CERC's draft generic renewable energy tariffs for FY 2026-27: A step towards a sustainable future or a missed opportunity?
The Central Electricity Regulatory Commission (CERC) has recently released a draft proposal for determining the levellised generic tariff for renewable energy projects, aiming to encourage the development of clean energy sources in India. While the proposal is a welcome step towards a sustainable future, there are several aspects that warrant further scrutiny and discussion.
One thing that immediately stands out is the retention of existing capital cost norms for eligible renewable energy technologies. In my opinion, this is a sensible decision as it ensures that the tariffs remain aligned with market conditions. However, it also raises a deeper question: why are these norms not being revised to reflect the rapidly declining costs of renewable energy technologies? Personally, I think that a more dynamic approach could have been taken to incentivize the adoption of the latest and most efficient technologies.
Another interesting aspect of the proposal is the retention of the normative debt-equity ratio of 70:30 for tariff calculations. While this may be a prudent financial decision, it also highlights a potential gap in the proposal: the lack of incentives for developers to take on more debt. In my view, a more aggressive debt-equity ratio could have been proposed to encourage the use of debt financing, which could in turn lead to lower tariffs for consumers.
The proposed tariffs for different renewable energy technologies are also worth noting. For instance, small hydro projects in certain states have been assigned a levellised tariff of ₹6.69 per kWh for projects below 5 MW, which is a competitive rate. However, the tariffs for biomass-based power projects, which are generally considered to be less efficient, range from ₹9.5 to ₹11.6 per kWh. This raises a question: why are less efficient technologies being incentivized at the expense of more efficient ones?
One thing that many people don't realize is the potential for hidden implications in the proposal. For instance, the retention of the useful life of renewable energy projects at 25-40 years may seem like a straightforward decision, but it could have significant implications for the long-term sustainability of the renewable energy sector. In my opinion, a more dynamic approach to useful life could have been taken to encourage the adoption of technologies with longer lifespans, which could in turn lead to lower tariffs over the long term.
In conclusion, while the CERC's draft proposal for determining the levellised generic tariff for renewable energy projects is a step towards a sustainable future, it is not without its flaws. Personally, I think that a more dynamic approach could have been taken to incentivize the adoption of the latest and most efficient technologies, and to encourage the use of debt financing. However, the proposal does represent a positive step towards a cleaner and more sustainable energy future, and I look forward to seeing how it evolves in the coming months.
