate  prevalent during the first six months of the previous year plus 350 basis points (equivalent to interest rate of 13.20%). The interest on working capital has been worked out as specified below for determination of tariff of the RE projects:

 

 

 

Source for SBI Base Rate: State Bank of India (www.statebankofindia.com)

 

OPERATION AND MAINTENANCE EXPENSES

 

46.       Regulation 18 of the RE Tariff Regulations with its amendment provides for Operation and Maintenance Expenses (O&M expenses) in respect of RE projects as under:

 

(1) ‘Operation and Maintenance or O&M expenses’ shall comprise repair and maintenance    (R&M),   establishment   including   employee   expenses   and administrative & general expenses.

 

 

(2) Operation  and  maintenance  expenses  shall  be  determined  for  the  Tariff Period  based  on  normative  O&M  expenses  specified  by  the  Commission subsequently in these Regulations for the first Year of Control Period.

 

 

(3) Normative O&M expenses allowed during first year of the Control Period (i.e. FY 2012-13) under these Regulations shall be escalated at the rate of 5.72% per annum over the Tariff Period”.

 

 

 

47.       The normative O&M expenses for various RE technologies specified under the relevant provisions of the RE Tariff Regulations with its amendment are as under:

 

 

(a) Wind Energy: Regulation 27 of RE Tariff Regulations with its amendment provides that the normative O&M expenses for the first year of the control period (i.e. 2012-13) as  ` 9 lakh per MW and  shall  be  escalated  at  the  rate  of  5.72%  per  annum  over  the  tariff  period  for determination of the levellised tariff. Accordingly, the Commission has considered O&M cost norm for wind energy as ` 10.05 Lakh/MW for FY 2014-15.

 

(b) Small Hydro: Regulation 32 of RE Regulations with its amendment provides the normative O& M expenses for small hydro projects for the year 2012-13 which shall be escalated at the rate of 5.72% per annum over the tariff period for determination of the levellised tariff.

The table below presents the normative O&M Expenses considered by the Commission for small hydro power for FY 2012-13;

 

 

 

 

Accordingly, the table below presents the normative O&M Expenses considered by the Commission for small hydro power for FY 2014-15,

 

 

 

 

 

(c) Biomass: Regulation 39 of RE Tariff (First Amendment) Regulations provides that the normative O& M expenses for biomass based projects for the year 2013-14 shall be   ` 40 Lakh per MW and which shall be escalated at the rate of 5.72% per annum over the tariff period for determination of the levellised tariff. Accordingly, the Commission has considered O&M cost norm for biomass power as ` 42.29Lakh/MW for FY 2014-15.

 

 

(d) Non-fossil fuel co-generation: As per Regulation 55 of RE Tariff (First Amendment) Regulations, the normative O&M Expenses for non-fossil fuel co-generation projects for the year 2012-13 has been specified as ` 16 Lakh per MW which shall be escalated at the rate of 5.72% per annum over the tariff period for determination of the levellised tariff. Accordingly, the Commission has considered O&M cost norm for non-fossil fuel based co-generation as ` 17.89 Lakh/MW for FY 2014-15.

(e)  Solar PV: Regulation 59 of RE Tariff Regulations provides that the normative O&M expenses for solar PV projects for the year 2012-13 shall be ` 11 Lakh per MW which shall  be   escalated  at  the  rate  of  5.72%  per  annum  over  the  tariff  period  for determination of the  levellised  tariff. Accordingly, O&M expense norm for solar PV power project as ` 12.30 Lakh/MW for FY 2014-15 has been considered.

 

 

(f)  Solar Thermal: Regulation 63 of the RE Tariff Regulations specified the normative O&M expenses for solar thermal power projects shall be `15 Lakh/MW for the first year of operation, which shall  be  escalated at the rate of 5.72% per annum over the tariff period for determination of the levellised tariff. Accordingly, O&M expense norm for  solar  thermal  power  project  as  ` 16.77  Lakh/MW  for  FY  2014-15,  has  been considered.

