India remains an attractive market for solar power; this fact has been reaffirmed by a recent order that is in stark contrast to some of the recent regulations issued by several European countries to retrospectively cut tariffs for solar power projects.
The Indian Appellate Tribunal for Electricity (Aptel) has ruled that some of the first solar power projects to be commissioned in India would not face a retrospective reduction in tariffs after the utilities buying power from these projects had claimed that the tariffs had been determined using higher than actual capital costs to the project developers.
The utilities that had signed power purchase agreements with 88 projects representing over 970 MW of solar power capacity in the state of Gujarat claim that the capital cost for projects assumed to determine the tariffs in 2010 is significantly higher than what the developers actually had to invest when the implemented the projects. The project developers had signed PPAs to sell their power at ₹15 ($0.25) per unit for the first 12 years and at ₹5 ($0.08) for the next 13 years.
These tariff had been determined on the basis of ₹16.5 crore ($2.75 million US) per MW capital cost investment. During financial year 2011-12, when many of these projects were commissioned, the Central Electricity Regulatory Commission had assumed capital cost for solar PV projects as ₹14.42 crore ($2.4 million) per MW.
The projects in question were among the first to be commissioned in India. These projects predate those commissioned under the National Solar Mission. Some of these projects, pioneered by then-Chief Minister Narendra Modi, are part of the Gujarat Solar Park located in the Patan district. The utilities’ objection to the existing tariffs stems from the fact that the solar PV tariffs have fallen tremendously since 2010. Over the last few years, the CERC has been cutting the tariffs by almost 20% per year. While these tariffs are recommendations to the state regulators, many states either follow them in entirety, or implement tariffs very similar to those determined by CERC.
The projects in Gujarat were not allocated through competitive bidding. The projects being allocated by other states and the central government are now being allocated through competitive bidding, and the project developers are ready to quote tariffs as low as ₹5 ($0.08) per unit. So it is natural that no company would like to pay a tariff 2.5 times what the developers are now willing to pay.
The tribunal is of the view that the Gujarat solar policy was among the first solar power programs in India, and project developers, aware of the risks and high capital costs at that time, committed their finances and should not be, in way, punished by retrospective cut in tariffs.
Image Credit: Gujarat Power Corporation Limited
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