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 incentivize and support the development of clean energy sources in India. While the proposal is a welcome step towards a more sustainable energy sector, I believe it falls short in several key areas, and there are opportunities for improvement.
One thing that immediately stands out is the continued reliance on project-specific tariffs for solar, wind, hybrid renewable energy, and energy storage projects. While these technologies are crucial for India's energy transition, the draft proposal fails to provide a level playing field for all renewable energy sources. In my opinion, this is a missed opportunity to create a more unified and supportive framework for the entire renewable energy sector.
Furthermore, the draft proposal retains the existing capital cost norms for eligible renewable energy technologies, which may not accurately reflect the current market conditions. As an expert in the field, I believe that the benchmark capital costs should be regularly updated to ensure that the tariffs are fair and competitive. This is especially important for small hydro projects, which may struggle to compete with other renewable energy sources if the capital costs are not kept in check.
Another area of concern is the normative debt-equity ratio of 70:30 for tariff calculations. While this ratio may be appropriate for some projects, it may not be sufficient for others, particularly those with higher capital requirements. In my view, the debt-equity ratio should be flexible and tailored to the specific needs of each project, rather than being a one-size-fits-all approach.
On the positive side, the draft proposal retains the existing useful life of renewable energy projects, which is a good step towards providing stability and predictability for developers. However, I believe that the annual escalation rate for operation and maintenance expenses should be reviewed and potentially increased to account for the rising costs of maintaining and operating renewable energy assets.
In conclusion, while the CERC's draft proposal is a step towards a more sustainable energy sector, it falls short in several key areas. I believe that the proposal should be revised to provide a level playing field for all renewable energy sources, update the benchmark capital costs, and tailor the debt-equity ratio to the specific needs of each project. Only then can we create a truly supportive and competitive framework for the development of clean energy in India.
