Bihar Electricity Regulatory Commission - Solar for … SMP-SOLAR-22/2014-SKP Bihar Electricity Regulatory Commission VidyutBhawan-II, J.L.NehruMarg, Patna 800 021Suo-Motu Proceedings

1

SMP-SOLAR-22/2014-SKP

Bihar Electricity Regulatory CommissionVidyutBhawan-II, J.L.NehruMarg, Patna 800 021

-----------------------------------------------------------------------------------------------------------Suo-Motu Proceedings No. 22/2014

IN THE MATTER OF:Determination of Generic Levelised Generation Tariff for FY2014-15 for Power Generated from Solar Power PV Projectsincluding Rooftop Solar PV and Small Power Projects andSolar Thermal Power Projects.

Coram:1. Sri U. N. Panjiar- Chairman2. Sri S. C. Jha- Member

Appearance :1. Sri J. K. Bhanu, ESE (Com.)

On behalf of North Bihar PowerDistribution Co. Ltd.

2. Sri J. K. Dubey, EEE (Com.)3. Shri Manish Sakya, AEE (Com.)4. Shri Anand Suman, AEE/IS On behalf of Bihar State Power (Holding)

Co. Ltd.5. Shri Kumar Deepak, AEE/IS6. Shri Abhishek Raj, AEE (Com.)

On behalf of South Bihar PowerDistribution Co. Ltd.

7. Miss Julie Kumari, AEE (Com.)8. Shri Atul A. Singh, Consultant9. Shri Sant Prasad, G.M.

On behalf of M/s Response RenewableEnergy Ltd.10 Shri Suraj Kumar, Management

Trainee11. Shri Devjeet Deogharia, Sr. Manager

On behalf of M/s Hindustan Power12. Shri Ashish Nandan, Manager(Regulatory Affairs)

13. Shri Chandan Kumar On behalf Glatt Solutions Pvt. Ltd.14. Shri Dewaki Nandan Pandey, Project

EngineerOn behalf of M/s Avantika Contractors (I)Ltd.

15. Shri Amrendra Kumar Amar, ProjectEngineer

On behalf of M/s Alex Green Energy Pvt.Ltd.

16. Shri Alok Verma, Manager BusinessDev. On behalf of Sun Edison Energy India

Pvt. Ltd.17. Shri Jay Prakash Sinha, Asst.Manager

Dates of Hearing:21.10.2014, 27.11.2014 and 05.01.2015 - Order reserved .Order

Dated :09.04.2015

1. The Bihar Electricity Regulatory Commission (BERC) (Terms and Conditions for

Tariff Determination from Solar Energy Sources) Regulations, 2010, hereinafter

called Regulations, 2010, were approved by the Commission in exercise of powers

2


conferred to it under section 61 read with section 181 (2) (zd) of the Electricity Act,

2003 and were issued on 2nd August, 2010. Three years control period specified in

the Regulations ended on 31.3.2013. During the 1st year of subsequent control

period from FY2013-14 to FY2015-16,based on revised norms considering

CERC(Terms and Conditions for Tariff determination from Renewable Energy

sources)Regulations,2012, generic tariff for FY2013-14 for solar PV power projects

and solar thermal power projects were determined in suo-motu proceedings

no.09/2013 dated14.06.2013.

2. The Commission is empowered to specify the terms and conditions for

determination of tariff under section 61 of the Act. Section 62 (1) (a) of the Act

stipulates that the appropriate Commission shall determine the tariff for supply of

electricity by a generating company to a distribution licensee. The Commission has

to determine the tariff for generation, supply, transmission and wheeling of

electricity, wholesale, bulk or retail, as the case may be, within the State under

section 86 (1) (a) of the Act.

3. Regulation 39 of the Regulations, 2010 empowers the Commission to amend any

provision ofthe Regulations, 2010and may from time to time add, vary, alter,

modify or amend any provisions of the Regulations, 2010 on its own motion or on

any application made before it by an interested person.

4. The Commission decided to initiate a suo-motu proceedings no.22/2014 under

Regulation 8 of the BERC (Terms and Conditions for Tariff Determination from

Solar Energy Sources) Regulations, 2010 pursuant to revised capital cost

benchmarkapproved by CERCfor determination of tariff for electricity generated

from Solar PV and Solar Thermal Power Projects for Fy2014-15 and issued a

consultative paperto obtain views from general public and stakeholders for

determination of generic levellised tariff for FY 2014-15 for Solar PV Projects

including Rooftop Solar PV and small Power Projects which are to be commissioned

up to 31.03.2016 and for Solar Thermal Projects which are to be commissioned

upto 31.03.2017 and for which PPA is signed upto 31.03.2015.

5. The consultative paper was put on the website of the Commission and a public

notice was issued on 30.09.2014 inviting objections/suggestions/comments from

general public and all stakeholders latest by 20.10.2014. The notice was published

in Hindustan Times dated 1st October, 2014 (daily newspaper in English) and

Danik Jagran dated 1stOctober, 2014 (daily newspaper in Hindi). A copy of the

3


proposed draft was also sent to Bihar State Power (Holding) Co. Ltd., South Bihar

Power Distribution Co. Ltd., North Bihar Power Distribution Co. Ltd.,Bihar State

Power Transmission Co. Ltd.,M/s Kumar Tech-Bio products Pvt Ltd, HPCL Biofuels

Ltd., Response Renewable Energy Ltd, Ruchi Soya Industries Ltd, Glatt Solutions

Pvt. Ltd., Claro Energy Pvt. Ltd, Alex Green Energy Pvt. Ltd,Moser Baer Clean

Energy Ltd, Awantika ContractorsPvt Ltd Vaishali vidyut upvoka sangh, Bihar

Chamber of Commerce, Bihar Industries Association, Bihar Steel Manufacturers

Association and Mr. Binay kumar singh ,Advocate etc inviting

objections/suggestions/comments so as to reach Secretary of the Commission by

20.10.2014.

6. Hearings:-Public hearing was held on 21.10.2014 and comments/suggestions/objections

were received from :-

(i) M/s EPC Company Ltd, New Delhi

(ii) Sri Binay Kumar Singh, Advocate,Barh.

Representatives of SBPDCL prayed for 10 days time to submit their

comments/suggestions on the matter. Similarly representatives of M/s Response

renewable Energy ltd and M/s Glatt Solutions Pvt Ltd also prayed for 10 days time to

submit their comments/suggestions. Commission allowed their prayers.

Matter was put up for hearing on 06.11.2014 but stake holders were not present on

date due to Guru Nanak Jayanti holiday and the case was posted for hearing on

20.11.2014.Due to some other occupation of the Commission,hearing couldnot take

place on the scheduled date and matter was fixed for hearing on 27.11.2014.

Representatives of M/s Hindustan Power and M/s Response Renewable Energy

Pvt.Ltd made their argument/oral submissions in support of written submissions filed

by them on 20.10.2014 and 3.11.2014 respectively. Representatives of NBPDCL and

SBPDCL prayed for further 10 days time to file reply. Commission allowed their prayer

and 05.01.2015 was fixed for hearing.On 05.01.2015 the matter was finally heard and

in course of hearing, the following stakeholders submitted their written

comments/suggestions:-

1.M/s Acme Solar Energy private Ltd, Gurgaon

2.M/s Response Renewable energy Ltd, Kolkata(additional submission)

3.M/s SunEdision Energy India Pvt. Ltd,Chennai

4


Representatives of M/s SunEdision Energy India Pvt.Ltd and M/s Response

Renewable Energy Ltd made their oral submissions in support of their written

comments/suggestions/objections. SBPDCL also submitted its comments vide its

letter no.12dated03.01.2015. Representatives of NBPDCL prayed for another 15 days

time to submit their comments. Commission allowed theirprayer.