 

(g)  Biomass Gasifier: Regulation 71 of the RE Tariff (First Amendment) Regulations specified the normative O&M expenses for solar thermal power projects shall be   `  40 Lakh/MW for the first year of operation, which shall  be  escalated at the rate of 5.72% per annum over the tariff period for determination of the levellised tariff. Accordingly, the Commission has considered O&M cost norm for biomass gasifier based power plant as ` 44.71 Lakh/MW for FY 2014-15.

 

 

(h)  Biogas: Regulation 80 of the RE Tariff (First Amendment) Regulations specified the normative O&M expenses for solar thermal power projects shall be  ` 40 Lakh/MW for the first year of operation, which shall be  escalated at the rate of 5.72% per annum over the tariff period  for  determination  of  the  levellised  tariff.  Accordingly, the Commission has considered O&M cost norm for biogas based power plant as   ` 44.71 Lakh/MW for FY 2014-15.

 

48.       The   normative   O&M   expenses   have   been   worked   out   as   specified   above   for determination of tariff for the renewable energy generating stations.

 

CAPACITY UTILISATION FACTOR

49.       Regulations 26, 30, 58 and 62 of the RE Tariff Regulations with its amendment specify the norms for Capacity Utilization Factor  (CUF)/Plant Load Factor (PLF) in respect of the Wind Energy, Small Hydro, Solar PV and Solar Thermal based power generating stations as per the details given in the table below which has been considered for determination of tariff.

 

 

PLANT LOAD FACTOR (PLF)

 

50.       Regulations 36, 68 and 78  of the RE Tariff Regulations with its amendment specify the plant load factor for Biomass,  Biomass  Gasifier and Biogas based renewable energy generating stations as given in the table below which has been considered for determination of fixed charges component of tariff.

51.       Regulation 49 of the RE Tariff Regulations stipulates the plant load factor for Non-fossil Fuel based Co-generation projects as under, computed on the basis of plant availability for number of operating  days considering the operations during crushing season and off-season and load factor of 92%. The number of operating days as specified in the Regulation 49(2) is as under:

 

 

 

AUXILIARY POWER CONSUMPTION

 

52.       Regulations 31, 37, 50, 64, 69 and 79 of the RE Tariff Regulations with its amendment  stipulate  the auxiliary power consumption factor as under which has been considered for determination of tariff of the RE projects :

 

 

 

 

STATION HEAT RATE

 

53.       The Station Heat Rates (SHR) specified under Regulations 38 and 51 of the RE Tariff Regulations with its amendment for biomass and non-fossil fuel based co- generation projects are as under:

 

 

 

FUEL

 

(a) Fuel Mix

 

54.       Sub-Regulation  (1) of Regulation 40 of the RE Tariff Regulations stipulates that the Biomass based  power generating stations are to be designed in a way that it uses different types of non-fossil fuels available within the vicinity of biomass power project such as crop residues, agro-industrial residues,  forest residues etc. and other biomass fuels  as  may be  approved  by  the Ministry  of Non-Renewable  Energy  (MNRE).  Sub- Regulation (2) of the said Regulations stipulates that the biomass power generating companies are to ensure fuel management plan to ensure adequate availability of fuel to meet the respective project requirements.

 

55.       Regulation 70 of the RE Tariff (First Amendment) Regulations stipulates that the normative specific fuel consumption  shall  be 1.25 kg per kWh for Biomass Gasifier based power generating stations.

56.       Regulation 81 of the RE Tariff (First Amendment) Regulations stipulates that the normative specific fuel consumption shall be 3 kg of substrate mix per kWh for Biogas based power generating stations.

(b) Use of fossil fuel

 

 

57.       As per Regulation 41 of the RE Tariff (First Amendment) Regulations, the use of fossil fuel is not allowed.

 

(c) Calorific value

 

58.       Regulation 43 of the RE Tariff (First Amendment) Regulations, provides the calorific value of biomass fuel used for determination of tariff shall be at 3100 kCal/kg.

