India's Central Electricity Regulatory Commission (CERC) in New Delhi recently announced new regulations launching a system of feed-in tariffs for renewable energy, including both wind and solar energy. The National Action Plan on Climate Change calls for five percent of electricity generation in India to be from renewable sources by 2010 and to increase one percent per year for the next ten years.
It is not clear whether CERC will set specific tariffs or whether each project would apply for tariffs individually. Usually, feed-in tariffs are specified for each technology or application.
CERC specifies the tariffs before tax which is unlike the practice in the US, where federal tax subsidies play an important part in project finance. CERC’s "normative return on equity" used in the calculations of 19 percent pre-tax during the first 10 years, and 24% after 10 years is comparable to the method used in Europe.
CERC also said that developers can approach the commission for project-specific tariffs as well as take the posted tariffs.
The new regulations spell out what assumptions need to be made to calculate the tariffs. For example, the regulations say that the discount rate used in determining the tariff will be the average weighted cost of capital. Further, the tariffs, defined as the levelized cost of energy, are derived from the specific "useful life" of each technology.
As successfully used in Germany and France and now proposed in China, India's new regulations will vary the tariff for wind energy based on resource intensity.
There is scope for discussions on the regulation with CERC inviting comments on its website. So folks, here is your chance to speak out!
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