Order was reserved.

7. COMMENT/SUGGESTIONS/OBJECTIONS :-

7.1 ACIRA Solar Pvt. Ltd., New Delhi:-

Acira Solar Pvt. Ltd has submitted that alongwith German partners, M/s

Vispiron EPC GmbH & KG, they are currently in the process of implementing two

projects in Bihar at sites about 100 KM from Patna. They have submitted the

following:-:-

I. Sites suitable for MW scale PV projects in Bihar have a solar radiation not

exceeding 1850 Kwh/m2/year.

II. The estimated yield of typical plants with German engineering (Tier-1 PV

modules and world renowned German inverters, the most important

components in the performance of the project) is around 1517 KWh/KWp.

Supporting evidence is attached for your ready reference.

A yield of 1517 KWh/Kwp leads to a Capacity utilization Factor of 17.3% lower

than projected 19% in the Consultative paper presented by the Commission.

The Capacity Utilization factor determined by CERC is a national average and

the central regulator expects the State Regulator to bear local factors in mind when

recommending tariffs for their State. This implies that the Capacity Utilization factor

should be commensurate with the prevalent solar radiation in the State.

It is, therefore, suggested thatCapacity Utilization Factor may be determined

according to the solar radiation prevailing in the State and it may be reduced to 17%

for projects in the State and the generic levellized tariff may be computed accordingly.

7.2 RESPONCE RENEWABLE ENERGY LTD., KOLKATA:-Response Renewable Energy Ltd. has submitted the following

comments/suggestions on the proposed norms for determining the Generic

Levelized Tariff for FY 2014-15 for Power generated from Solar Power Projects:-

(i) That CERC vide its order dated 15th May 2014 has notified benchmark

capital cost Rs. 691 lakhs/MW for solar PV project for FY 2014-15

considering parameters like modules cost, cost of land, civil work etc.

5


(ii) That based on the MVR notified by the Government of Bihar for ekfasla/un-

irrigated type of land in different parts of the State, the Commission has

considered Rs. 5 Lakhs/Acre as cost of land for the Solar PV Projects in the

capital cost of Rs. 691 lakhs/MW. However, for those projects where the cost

of land is higher, a project specific determination of tariff may be considered

on case to case basis.

(iii) That if we look at the land use profile of Bihar more than 60% of land is

utilized for agriculture purpose, Bihar economy is primarily based on

agriculture. There is less than 4% of barren land in Bihar which is shrinking

with rising population. There is hardly any land available which are barren,

rocky and not used for farming, pasture of real estate.

(iv) That solar plants are proposed only where it is adjacent to grid. Areas

adjacent to grid have access to electricity in general for irrigation purpose.

Such irrigated areas have in general three harvests in a yeaf. (i) Bhadai,

dominated by corn that is sown from May to June and gathered in

August and September (ii) Aghani, consisting primarily of rice sown in mid-

June and gathered in December (iii) Rabi, made up largely of wheat that

ripens in the plains in the spring (March to May.)

(v) That there are mainly small and marginal farmers in the state & buying

large chunk of land requires sorting out of several issues associated with

large number of sellers & land acquisition process which result in extra cost

both in terms of brokerage, time and in sorting out litigations which do come

as large number of sellers are involved.

(vi) CERC has proposed the land requirement of 5 Acres/ MW for crystalline

modules. As mentioned in the order of CERC dated 15th May 2014, out of

29, 28 stakeholder who have participated in the hearing (including NTPC,

IL&FS, Tata Power, Federation of India Chamber of Commerce & Industries)

have suggested land cost in the range of 25 to 67 Lakhs/MW. In north

Bihar, more than 2300 people reside in one Sq km area. There are large

barren land/ ekfasli area/ Unirrigated area in MP, Gujrat, Rajasthan &

other states, Jharkhand have three times less population with land area of

three times compared to Bihar. The Commission should consider the cost of

land as Rs 50Lakhs/MW.

6


(vii) As explained in the above para, Bihar has altogether a different scenario. No

grid connected solar power project has so far come up in the state & the

contention of Commission to consider at this stage the MVR notified by the

Government of Bihar for ekfasla/ un irrigated type of land in different parts

of the State as base land price at the rate of Rs. 5 lakhss/ acre (Rs 25

Lakhs/ MW) is totally unjustified and not based on realistic parameters &

ground reality. This will further prove determinental to the Growth &

promotion of solar power generation in the State.

(viii) That unfortunately the banks/financial institutions are also showing

reluctance to provide finance to solar projects in Bihar. First annual

integrated rating for State Power Distribution Utilities under the integrated

rating methodology formulated by Ministry of power was carried out by

independent agencies ICRA & CRISIL. Bihar Distribution companies has

been awarded "B: grade which shows below average operational and

financial performance capability of BSPHCL and this has added to our woo.

This matter was raised before the Energy Secretary cum CMD of Bihar State

Power Distribution Company Ltd. A meeting of Bankers and developer was

also called by BSPHCL but this has not taken place so far.

(ix) That there are 2 kinds of financing mechanisms for solar project- (i)

Recourse Financing and (ii) Non-Recourse Financing. Recourse Financing is

the prevalent mechanics,. The typical Debt-Equity Ratio (Loan to Investment

Ratio) for Solar Power plants is 70:30. And the typical collaterals required

for 10 MW solar Project at 70% dept could by nearly 60 Crs. The

Commission will agree that collaterals requirement is very high. More-so

there is lack of confidence of Bankers in Bihar particularly in financing solar

projects. Lowering of capital cost will add one more negative parameter in

appraisal of projects for funding by banks and other financial institutions..

(x) That as stated in Para-9 major public sector banks consider Solar Energy

Project more risky as compared to infrastructure projects. Hence Solar

Projects developer relies on foreign lenders which invite lending rate plus

hedging risks. As such we pray Commission consider higher interest rate for

determination of tariff.

(xi) 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 lakhs per

7


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 for FY 2014-15

should be considered as 11X5.72X2 (FY 2013-14 & FY 2014-15) =Rs12.60

Lakhs should be considered instead of Rs 12.30 lakhs.

(xii) The performance (Capacity utilization factor)CUF depends on several factor

including the solar radiation, temperature, air velocity apart from the

module type and quality, angle of tilt (or Tracking) design parameters to

avoid cable losses and efficiencies of inverters and transformers. There are

some inherent losses which can be reduced through proper designing but

not completely avoided. The estimated capacity utilization factor varies form

16 to 20 % in various parts of the country. The Solar radiation available at

Nawada where we are setting up 10 MW solar plant is on annual average

4.89 kwh/m2/day.

District:

(xiii) With this solar radiation, the actual CUF would be around 17% CERC has

adopted average CUF of 19% taking all India Average. As per solar radiation

map attached, solar radiation varies in different zones of the county

considerable and CERC should have notified varying solar irradiation across

the different State varying form 15% 16% 17% 18% 19% and 20%. But

because of lack of available resource analysis decided all India average.