 

59.       Regulation 52 of the of the RE Tariff Regulations provides the gross calorific value for bagasse  to  be  considered  in  case  of  non-fossil  fuel  co-generation  projects  is  2250 kCal/kg and for the use of  biomass fuels other than bagasse, the calorific value as specified above shall be applicable.

 

(d) Fuel cost

 

60.       The Commission, in terms of Regulation 44 of the RE Tariff (First Amendment) Regulations, has specified the biomass fuel  price  applicable during the period 2012-13 as `2476/- per tonne and has specified fuel price indexation mechanism, in case developer wishes to opt for the remaining years of the control period. The data for Pd and WPI, as per regulations, latest figures for April, 2013 and  April,  2012  corresponding  to  nth  and  (n-1)th   year  has  been  considered  while calculating  the fuel price  indexation  for  biomass  and  also  non-fossil  fuel  based  co- generation  power  projects.  The detailed computations of the fuel price indexation mechanism and the determination of the biomass fuel prices for FY 2014-15 thereof, has been enclosed as Appendix-7 to this order. Accordingly, the biomass fuel price applicable for FY 2014-15 is ` 2942.54 per tonne.

 

61.       The Commission, in terms of Regulation 53 of the RE Tariff (First Amendment) Regulations, has specified the price  of  bagasse  applicable  during  the  period  2012-13  and  has  specified  fuel  price indexation mechanism, in case developer wishes to opt, for the remaining years of the control period. The detailed computations of the fuel price indexation mechanism and the determination of the bagasse fuel prices for FY 2014-15 thereof, has been enclosed as Appendix-8 of this Order.  The price of bagasse (for non-fossil fuel based co- generation projects) applicable for FY 2014-15 shall be ` 1881.27 per tonne.

 

62.       The Commission, in terms of Regulation 73 of the RE Tariff (First Amendment) Regulations, has specified the biomass  fuel  price  during  first  year  of  the  Control  Period  (i.e.  FY  2012-13)  and as  per amended Regulation  45  it  has  specified  fuel  price  indexation  mechanism  for  the  Biomass Gasifier project developer. Accordingly, the biomass fuel price for the Biomass gasifier based power project applicable for FY 2014-15 shall be  the same as for the biomass based power project (Rankine cycle) as mentioned above. The detailed computations of the fuel price indexation mechanism and the determination of the biomass fuel prices for FY 2014-15 thereof, has been enclosed as Appendix-9 of this Order.

 

63.       The Commission, in terms of Regulation 82 of the RE Tariff (First Amendment) Regulations, has specified the feed stock price during first year of the Control Period (i.e. FY 2012-13) at ` 990/MT (net of any cost recovery from  digester effluent) and has specified fuel price indexation mechanism for the Biogas project  developer.  The detailed computations of the fuel price indexation mechanism and the determination of the bagasse fuel prices for FY 2014-15 thereof, has been enclosed as Appendix-10 of this Order. The price of fuel applicable for the biogas based   power plant for FY 2014-15 shall be at ` 1176.54/MT (net of any cost recovery from digester effluent).

 

64.       In case of Biomass Power Projects, non-fossil fuel based co-generation projects, Biomass Gasifier based power Projects and Biogas based power projects, variable component of tariff is calculated based on the fuel cost for FY 2014-15. This variable component will change each year based on whether a Renewable Energy Power Project developer opts for fuel price indexation or escalation factor of 5%. Hence, while  calculating the total applicable  tariff  for  Biomass  Power  Projects,  non-fossil  fuel  based   co-generation projects,  Biomass  Gasifier  based  power  Projects  and  Biogas  based  power  projects, levellisation of only fixed component is considered and the variable component for the first year of operation (i.e. 2014-15) is specified.

