CEE April-June 2012

- - during the Twelfth Plan period. These regulations are a welcome step as they offer tariff visibility for the upcoming plan period and thus help renewable energy developers in determining future expansion strategies. As all the renewable energy technologies (except solar) are at a mature stage in the country, the CERC has set tariff regulations for a control period of five years (2012-17). However, the commission plans to review biomass fuel prices at the end of the third year of the control period to accommodate changes resulting from price volatility. The CERC has set a tariff period of a minimum 13 years for renewable energy power projects (except small-hydro power [SHP] projects below 5 MW, solar photovoltaic [PV], solar thermal , biomass gasifier and biogas-based projects). SHP projects below 5MW will have a 35-year tariff period, while solar PV and solar thermal power projects will have a 25-year tariff period. For biomass gasifier and biogas-based power projects, the tariff period is 20 years. Wind The approved capital cost for wind energy projects has been increased from Rs 51.5 milllion per MW for 2009-10 to Rs 57.5 million per MW for 2012-13. The draft regulations had proposed an increase of only Rs 1 million in the approved capital cost, to Rs 52.5 million per MW. However, recent trends have shown that the capital cost of wind projects ranges from Rs 5.75 million-Rs 7 million per MW. Deployment of new technologies and larger– sized turbines has resulted in higher capital costs. Further, fiscal years 2010 and 2011 witnessed a sharp rise in material/equipment costs. Given that equipment manufacturers and project developers are already operating on tight margins, a reduction in capital cost is not likely in the near future. Taking these factors into account, the CERC decided to revise the approved capital cost to Rs 57.5 million per MW for the new control peri od. The approved operation and maintenance (O&M expenses for wind projects for the first year of the control period (2012-13) have been increased from Rs 650,000 per MW in 2009-10 to Rs 900,000 per MW, with an escalation rate of 5.72 per cent per annum over the tariff period. The revised expenses include the cost of forecasting. Further, the post-tax weighted average cost will be used as a discount factor while calculating level-lised tariffs for wind projects. The CERC has approved a loan tenor of 12 years for renewables as most of these technologies have matured, enabling developers to secure loans from financial institutions for longer durations. Biomass and biogas For biomass power projects based on rankine cycle technology using water-cooled condensers, the approved capital cost for 2012 - 13 has been revi sed to Rs 44.5 million per MW. However, for projects employing air-cooled condensers, the approved cost will be decided on a case-to-case basis. All projects are required to maintain a 60 per cent plant load factor (PLF) during the stabilization period (not more than six months from the project's date of commissioning) and a 70 per cent PLF for the remaining six months of the first year. Project developers must maintain a PLF of 80 per cent from the second year of operation. Several stakeholders argued for revising the auxiliary consumption level, the calorific value and the station heat rate for rankine technology-based biomass projects to around 12 per cent, 2,300 kcal per kg and 4,250 kcal per kWh respectively. This reflects the actual project operation scenario. However, the final regulations specify an auxiliary consumption level of 10 per cent, as the trend has been towards adopting energy conservation methods, which would lead to lower auxiliary consumption. Meanwhile, the CERC has revised the station heat rate for these projects to 4,000 kcal per kWh as compared to 3,800 kcal per kWh in 2009 - 10, and the calorific value to a uniform 3,300 kcal per kg as against state-specific values earlier. Recognizing that the size of biomass power plants is comparatively smaller than conventional power projects, which results in higher per MW O&M expenses, the commission has increased the O&M expenses for biomass projects to Rs 2.4 million per MW for the new control period as against Rs 2.02 million per MW for 2009 -10. However, the escalation rate has been retained at 5.72 per cent. To bring the price of biomass fuel in line with its true market cost, the commission revised the state– specific prices of biomass fuel mix. As against the earlier prices, which ranged from Rs 1.301 to Rs 2,168 per million tonne (mt) in 2009 - 10, the prices for 2012 - 2013 range from Rs 2,315 per mt. An escalation factor of 5 per cent per annum on these prices has been approved. The approved capital cost for non-fossil fuel– based cogeneration plants has been reduced, from Rs 44.5 million per MW in 2009- 2010 to Rs 42 million per MW in 2012 -13. Since in non-fossil fuel - based cogeneration plants, the sugar mill and the power generation unit use the same auxiliary equipment, an auxiliary power consumption factor of 8.5 per cent has been approved. 41