Commission should arrive at actual CUF & in the mean time, keeping in

view totally unsatisfactory states of solar power generation project in Bihar;

Commission should take a lenient view in the larger interest of promotion of

solar project in the state of Bihar and adopt CUF in between 17-18%

(xiv) That the Commission will agree that power scenario in the State is far from

satisfactory. It has the lowest annual per capita consumption of electricity in

country at 140 kwh, against the national average of about 800kwh. The

state is facing increasingly acute power shortage not only for peak load but

also for base load requirement. A number of projects have been approved by

the state government to enhance the availability of power under the Public-

Private Partnership mode but hardly things have moved up in the last five

years. The total installed capacity of 525 MW in the state has hardly any

relevance as these thermal power plant are either closed or operating at de

8


related capacity. With major share of NTPC, State Government has hardly

any control over KantiBijleeUtpadan Nigam Limited. Thus the State has to

depend largely upon power purchase for short & long term form central

pool, private sector, and PTC or power exchange, There is hardly any

industrial growth in the state & adding primarily domestic & agriculture

load is going to create a lot of problems on the financial health of the

distribution companies besides creating instability of the power system.

(xv) That keeping in view immense potential of solar power generation in the

state, Distributed Generation needs to be promoted on large scale. Solar

Power industry in India is gaining more and more prominence with each

passing day. The domestic/off-grid industry is picking up speed too.

(xvi) But unfortunately the state is yet to commission a single grid connected

solar project.

(xvii) Seven developer have been recommended by Energy Department for signing

PPA with Bihar State Po0wer Holding Company Ltd for a total installed

Capacity of 50 MW so far, These projects are to be commissioned before 31st

March 2014 but only 5 have signed PPA & rest two are in litigation.

(xviii) That the State Commission is mandated to promote RE power in the state of

Bihar. We have no solar plant installed in the state. The state still needs to

operate in promotional mode. Solar project needs to be promoted keeping in

view the actual base level parameters which is not comparable with most of

the states. Therefore, there is need to be state specific not project specific

approach till developers finds interest in setting up solar projects in state of

Bihar and it gets initial momentum.

(xix) In the past five years the Commission has revised the tariff three times but

not even a single lproject has come up. We therefore, humble request

Commission in the larger interest of power starved state of Bihar to allow the

existing tariff to continue till at least one or two grid connected Solar PV

generating Project come/Set up in the State.

7.4 Sun Edision Energy India Pvt. Ltd., Chennai-

SunEdison has submitted following comments on the proposed

determinationof tariff:-

9


Capacity Utilization Factor:-Paper has adopted the CUF of 19% in the present draft. We understand that said CUF

has been adopted from the current CERC RE tariff regulation, 2012. Here it is to be

noted that 19% CUF is achievable in only few states such as Gujarat, Rajasthan,

Madhya Pradesh etc. However, in Bihar, Said adopted value of CUF is impossible to

achieve as the state has lesser solar irradiation. CERC in its suo-moto order dated 15th

May, 2014 (petition no. 353/2014) has recognized this issue and directed staff to come

out with the suitable amendments in the RE tariff regulations, 2012 with different

CUF for different GHI bands across the country. In addition, the Central Commission

has also recognized comments received from the Ministry of New & Renewable Energy

(MNRE) advocating zone wise classification of the country. MNRE has also conveyed its

opinion of solar tariff with respect to the CUF (Table-1).

Solar Zone

GHI(kWh/Sq.m./day

Estimated ElectricityGeneration (MU) Year CUF (%)

Tariff(Rs./kWh)for Solar

PV

Greaterthan

Lessthan orequal to

Greaterthan

Lessthanor

equalto

Avg. Greaterthan

Lessthanor

equalto

Avg.

Solar Zone-I 4.5 1.28 14.58 9.11Solar Zone-II 4.5 5.0 1.28 1.46 1.37 14.58 16.67 15.63 8.50Solar Zone-III 5.0 5.5 1.46 1.64 1.55 16.67 18.72 17.69 7.51

1.66* 19.0* 6.99*Solar Zone-IV 5.5 6.0 1.64 1.83 1.74 18.72 20.89 19.81 6.71Solar Zone-V 6.0 6.5 1.83 2.01 1.92 20.89 22.95 21.92 6.06Solar Zone-VI(if any)

6.5 2.01 22.95 5.79

*As per present Draft Tariff Order(Ministry of New and Renewable Energy)

As per the study conducted by CERC in 2010, Commission has arrived on average

CUF of 19% for whole country based on GHI data received from "IMD" and

"Meteronam" for 51 sites across the country which also includes Bihar. According to

the same report, Bihar has a GHI of 4.83 kWH/sq.m which leads to maximum CUF of

17.24% with crystalline and 18.22% with thin film technology.

Considering the fact, proposed CUF should be reduced to 17% to present the realistic

scenario and accordingly tariff should be increased to provide the comfortable returns

to the developers.

Further, degradation in CUF of 1% should also be considered as mentioned in earlier,

being the degradation prescribed by the OEM.

10


Capital Cost for MW Solar PV Plants:-Commission has considered the capital cost of INR 6.91 Cr/MW for FY 2014-15. The

proposed cost and assumed parameters do not reflect the true cost of a solar PV

project in the current market scenario. This is mainly due to increase in the module

price and unfavorable INR/ USD fluctuation. At present, prices of modules are going

through a rationalization and stabilization phase leading to a reversal of the hitherto

seen downtrend. Rapid absorption to the overcapacity of previous years amidst

accelerating demand from China, Japan, Europe and other parts of the world has led

to a stall in Module Price trends.

By the time when balance in demand supply is achieved, prices are likely to have risen

further. This is also in line with other forecasts about the industry. It had been

projected in earlier forecasts as well that price drop will be stall and reverse in first

quarter of 2015.

Concurrently, the variation in USD-INR exchange rates and price increment of steel,

copper, aluminum etc;, which are the fundamental elements of the mounting

structure and rest of the system, is pushing system costs to higher levels.

A look at various project components confirms the same:Module Cost:As already highlighted, industry is witnessing a sudden increase in module prices.

This is due to the increased demand of solar modules in China and Japan and refining

of project economics in European countries.

At present weekly spot price of silicon and thin film modules is USD 0.621/Watt and

USD 0.641/Watt respectively. in addition, there is an incremental cost of insurance

and freight which comes to USD 0.07/watt. Therefore, resultant cost turns out to be

USD 0.691/Watt and USD 0.771/Watt respectively. Given the present rupee-dollar

exchange rate of INR 62/USD modules prices are INR 43/Watt for silicon and INR

548/Watt for thin film. As a result, for one megawatt utility scale solar PV plant,

module cost would come to INR 430 Lakh/MW and INR 480 Lakh/MW for silicon and

thin film based systems respectively.

Item High Low AverageSilicon Solar

Module0.88 0.54 0.621

Thin Film SolarModule

0.84 0.50 0.641

Unit: USD/Watt

11


Last update:29-01-2014; Source: PV insights.com

In the light of above submitted facts we request you to consider module cost as INR

455 Lakh/MW.

Power Conditioning Unit (Inverter):-Power conditioning unit is an important component of the balance-of system; the

unit's conditioners process the DC power produced by a photovoltaic system to AC

power and match the same with utility's power. In its order, CERC has considered the

invertor cost as INR 50 Lakh/MW. Please note that as per the current Indian

Electricity Grid Code, solar plants are required to adhere to the scheduling mechanism

and such set up requires an additional cost of INR 15 Lakhs/MW towards the setting

up of SCADA and monitoring instruments. Therefore, we request you to consider PCU

cost as INR 65 Lakhs/MW.

based on our analysis; we propose to adopt the following project cost:-

Sr. No. Components Value1 Module Cost (INR Lakh/MW) 4552 Degradation (INR Lakh/MW) 11.293 Land Cost 254 Civil and General Works 605 Mounting Structure 506 Power Conditioning Unit 607 Cables and Transformer 608 Preliminary and Operative

Expanses, IDC etd69

Total Cost (INR Lakh/MW) 790Auxiliary Consumption:-

Commission has not considered the auxiliary consumption in its paper. However,

other states like Gujarat and Rajasthan has considered the auxiliary consumption of

0.25%. CERC has also acknowledged this aspect has directed the staff to incorporate

the suitable amendment in the regulations. We also submit to Commission to consider

the auxiliary consumption in its tariff order and

review and finalise the benchmark capital cost of the Solar PV project for FY14-15.revise and declare the tariff for Solar PV prject as INR 9.45/kWh for FY 14-15.