 

Subsidy or incentive by the Central / State Government

 

65.       Regulation 22 of the RE Tariff Regulations provides as under:

 

“The Commission shall take into consideration any incentive or subsidy offered by the Central or  State Government, including accelerated depreciation benefit if availed by the generating company, for the renewable energy power plants while determining the tariff under these Regulations.

Provided that the following principles shall be considered for ascertaining income tax benefit on account of accelerated depreciation, if availed, for the purpose of tariff determination:

i) Assessment of benefit shall be based on normative capital cost, accelerated depreciation rate as per relevant provisions under Income Tax Act and corporate income tax rate.

ii) Capitalization of RE projects during second half of the fiscal year. Per unit benefit shall be derived on levellised basis at discount factor equivalent to Post Tax weighted average cost of capital”.

 

66.       In terms of the above regulation, for the projects availing the benefit of accelerated depreciation as per applicable Income tax rate @ 33.99% (30% IT rate+ 10% surcharge +3% Education cess) has been considered. For  the  purpose  of  determining  net depreciation   benefits,  depreciation  @  5.28%  as  per  straight  line  method  (Book depreciation as per Companies Act, 1956) has been compared with depreciation as per Income Tax rate i.e. 80% of the written down  value method. Moreover, additional 20% depreciation in the initial year is proposed to be extended to new assets acquired by power generation companies vide amendment in the section 32, sub-section (1) clause (iia) of the Income Tax Act.

 

67.       Depreciation for the first year has been calculated at the rate of 50% of accelerated depreciation  80%  and  50% of  additional  depreciation  20% (as  project  is  capitalized during the second half of the financial year as per proviso (2) to Regulation 22). Income tax benefits of accelerated depreciation and additional depreciation, has been worked out as per normal tax rate on the net depreciation benefit. Per unit levellised accelerated depreciation benefit has been computed considering the post-tax weighted average cost of capital as discount factor.

 

68.       In the light of the discussion made in the preceding paragraphs, the generic tariffs of the following RE projects for the financial year 2014-15 have been determined as under:

 

Generic Tariff for RE Technologies for FY 2014-15

 

 

 

 

 

 

 

 

 

69.       The detailed computations for the generic tariff for various RE technologies have been enclosed to this Order as per the details given hereunder:

S No                Renewable Energy Projects                               Annexure

 

A                     Wind Power Projects

Wind Zone-I                                                                                 Annexure 1A

Wind Zone-II                                                                                Annexure 1B

Wind Zone III                                                                              Annexure 1C

Wind Zone IV                                                                              Annexure 1D

Wind Zone V                                                                                Annexure 1E

 

B                      Small Hydro Power Projects                              Annexure

Projects less than 5 MW                                                               Annexure 2A

Projects between 5 MW and 25 MW                                           Annexure 2B

 

C                     Biomass Power Projects [other than Rice      Annexure 3

                   Straw and Juliflora (plantation) based project]

                        with Water Cooled Condenser and using Travelling

                        Grate boiler              

 

D                     Non-Fossil Fuel Based Cogeneration                Annexure 4

E                      Solar Projects

                        Solar PV Projects                                                  Annexure 5A

                        Solar Thermal Projects                                          Annexure 5B

 

F                      Biomass Gasifier Power Projects                      Annexure 6

 

G                     Biogas based Power Projects                             Annexure 7

 

 

Sd/- A.CHHAWNMAWIA

Member

Dated Aizawl

 

the 5th January, 2015

Appendix-1

 

Capital cost of Indexation for Wind Power Projects (FY 2014-15)

Indexation Formulation

CC( n ) = P&M (n) * [1 + F1 + F2 + F3]

d (n) = (a * (SI(n-1)/SI(0))-1) +b* (EI(n-1)/EI(0))-1)) / (a+b)

P&M(n) =P&M(0)*(1+ d (n))

 

 

 

