The Central Electricity Regulatory Commission (CERC) has issued its order on the levelized generic tariff for renewable energy sources for the second year of the control period, covering FY 2025-26. This order is based on the RE Tariff Regulations, 2024, and outlines tariffs for small hydro projects, biomass power projects, non-fossil fuel-based co-generation, biomass gasifier-based projects, biogas-based projects, and refuse-derived fuel-based municipal solid waste projects. It does not cover solar, wind, hybrid, or storage technologies, for which project-specific tariffs are to be determined upon petition.
The Commission followed a structured approach in determining these tariffs, considering a normative debt-equity ratio of 70:30, a post-tax return on equity of 14% for most projects and 15% for small hydro, and a loan tenure of 15 years. The discount factor used was 9.21% for most technologies and 9.51% for small hydro projects. The Commission also factored in capital costs, operation and maintenance expenses, auxiliary consumption, depreciation, interest on working capital, and capacity utilization or plant load factors based on specific technologies and regions.
One of the key areas of debate was the capacity utilization factor (CUF) for small hydro projects in Odisha. Stakeholders argued that the proposed 45% CUF was too high given the seasonal and canal-based nature of projects in the state. They cited historical data and previous regulatory decisions to suggest a more realistic CUF of 30%. However, the Commission maintained the 45% figure as specified in the RE Tariff Regulations, 2024, stating that changing it would require amending the regulations, which was outside the scope of the current order.
Similarly, concerns were raised about the capital cost benchmarks for small hydro projects in Odisha. Developers pointed out that wide rivers and low-head designs require higher infrastructure investments. Despite these inputs, the Commission retained the earlier normative capital costs, indicating that individual state-level adjustments were not part of the current exercise.
Fuel pricing also featured in the discussions. For bagasse-based projects, the South Indian Sugar Mills Association (SISMA) objected to the low fuel cost fixed for Tamil Nadu, highlighting higher market prices and demand. They requested a revision of the price to Rs. 4000/MT from the proposed Rs. 2506.59/MT. However, the Commission did not accept this change, as fuel price adjustments are fixed under the current regulations and outside the scope of the order.
Another issue raised was regarding refuse-derived fuel-based municipal solid waste projects. Stakeholders sought clarity on whether fuel costs and associated transport charges should be considered in tariff calculations. The Commission clarified that no separate fuel cost is allowed for RDF-based projects, as the cost of fuel preparation is already integrated into project costs.
The order also details the final levelised tariffs for each technology and region. For example, small hydro tariffs range from ₹4.95/kWh in Odisha (5–25 MW) to ₹7.57/kWh in other states (below 5 MW). Biomass and biogas projects have varying tariffs depending on technology and fuel type, ranging between ₹7.33 and ₹11.28 per unit. For refuse-derived fuel-based projects, the levelised tariff was set at ₹10.47/kWh, which reduces to ₹9.92/kWh after accounting for accelerated depreciation benefits.
This order, applicable from July 1, 2025, to March 31, 2026, aims to ensure financial viability and regulatory clarity for renewable energy projects falling under its scope. While the Commission did not entertain changes beyond the set regulatory framework, the feedback provided may inform future updates to the RE Tariff Regulations.