7.5 ACME SolarEnergyPvt. Ltd. , Haryana:-ACME Solar Energy Private Ltd. has submitted as under:-

12


(i) Capital cost considered under the consultative paper is Rs.

6.91Crore/MW, which is very low and it would be tough and even

impossible for a solar developer to consider such a low cost of the power

plant. In order to highlight this low capital cost, some of the facts have

been provided below:

(a) The land cost in Bihar is very high in comparison to other states.

(b) The modules cost have increased.

(c) The cost for Civil, Mounting Structure, etc has increased.

(ii) GHI: The average GHI in Bihar is in the range of 4.482 to 5.066 which is

very low in comparison other states of India.

(iii) Interest on Loan : Major public sector banks are drying up with

infrastructure funds, projects now rely on foreign lenders which invites

lending rate plus hedging risk.

(iv) Auxiliary Power Consumption: There is no consideration of auxiliary

consumption in the consultative paper. Auxiliary consumption is the

quantum of energy consumed by auxiliary equipment of the generating

station and transformer losses within the generating station, expressed

as a percentage of the sum of gross energy generated at generator

terminals of all the units, and hence are significant enough to be

considered. Auxiliary power is required for air conditioning in inverter

room and control room & lighting in night. We propose the Commission

to consider 1% as auxiliary consumption.

(v) Assumption for Solar PV Power Projects parameters: Module Degradation

loss, Grid Unavailability Loss need to be considered/assumed suitably as

it impacts the generation/sale of energy of the plant. Linear Degradation

based on module supplier warranty need to be considered.

7.6 HINDUSTAN EPC CO. LTD. (formerly MOSER BAER Engineering &Construction Ltd) has submitted the following Comments/suggestions:-(i) Preliminary Submission-

Commission has initiated the present suo-motu proceedings under

BERC (Terms and Conditions for Tariff Determination from Solar Energy

Sources) Regulations, 2010 (2010 Regulations). Further, the said 2010

Regulations first control period has ended with the end of FY 2012-13

and Commission initiated the suo-motu proceedings for the second year,

13


i.e. 2014-15 of the next control period of three years starting FY 2013-14.

In this regard we would humbly submit that the present exercise of tariff

determination needs to be carried out strictly as per the provisions of

2010 Regulations.

(ii) Interest Rate-As per 2010 Regulations Commission had allowed interest rate as LTPLR

of SBI prevalent during the previous year plus 150 basis points. The

relevant extract reads as under:

"(b) For the purpose of computation of tariff, the normative interest rate

shall be considered as average long term prime lending rate (LTPLR) of

State Bank of India (SBI) prevalent during the previous year plus 150

basis points. In case of change of SBI policy as regard LTPLR the

Commission may SuoMotu amended this rate of basis points over and

above the bank interest rate".

However, Commission has proposed to adopt the interest rate i.e. Base

Rate plus 300 basis points as taken by CERC. It may be noted that

although there is Policy shift from PLR to Base Rate as per RBI

guidelines for commercial banks, however, SBI still notifies the PLR from

time to time. Therefore, PLR is history till date is still available and there

is no difficulty in implementing the provisions of 2010 Regulations as far

as Interest Rate is concerned.

However, even if Commission wishes to adopt the Base Rate linked

Interest Rate then the equivalent percentage of the allowed interest rate

may be taken. It may be seen from the historic data of SBI that the

difference between PLR and corresponding Base Rate is a fixed no. of

4.75% (Detailed data enclosed as Annexure-I). Thus, LTPLR plus 150

basis points translate to SBI Base Rate plus 625 basis points. So the

current allowed interest rate of Base Rate Plus 300 basis points is not

equitable compared to the principles provided in Commission's 2010

Regulations. Therefore, in all equity and fairness the interest rate (cost of

debt) be allowed as LTPLR of previous year of SBI plus 150 basis points

as provided in the Regulations or its equivalence of SBI Base Rate during

the previous year plus 625 basis points.

(iii) Interest on Working Capital-

14


As per 2010 Regulations stipulate interest on working capital as LTPLR

of SBI prevalent during the previous year plus 100 basis points. The

relevant extract of Regulation reads as under:

"(2) Interest on working capital shall be at interest rate equivalent to

average State Bank of India short terms Prime Lending Rate (STPLR)

during the previous year plus 100 basis points. In case of change of SBI

Policy as regard STPLR the Commission may Suo-motu amend this rate of

basis points over and above the bank interest rate."

However, Commission has proposed to adopt the interest rate i.e. Base

Rate plus 350 basis points as taken by CERC. Further, the principle of

interest on working capital has been 50 basis points higher than the

proposed Interest Rate unlike provision of 2010 Regulations wherein

Commission has allowed 50 basis points lower interest on working

capital compared to interest rate for long term. However, for the reasons

mentioned above the Interest on Working Capital, in all fairness, may be

considered as LTPLR of SBI prevalent during the previous year plus 100

basis points as provided in the Regulations or its equivalence as SBI

Base Rate prevalent during first six months of the previous year plus 575

basis points.

(iv) Capital Cost of Solar PV Plants-The break-up of Capital Cost under various heads as considered by

CERC while determining the Capital Cost for Solar PV projects and our

submissions for FY 2014-15 are given below for kind consideration of

Commission:Cost in Rs. Lakh/MW

Sl.No.

Project Cost Head 2014-15 OurProposals

1. PV Modules 365.80 3912. Additional module cost as against

Degradation11.29 …..

3. Land Cost 25 254. Civil and General Works 60 955. Mounting Structures 50 1056. Power Conditioning Unit 50 607. Evacuation Cost up to Inter-connection Pint

(Cables & Transformers)60 105

8. Preliminary and Pre-operative Expensesincluding IDC & contingency

69 86

Total Project Cost (1 to 8 ) per MW 691.09* 863* Hon'ble CERC rounded it off to Rs. 691 Lakh/MW

15


In light of the above, the total capital cost of Rs. 8.63 Crore/MW (i.e.

module cost of Rs. 3.91 + non-module cost of Rs. 4.72 Crore/MW) may

kindly be considered for FY 2014-15 for Solar PV Projects.

(v) Capacity Utilisation Factor (CUF):Commission in Regulation 26 of Solar Tariff Regulations, 2010 has

allowed CUF of Solar PV projects as 19%, which presumably seems to be

based on the PAN India norms specified by CERC, whereas, the Global

Horizontal Irradiation (GHI) data from four different sources (enclosed as

Annexure-II) suggests a much lower CUF of around 15.5% based on the

given data may kindly be considered by relaxing the norms by exercising

its power under Regulation 37 of Solar Tariff Regulations, 2010. Detailed

submissions in justification thereof are given in the following paras.

The Capacity Utilisation Factor (CUF) specified by Commission is

19% for Solar PV Projects. In this regard, it is submitted that 19% CUF

was specified by CERC based on the maximum value of radiation data

(5.8 kWh/m2/day) considered for entire country (kindly refer Annexure-

III-PP 8-9 of CERC's Explanatory Memorandum for Solar Tariff 2009).