Source of WPI (Steel and Electrical  Machinery): Office of Economic Advisor, Ministry of Commerce and Industry (www.eaindustry.nic.in)

 

 

 

 

Appendix-2

 

Capital cost of Indexation for Small Hydro Power Projects (FY 2014-15)

Indexation Formulation

CC( n ) = P&M (n) * [1 + F1 + F2 + F3]

d (n) = (a * (SI(n-1)/SI(0))-1) +b* (EI(n-1)/EI(0))-1)) / (a+b)

P&M(n) =P&M(0)*(1+ d (n))

 

 

Source of WPI (Steel and Electrical Machinery): Office of Economic Advisor, Ministry of Commerce and Industry (www.eaindustry.nic.in)

 

 

 

 

Appendix-3

Capital cost of Indexation for Biomass Power Projects (FY 2014-15)

Indexation Formulation

CC( n ) = P&M (n) * [1 + F1 + F2 + F3]

d (n) = (a * (SI(n-1)/SI(0))-1) +b* (EI(n-1)/EI(0))-1)) / (a+b)

P&M(n) =P&M(0)*(1+ d (n))

 

 

 

 

 

 

 

 

 

 

 

Source of WPI (Steel and Electrical Machinery): Office of Economic Advisor, Ministry of Commerce and Industry (www.eaindustry.nic.in)

 

 

 

 

 

* a.      Project [other than rice straw and juliflora (plantation) based project] with water cooled condenser;

b.         Project  [other  than  rice  straw  and  Juliflora  (plantation)  based  project]  with  air  cooled condenser;

c.         For rice straw and juliflora (plantation) based project with water cooled condenser;

d.         For rice straw and juliflora (plantation) based project with air cooled condenser.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendix-4

 

  Capital cost of Indexation for Non-fossil fuel based Cogeneration Power Projects (FY 14-15)  Indexation Formulation

CC( n ) = P&M (n) * [1 + F1 + F2 + F3]

d (n) = (a * (SI(n-1)/SI(0))-1) +b* (EI(n-1)/EI(0))-1)) / (a+b)

P&M(n) =P&M(0)*(1+ d (n))

 

 

 

Source of WPI (Steel and Electrical Machinery): Office of Economic Advisor, Ministry of Commerce and Industry (www.eaindustry.nic.in)

 

 

 

 

Appendix-5

Capital cost of Indexation for Biomass Gasifier Power Projects (FY 2014-15) Indexation Formulation

CC( n ) = P&M (n) * [1 + F1 + F2 + F3]

d (n) = (a * (SI(n-1)/SI(0))-1) +b* (EI(n-1)/EI(0))-1)) / (a+b)

P&M(n) =P&M(0)*(1+ d (n))

 

 

 

Source of WPI (Steel and Electrical Machinery): Office of Economic Advisor, Ministry of Commerce and Industry (www.eaindustry.nic.in)

 

 

 

 

 

Appendix-6

Capital cost of Indexation for Biogas based Power Projects (FY 2014-15) Indexation Formulation

CC( n ) = P&M (n) * [1 + F1 + F2 + F3]

d (n) = (a * (SI(n-1)/SI(0))-1) +b* (EI(n-1)/EI(0))-1)) / (a+b)

P&M(n) =P&M(0)*(1+ d (n))

 

 

 

Source of WPI (Steel and Electrical Machinery): Office of Economic Advisor, Ministry of

Commerce and Industry (www.eaindustry.nic.in)

 

 

 

 

 

Appendix-7

 

Biomass Fuel Price across States for FY 2014-15

 

As per fuel price Index Mechanism outlined under Regulation 45 and the availability of required information

Fuel Price indexation for Biomass Power Projects (FY2014-15)

 

 

Note:

1.          The Calculation of WPI (n) and WPI (n-1) is based on the figures available on April 2013 andApril 2012 respectively.

 

2.         The Calculation of Pd (n) is based on the weighted average of the WPI (Price of HSD) figures available for the months from January 2013 to December 2013.