This maximum value is 5.83 kWh/m2/day for the station Bhavnagar

located in Gujrat. For Patna, the radiation level is only 4.79

kWh/m2/day. Accordingly, the expected CUF in Bihar would be

proportionally lower and should be around 15.6% (19% x 4.79/5.83) as

per the said data.

The solar radiation data of from four different sources for the entire State

of biharalongwith Gujarat, the most successful Solar State in the country

(enclosed at Annexure-II) wherein it may be seen that the Global

Horizontal Irradiance (GHI) i.e. Solar Insolation of Bihar is lower than

that of Gujarat. The average insolation data of Bihar and Gujrat have

been complied as below-

16


State GHIMeteonorm-7.1.2

GHINASA

GHIMNRE

GHISolar-GIS

Average

Gujarat Maximum 5.71 6.07 5.79 5.68 5.856

Minimum 5.30 5.79 5.55 5.23 5.546

Average 5.549 5.332 5.731 5.470 5.521

Bihar Maximum 5.00 5.28 5.34 5.06 5.206

Minimum 4.59 4.88 4.99 4.43 4.820

Average 4.796 5.120 5.183 4.788 4.972

* (All figures in kWh/m2/Day)

The average solar insolation of the above referred data sources is 5.521

kWh/m2/Day and 4.972 kWh/m2/Day for the States of Gujarat and Bihar

respectively. Considering the CUF of 18% as allowed by CERC at the average

solar radiation in Gujarat (5.521kWh/m2/Day), the CUF for Bihar works out to

be 16.21%. However, even at the average maximum and minimum solar

radiation of Bihar, with respective average maximum and minimum solar

radiation of Bihar, with respective average maximum and minimum of Gujarat,

are taken the CUF works out to be 16.00% (18% x 5.206/5.856) and 15.64%

(18% x 4.82/5.546) respectively. It may also be seen from enclosed Annexure-IV

that the average CUF of four three plants in the State of Gujarat is around 18-

18.5%, which also substantiates the allowed CUF of 18% in Gujarat for all

locations in Gujarat. Therefore, it is requested that while determining the tariff

for solar PV Project, the Capacity Utilisation Factor (CUF) @ 15.5% or a

maximum 16% may kindly be considered by Commission by invoking

Regulation 37 (Power to Relax) and Regulation 38 (Power to remove difficulties)

of the Solar Tariff Regulations, 2010.

(vi) O&M Expenses :

Commission in its 2010 Regulations has fixed O&M Expenses for Solar

PV Projects as Rs. 9.51 Lakh/MW for first year (2010-11) and escalated

@ 5.72% per annum, which works out to be Rs. 11.88 Lakh/MW for FY

2014-15. Whereas, Commission in the proposed order has taken the

O&M Expenses as Rs. 12.30 Lakh/MW for FY 2014-15 which is being

taken by CERC for same year. In this regard, it is humbly submitted

17


that Commission may kindly take the O&M Expenses for Solar PV

projects as Rs. 11.88 Lakh/MW for the FY 2014-15 (instead of Rs. 12.30

Lakh/MW) and escalated @ 5.72% per annum as per the provision of

2010 Regulations.

(vii) Auxiliary Consumption in Solar PV Power Plants :

It is submitted that Commission's Solar Tariff Regulations, 2010 and

CERC's RE Regulations, 2012 neither specifically provide any norm for

degradation nor deny allowing the same. Although, CERC has not

considered Auxiliary Consumption for Solar PV Plants whereas there is

an Auxiliary Consumption at Solar PV Power Plants too, which is not

negligible and, hence needs to be considered for tariff determination.

With our reasonably enough experience of successfully running the Solar

PV Power Plants we have found that Auxiliary Consumption is as high as

2% in MW capacity plant with smaller size, say 5 MW plant.

Commission may kindly exercise Power to relax as provided under Solar

Tariff Regulation, 2010 to factor in a normative Auxiliary Consumption of

at least 0.25% as is being done by GERC, RERC, KERC & MPERC.

(viii) Degradation of Solar Modules :

The annual degradation is also not captured by the average performance

(CUF of 19%) for the entire period 25 years, as that is the expected

average of solar insolation in the State over this period and does not

consider reduction in efficiency due to module degradation effect, which

has been separately considered by CERC and other State Commission.

Therefore separate dispensation for degradation needs to be done. Also,

both Commission's Solar Tariff Regulations, 2010 and CERC's RE

Regulations, 2012, neither specifically provide any norm for degradation

nor deny allowing the same for Solar PV Projects. Hence, Commission

may allow degradation by exercising its power under Regulation 37

(Power to relax) of the 2010 Tariff Regulations for Solar Energy to capture

the same.

It is, therefore, submitted that Commission may kindly consider

degradation/derating @ 0.5% per annum 4th year onwards for

determining the tariff for Solar PV plant.

18


(ix) Computation of Tariff :

Discount Factor Correction Required:

Commission in BERC (Terms and Conditions for Tariff Determination

from Solar Energy Sources) Regulations, 2010 dated 02.10.2010

(hereafter "Solar Tariff Regulations") has provided provision for discount

rate at pre-tax WACC. The relevant extract of the Regulation 10 (2) reads

as under:

" (2) For the purpose of levellised tariff computation, the discount factor

equivalent to weighted average cost of capital shall be considered"

However, in the present proceeding Commission has proposed to

adopt post-tax WACC as taken by CERC. Commission while determining

the first solar Tariff Order (for FY 2010-11) during the first control period

(2010-13) has computed the pre-tax WACC as mandated under 2010

Regulations, whereas in the present proceeding Commission has not

computed the same as per the Regulations. It is, therefore, requested

that commission may kindly compute discount factor as pre-tax WACC

as mandated under 2010 Regulations.

15. Levellised Tariff is calculated by carrying out levellisation for 'useful life'

of each technology considering the discount factor for time value of money.

16. 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 (ie. 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% ( (12.70% x 0.70 x (1-33.99%) + (16.0% x 0.30))."

It may be seen that the shift from taking discount factor as pre-tax

WACC to post-tax WACC is due to change in Regulations. However, the present

discount factor (i.e. post-tax WACC) taken by CERC does not ensure the

assured return on equity in Regulations. However, this issue is not being

19


highlighted as it does not relate to the present proceeding considering the

provisions of 2010 Regulations of Commission.

Since Commission has not modified its regulations to state that discount

factor shall be post tax WACC. Commission is, accordingly, requested to correct

the discount factor from post-tax WACC to pre-tax WACC as mandated under

the provisions of 2010 Regulations.

It is, therefore, submitted that Commission while arriving at the generic

levellised tariff for solar PV plant levelisation from the revenue stream may

kindly be done.

7.7 SOUTH BIHAR POWER DISTRIBUTION CO. LTD , PATNA:-South Bihar Power Distribution Company Ltd. has submitted its

comments/suggestions/objections vide letter no. SBC-215/2014/12 dt.

03.01.2015. The detailed comments/suggestions/objections are hereunder-

(i) Section 7 (IV)-Loan Tenure- For the purpose of determination of tariff, loan tenure of 10

years shall be considered and no change is proposed.

Comment 1- In the wake of prevailing tight liquidity conditions and

impact on cash flows of the loan disbursement period, loan tenure of 12

years may be considered as per CERC for determination of generic tariff

order for FY 15 (Petition No. SM/354/2013 (Suo-Motu).

(ii) Section 7 (VI)-Depreciation- It shall be 7 percent for the first 10 years of the tariff

period and remaining depreciation shall be spread over the remaining

useful life of the project from 11th year onwards.

Comment 2- With the proposed revision in loan tenure, it is proposed to

revise the depreciation at the rate of 5.83 percent for the first 12 years

and remaining depreciation should be spread over the remaining useful

life of the project from 13th year onwards. The same treatment has been

done by CERC for determination of generic tariff order for FY 15 (Petition

No. SM/354/2013 (Suo-Motu).

Other Comments(iii) Auxiliary Consumption-

No auxiliary consumption has been considered for Solar PV projects.

20


Comment 3- Suitable auxiliary consumption should be considered for

auxiliary power requirements of various peripheral systems such as

inverter room and control room air conditioning.

(iv) Module Degradation-The Commission has not considered the loss of power generation due to

module degradation.

Comment 4- An annual performance degradation of 0.5% from second

year onwards should be considered to capture the impact of degradation

process on reduction in generation over the life of project.

7.8 BIHAR STATE POWER HOLDING CO. LTD , PATNA:-Bihar State Power Holding Company Ltd. has submitted following parawise

comments vide letter no. 24 dt. 12.03.2015-

(1) Para 7 (i) : Control period or Review Period- No comment.

(2) Para 7 (ii) : Tariff Period- No comment.

(3) Para 7 (iii) : Debt Equity Ratio- No comment.

(4) Para 7 (iv) : Loan Tenure- No comment.

(5) Para 7 (v):Interest Rate-The project developer obtain loan for the project corresponding to 70% of the

project cost at the SBI base rate, whereas, Commission in the tariff for 2014-15

has proposed interest rate on the loan component as SBI Base Rate + 300 basis

point. The consideration of the additional interest rate i.e. 300 basis point over

and above the SBI base rate coupled with high rate of return proposed by the

Commission on equity to be employed by the developer will be an additional

income to the developer and at the same time it may have considerable impact

on the tariff to be paid by the Distribution licensee and ultimately by the end

consumers.

The reason behind considering the interest rate as SBI Base Rate + 300 basis

points is mainly on account of the high profile risk involved in the Renewable

energy projects in comparison to the conventional energy projects. The

evacuation system is also being provided free of cost to the project developers if

it qualify the provisions of Clause 4.2.3 of the "State NRE Policy 2011". Further,

payment against monthly power supply to DISCOMs from Solar Power PV

projects including Rooftop Solar PV project including Rooftop Solar PV and

Small Power Projects and Soar Thermal Power Projects based generation plant

is also secured in the form of LC to be maintained by the Distribution licensee

21


in favour of the Solar Power PV/Small thermal project developers under

payment security mechanism in case of default in payment by DISCOMs.

The interest rate considered by the Commission 300 basis point over SBI Base

Rate is very high and not in line with the Monetary Policy Statement of RBI for

2014-15.

It is also relevant to mention that the norms decided by the CERC is the ceiling

norms and State Commissions are free to determine better norms by striking

balance between the cost of generation & Cost of supply in accordance with

section 61 © & 61 (d) of EA-2003. The project developers in the State are being

given various incentive / special concession under provisions of Clause 5 & 6 of

the State NRE Policy, 2011, which is also required to be consider by the

Commission for determination of tariff solar PV including rooftop.

In view of the position explained above, it is prayed that for computation of

interest on loan component in respect of Solar Power PV / Small thermal

project the interest rate be considered as Bank Rate of RBI (i.e. 9 % w.e.f.

28.01.2014) + 200 basis point only for project to be Commissioned in 2014-15.

Para6 (vi) : DepreciationCapital cost of the Solar PV & Rooftop Solar PV Generation Plant shall be

apportioned on Machinery and Land and civil works is the rate at 85% and 15%

respectively. Therefore Depreciation shall be calculated with the reference value of

85% of the cost of Plant and Machinery and accumulated depreciation shall be limited

to 90% of the cost of Plant and Machinery.

Para 7 (vii) : Return of EquityThe normative Return on equity be considered 16 % (pre-tax) for the useful life of

the plant.

Para 7 (viii) : Interest on Working CapitalInterest on working capital should be equivalent to RBIU Bank Rate (9%)+200

basis point (equivalent to 11.0%) only.

Para 7 (ix) : Discount FactorDiscount factor should be increased in the interest of beneficiaries or distribution

licensee to promote the solar power PV /small thermal projects in Bihar.

In the light of the position explained above, it humbly prayed before the

Commission for kind consideration of the followings:

22


a. Interest rate on loan in case of Solar Power PV/Solar thermal based Generation

Plants be equal to RBI Bank Rate (9%) + 200 basis point i.e. 11%.

b. Return on equity shall be 16% (pre-tax) for the useful life of the plant.

c. Interest on Working Capital shall be equal to Bank Rate (9%) + + 200 basis

point i.e. 11%.

d. Capital cost on Machinery, Land and civil works shall be apportioned in the

ratio 85%:15% and depreciation shall be computed on 85% cost of the plant

and machinery and accumulated depreciation shall be limited to 90% of the

cost of plant and machinery.

8 Commission’s Observation and Views:-(i) Commission has examined the comments /submissions made in respect of

norms considered by the Commission in the consultative paperfor

determination of generic levellised tariff for FY2014-15 for Solar PV Projects

and Solar Thermal Power Projects.

The norms for determination of tariff specified in the Regulations remain valid

during the control period and benchmark capital cost for these projects may be

reviewed annually by the Commission.

(ii) Commission has considered norms of Tariff period, Loan Tenure, Debt Equity

Ratio, Depreciation, O&M expenses and CUF etc. as provided in the

Regulations,2010. Other parameters such as Return on Equity, Interest Rate

and Interest on working capital etc. are as per norms decided by the

Commission during 1stYear of the Control period while determining generic tariff

for FY2013-14 for Power Generated from Solar PV Projects and Solar Thermal

Projects in suo-motu proceeding no.9/2013 dated 14.06.2013.The Commission

has amended respective Regulations 14(2)(b),16(2)(a), 17(2),27(1)and 31(1) of

the Regulations,2010 in para32 of the aforesaid order.

(iii) Capital cost, Capacity Utilization Factorand provision for auxiliary consumption

for Solar PV projects etc have been main issues raised in the comments

/suggestions submitted by M/s Hindustan Power(Moser Baer), Response

Energy, ACIRA solar, Welspun,Sun Edision and SBPDCL.Commission has

considered the following aspects while making decisions on the issues:- :-

23


(a)Capital Cost:The CERC vide its order dated 15th May 2014 has notified benchmark capital

cost of Rs. 691 Lakh/MW for Solar PV Projects for FY 2014-15 considering parameters

like module cost, cost of land, cost of module degradation and civil & mounting

structures etc. In the submissions,it has been suggested to consider higher capital

cost in view of higher costs of module, module degradation, land and Civil and

mounting structure, etc.

CERC in its order in petition no.SM/353/2013 has observed in para 8.2.4 that

though, average module price is around 0.67USD/Wp, prevailing module price offered

in the country by the leading manufacturers (world top 10 manufacturers) are on

lower side. CERC has considered the module cost of O.59USD/Wp after considering

the suggestions of MNRE and the stakeholders which is inclusive of custom clearing

charges, transportation and unloading. Cost component for module degradation have

also been considered and an amount of Rs11.29 lakhs/MW has been provided.

M/s Response Energy, Welspun and others have suggested higher cost of land

and has mentioned that there is less than 4% of barren land in Bihar and it is

shrinking with rising population. In north Bihar, more than 2300 people reside in one

sq.km area.

It has been submitted that consideration of the MVR notified by Government of

Bihar for ek fasla/un-irrigated type of land in different parts of the State as base land

price at the rate of Rs.5 lakhs/acre(Rs.25lakh/MW) is totally unjustified and not

based on realistic parameters.