 

3.         The Calculation of Pd (n-1) is based on the weighted average of the WPI (Price of HSD) figures available for the months from January 2012 to December 2012.

 

4.         The Calculation of Pd (n) and Pd (n-1) are shown as under:

 

 

 

 

 

 

 

 

WPI (Price of HSD)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source of WPI and WPI (Price of HSD): Office of Economic Advisor, Ministry of Commerce and Industry (www.eaindustry.nic.in),

 

Source of IRC: CERC (www.cercind.gov.in)

 

 

 

 

 

 

 

 

Appendix-8

 

Bagasse Fuel Price across States for FY 2014-15

As per fuel price Index Mechanism outlined under Regulation 54 and the availability of required information

Fuel Price indexation for Bagasse Power Projects (FY2014-14)

 

 

 

Note:

1.         The Calculation of WPI (n) and WPI (n-1) is based on the figures available on

April 2013 and April 2012 respectively.

 

2.         The Calculation of Pd (n) is based on the weighted average of the WPI (Price of HSD) figures available for the months from January 2013 to December 2013.

 

3.                         The Calculation of Pd (n-1) is based on the weighted average of the WPI (Price of HSD) figures available for the months from January 2012 to December 2012.

 

4.         The Calculation of Pd (n) and Pd (n-1) are shown as under:

 

 

 

 

 

 

 

 

 

WPI (Price of HSD)

 

Source of WPI and WPI (Price of HSD): Office of Economic Advisor, Ministry of Commerce and Industry (www.eaindustry.nic.in),

 

  Total         365

 

Source of IRC: CERC (www.cercind.gov.in)

 

 

 

 

 

 

 

 

 

 

 

 

Appendix-9

 

Biomass Gasifier Fuel Price across States for FY 2014-15

 

 

As per fuel price Index Mechanism outlined under Regulation 74 and the availability of required information

Fuel Price indexation for Biomass gasifier Power Projects (FY2014-15)

 

Note:

1.         The Calculation of WPI (n) and WPI (n-1) is based on the figures available on April 2013 and April 2012 respectively.

 

2.         The Calculation of Pd (n) is based on the weighted average of the WPI (Price of HSD)

figures available for the months from January 2013 to December 2013.

 

3.          The Calculation of Pd (n-1) is based on the weighted average of the WPI (Price of HSD)

figures available for the months from January 2012 to December 2012.

 

4.          The Calculation of Pd (n) and Pd (n-1) are shown as under:

 

 

 

 

 

 

 

WPI (Price of HSD)

 

 

 

Source of WPI and WPI (Price of HSD): Office of Economic Advisor, Ministry of Commerce and

Industry (www.eaindustry.nic.in),

 

Source of IRC: CERC (www.cercind.gov.in)

 

 

 

 

 

 

 

Appendix-10

 

Fuel Price for biogas based power plant for FY 2014-15

 

As per fuel price Index Mechanism outlined under Regulation 83 and the availability of required information

Fuel Price indexation for Biogas based power projects (FY2014-15)

 

Note:

1.         The Calculation of WPI (n) and WPI (n-1) is based on the figures available on April 2013 and April 2012 respectively.

 

2.          The Calculation of Pd (n) is based on the weighted average of the WPI (Price of HSD) figures available for the months from January 2013 to December 2013.

 

3.           The Calculation of Pd (n-1) is based on the weighted average of the WPI (Price of HSD) figures available for the months from January 2012 to December 2012.

 

4.           The Calculation of Pd (n) and Pd (n-1) are shown as under:

 

 

 

 

 

 

 

 

 

 

WPI (Price of HSD)

 

 

 

Source of WPI and WPI (Price of HSD): Office of Economic Advisor, Ministry of Commerce and

Industry (www.eaindustry.nic.in),

 

Source of IRC: CERC (www.cercind.gov.in)