Commission has examined the MVR rates prevailing in the different parts of the

state and it was found that average rate for Ek fasla/un-irrigated land is less than

Rs5000/decimal and therefore, has considered Rs25lakhs/MW as cost of Land for

Solar PV projects. However for those projects where the cost of land is higher, a project

specific determination of Tariff may be considered on case to case basis.

(b)Capacity Utilization Factor:SBPDCL, Response Energy, SunEdision, Hindustan Power and others in their

submissions have suggested todetermine CUF according to the solar radiation

prevailing in the State andaccordingly reduce the CUF in between 17-18% for Solar PV

Projects.CERC in its suo-moto order dated 15th May, 2014 (petition no. 353/2014) has

recognized this issue and directed staff to come out with the suitable amendments in

24


the RE tariff regulations, 2012 with different CUF for different GHI bands across the

country.

Commission has also observed that a study carried out by the CREC ( at page

no. 103-statement of Objects and reasons, RE Tariff Regulations,2012) has noted that

average CUF at more than 80% locations works out to be more than 19% for solar PV

plant based on thin film technology. Similarly, the average CUF at more than 50%

locations work out to be more than 19% for solar PV plant based on crystalline

technology. M/s SunEdision has mailed on 10.1.2015, a copy of report on

performance of Solar Power Plant submitted to CERC in Feb.2011 wherein at page

no.35,table:9 , CUF at 52 various locations in the country have been indicated. As per

the report, CUF for Patna is 17.24% for crystalline technology and 18.22% for thin film

technology.

However, in absence of Zone wise/state wise/location wise data for CUF level,

in its order in SM/353/2013 dated 15.5.2014,while determining the benchmark

capital cost norms for Solar PV power projects and solar thermal projects applicable

during FY 2014-15, the CERC has considered CUF of 19 % for Solar PV power

projects. In suo-motu proceeding no.9/2013 dated 14.06.2013 during 1st year of the

control period, Commission considered to retain the CUF of 19% for Solar PV projects

while determining generic tariff for FY2013-14 for Power Generated from Solar PV

Projects. The Commission, therefore, retains the same for FY 2014-15 also.

(c) Auxiliary Consumption: -SBPDCL and other stake holders have suggested to consider auxiliary

consumption for various peripheral systems such as inverter room and control room

air conditioning of the solar PV power projects.

Commission has not provided any auxiliary consumption in the

Regulation for Solar PV Projects .

CERC has also has not provided auxiliary consumption in RE Regulations,

2012 or in its tariff order for FY2014-15.

9. Common norms for both Solar PV and Solar Thermal ProjectsControl Period or Review Period : The following Common norms for Solar PV and

Solar Thermal Projects are considered for determination of generic levellised tariff for

FY2014-15 :-

(a) Control period or Review Period :- The control period is for three years as per

provisions in the BERC(Terms and Conditions for determination of Tariff from

25


Solar energy sources)Regulations,2010 i.e for the period from FY 2013-14 to FY

2015-16.

(b) Tariff Period :- It is 25 (twenty five) years for both Solar PV and Solar Thermal

Power Projects as per provision of the Regulations.

(c) Debt Equity Ratio :- For generic tariff to be determined based on suo-motu

petition, the debt equity ratio shall be 70:30 and no change is proposed.

(d) Loan Tenure :- For the purpose of determination of tariff, loan tenure of 10

years has been considered as per provisions in the BERCRegulations,2010

SBPDCL and Moser Bear have suggested Loan Tenure of 12 years as considered

by the CERC for determination of generic Tariff Order in for FY2014-15 for

Solar PV projects and Solar Thermal Projects.

(e) Interest Rate :- The BERC(Terms and conditions for determination of tariff for

solar energy sources)Regulations, 2010 provides that the interest rate shall be

average long term prime lending rate (LTPLR) of State Bank of India (SBI)

prevalent during the previous year plus 150 basis points. As per CERC

Regulations, 2012, the interest rate shall be SBI Base Rate during first six

months of the previous year plus 300 basis points. In view of significant policy

shift from Prime Lending Rate (PLR) to Base Rate for banks as per RBI

guidelines, interest rate on the basis of average State Bank of India (SBI) Base

Rate prevalent during the first six months of the previous year plus 300 basis

has been considered by the Commission in FY2013-14 while determining

generic Tariff for Solar PV projects and Solar thermal power projects. Base Rate

prevalent in SBI during the first six months in FY 2013-14 is 9.70%. As such

interest rate of 9.70% plus 300 basis points equivalent to 12.70% is considered

for FY2014-15 .

(f) Depreciation: It shall be 7 percent for the first 10 years of the tariff period and

remaining depreciation shall be spread over the remaining useful life of the

project from 11th year onwards as provided in theBERC Terms and conditions

for determination of tariff for solar energy sources)Regulations, 2010.

SBPDCL and Hindustan Power have suggested revision of depreciation at the

rate of 5.83% for 1st12 years as done by the CERC for determination of generic

tariff order for FY2014-15.

(g) Return on Equity :-The normative return on equity shall be 20% per

annum(pre –tax) for the first 10 years and 24% per annum(pre-tax) from the

26


11th years onwards. It is in conformity with the CERC (Terms and Conditions

for Tariff Determination from Renewable Energy Sources) Regulations, 2012

and has been adopted while determining the generic tariff for FY 2013-14 for

power generated from Solar PV and Solar Thermal Power projects in the order of

the Commission in suo-motu proceedings no.09/2013 dated 14.6.2013.

(h) Interest on Working Capital :- The BERC(Terms and conditions for

determination of tariff for solar energy sources)Regulations, 2010 provides that

Interest on working capital shall be at interest rate equivalent to average State

Bank of India Short Term Prime Lending Rate (STPLR) during the previous year

plus 100 basis points. As per CERC Regulations, 2012, the interest rate 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. In view of policy shift from Prime Lending Rate (PLR) to Base

Rate for Banks as per RBI guidelines, interest Rate on the basis of average State

Bank of India (SBI) Base rate prevalent during the first six months of the

previous year plus 350 basis points has been considered and adoptedby the

Commission while determining generic tariff. for the FY2013-14. Average Base

Rate for the first six months prevalent in SBI in FY 2013-14 is 9.70%. As such

interest rate on working capital shall be 9.70% plus 350 basis points equivalent

to interest rate of 13.2% forFY2014-15.

(i) Discount Factor :- No change is proposed in discount factor which is

equivalent to weighted average cost of capital as per Regulation 22(ii). At

12.70% interest rate for loan component and 16% post tax ROE the discount

factor is { 12.7% x.7 (1-33.990%) + (16% x 0.30)}, which comes to 10.67%.

(10).Following parameters have been considered for Solar PV Power Projects :-

(a) Capital Cost :- The benchmark capital cost for projects may be reviewed

annually by the Commission. The CERC vide its order dated 15th May 2014

has notified benchmark capital cost of Rs. 691 Lakh/MW for Solar PV Projects

for FY 2014-15 considering parameters like module cost, cost of land, cost of

module degradation and civil works etc. The Commission considers this

benchmark capital cost as capital cost of Rs. 691 Lakh/MW for FY 2014-15 for

Solar PV Projects.However for those projects where the cost of land is higher, a

project specific determination of Tariff may be considered on case to case basis.

27


(b) Capacity Utilisation Factor :- No change in existing 19% of CUF for Solar PV

and other small Solar Power Projects has been made for FY2014-15.

(c)Operation and Maintenance Expenses :- O&M expenses of Rs. 11.00

Lakh/MW for the first year of operation for FY 2012-13 with an escalation of

5.72% per annum was fixed by the CERC. Accordingly, Commission has

considered Rs. 12.30 Lakh/MW as O&M expenses for the period FY 2014-15

considering escalation rate of 5.72% per annum as provided by the CERC and

BERC Regulations.

11. Following parameters have been considered for Solar Thermal PowerProjects :-

(i) Capital Cost :- The CERC vide its order dated 15.05.2014 has fixed

benchmark capital cost of Rs. 1200 Lakh/MW for Solar Thermal Projects

for FY 2014-15. The Commission considers this benchmark capital cost

as normative capital cost of Rs. 1200 Lakh/MW for Solar Thermal Power

Projects for FY 2014-15.

(iii) Capacity Utilisation Factor :- No comment has been received from any

stake holder and Commission has not considered any change in the

existing 23% CUF for Solar Thermal Power Projects.

(iv) Operation and Maintenance Expenses :- O&M expenses of Rs. 15

Lakh/MT for the first year of operation for FY 2012-13 with an escalation

of 5.72% per annum was fixed by the CERC. The Commission considers

Rs. 16.77 Lakh/MW as O&M expenses for FY 2014-15 based on

escalation rate of 5.72% per annum as provided in the Regulations,

2010

(v) Auxiliary Consumption :- No comment has been received and existing

auxiliary consumption of 10% for Solar Thermal Projects has been

retained as provided under the Regulations,2010

12. For availing the benefit of accelerated depreciation applicable income tax rate @

33.990% (30% IT rate + 10% surcharge + 3% education cess)has been considered for

the purpose of determining net depreciation benefit. 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. Additional 20% depreciation in the initial year is proposed to be

28


extended to new assets acquired by power generation companies vide amendment in

section 32, sub-section (1) clause (ii a) of the Income Tax Act.

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 (ii) to Regulation

22). Income Tax benefit 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 taking discount factor

into account.

13. The generic levellised tariff determined on the basis of above common parameters and

parameters for Solar PV Power Projects shall be applicable for such projects which are

commissioned up to 31.03.2016 and for which PPA is signed up to

31.03.2015.However,till such time new tariff is determined,tariff determined in this

order shall remain applicable.

14. The said tariff shall be valid for 25 years from the date of commissioning of project.

15. The tariff has been determined for the projects for which PPA was to be signed up to

31.03.2015 and the project was to be commissioned before 31.03.2016. However, the

financial year 2014-15 is already over and the process of fresh determination of tariff

for the year 2015-16 may take some time. Therefore, this tariff shall be valid till a

new tariff order for the year 2015-16 is issued by the Commission. This tariff will also

be applicable to projects for which PPA is signed after 31.03.2015 and before the

issue of the next tariff order and the project is commissioned within one year from

the signing of the PPA.

16. The generic levellised tariff for Solar PV including Rooftop PV determined on the

basis of above common parameters and parameters for Solar PV Projects shall be as

hereunder :

Particulars LevelisedTariffRs./KWh

Levelised benefit ofaccelerateddepreciation, ifavailable Rs./KWh

Net levelised Tariffafter adjustment foraccelerateddepreciationRs./KWh

Solar PV PowerProjects includingRooftop Solar PV andSmall Power Projects

7.69 0.76 6.93

29


17.The generic levelised tariff determined on the basis of above common parameters and

parameters for Solar Thermal Power Projects shall be applicable for such projects

which are commissioned upto 31.03.2017 and for which PPA is signed upto

31.03.2015. However,till such time new tariff is determined, tariff determined in this

order shall continue.

The tariff shall be valid for 25 years from the commercial operation date (COD).

This tariff will also apply to Projects for which PPA is signed after 31.03.2015

and before issue of a new tariff order for the year 2015-16 and the Project is

commissioned within two years of signing of the PPA.

18.The generic levelised tariff determined on the basis of above common parameters for

Solar Thermal Power Projects for Solar Thermal shall be as hereunder:

Particulars LevelisedTariffRs./KWh

Levelised benefit ofaccelerateddepreciation,if available

Rs./KWh

Net levelised Tariff afteradjustment foraccelerateddepreciation

Solar ThermalPower Projects

11.84 1.23 10.61

17.The detailed computations of the generic levelised tariff are shown in Annexure I for

Solar PV Projects and Annexure II for Solar Thermal Projects.

18.Other terms and conditions will remain the same as stipulated in Regulations, 2010.

Sd/-(S. C. Jha)Member

Sd/(U. N. Panjiar)

Chairman

30


Annexure-1Template for Solar PV Power Projects

Sl.No.

AssessmentHead

Sub-Head (1) Sub- Head (2) Unit Assumptions

1. PowerGeneration

Capacity Installed PowerGenerationCapacityUtilization factorAuxiliaryConsumptionUseful life

MW

%%

Year

1

19.00.0

252. Power Cost Capital

Cost/MWPower Plant Rs.

Lac/MW691

3. FinancialAssumptions Debt :Equity

DebtComponent

EquityComponent

Depreciation

Tariff PeriodDebtEquityTotal DebtAmountTotal EquityAmountLoan AmountMoratoriumPeriodRepaymentPeriodInterest rateEquity AmountReturn onEquity first 10yearsROE 11th yearonwardsdiscount rateDepreciationrate first 10yearsDepreciationrate 11th yearonwardsIncome Tax

Year%%Rs. Lakh

Rs. Lakh

Rs. LakhYear

Year

%Rs. Lakh% p.a.

% p.a.

%

%

%

%

257030483.70

207.30

483.700

10

12.7207.3020

24

10.67

7

1.33

33.9904. Operation &

MaintenanceO&Mexpensesp.a.Escalationfor O&M

Rs. Lakh

%

12.30

5.725. Working O&M Month 1

31


capital expensesMaintenanceSpareReceivablesInterest onworkingcapital

(%O&Mexpenses)

%

Month

%

15

2

13.2

32


Annexure-II

Solar Thermal Power Projects

Sl.No.

Assessment Head Sub-Head (1) Sub- Head (2) Unit Assumptions

Installed PowerGeneration Capacity

MW 1

1 Utilization factor % 232 Auxiliary consumption % 10

useful life Year 25

3 Project Cost CapitalCost/MW

Power Plant cost Rs. Lakh/MW 1200

4 FinancialAssumptions

Tariff Period Year 25

Debt :Equity Debt % 70Equity % 30Total Debt Amount Rs. Lakh 840Total Equity Amount 360

DebtComponent

Loan Amount Rs. Lakh 840

Moratorium Period Year 0Repayment Period Year 10

Interest rate % 12.70EquityComponent

Equity Amount Rs. Lakh 360

Return on Equity first10 years

% p.a. 20

ROE 11th year onwards

discount rate

%

%

24

10.67Income tax % 33.90

Depreciation Depreciation rate first10 years

% 7

Depreciation rate 11th

year onwards% p.a. 1.33

4 Operation &Maintenance

O&Mexpenses(2014-15)

Rs. Lakh 16.77

Escalation forO&M

% p.a. 5.72

33


expenses

O&Mexpenses(2013-14)

Rs. Lakh 15.86

5 Working capital O&Mexpenses

Month 1

MaintenanceSpare

% of O&M expenses % 15

Receivables Month 2Interest onworkingcapital

% 13.2

34


34


34


35


35


35


36


36


36


37


37


37


Documents

Bihar Electricity Regulatory Commission - Solar for … SMP-SOLAR-22/2014-SKP Bihar Electricity Regulatory Commission VidyutBhawan-II, J.L.NehruMarg, Patna 800 021Suo-Motu Proceedings