Pricing Pressure Continues as Maharashtra Pushes down Generic Tariff for Solar and Wind for FY2018-19

While reviewing a petition regarding the determination of generic tariffs for renewable energy for the ongoing financial year, the Maharashtra Electricity Regulatory Commission (MERC) yesterday declared the generalised tariff rates for renewable projects in the state.

For wind and solar projects the commission set tariff rates around the industry standard right now at ₹2.87/kWh as the generic tariff for wind energy projects and ₹2.72/kWh as the generic tariff for solar photovoltaic (PV) projects in Maharashtra. The generic levelized tariff from renewable energy (RE) sources will be applicable for the projects commissioned from the date of issue of the order until March 31, 2019, or until the next order. The tariff will be valid for 25 years from the commercial operation date (COD).

The validity life cycle for all solar PV projects commissioned during this financial year will be considered as 25 years. MERC also fixed ₹3.22/kWh as the generic tariff for solar rooftop PV projects. The ₹2.87/kWh tariff on wind projects will be applicable between August 1, 2018 and March 31, 2019 for a period of 13 years from the date of commissioning being set as the useful life. Recently Maharashtra set a tariff ceiling of ₹2.52/kWh for a wind tender which is ₹0.35/kWh less the new generic tariff. State DISCOMs generally prefer competitive bidding auctions than procuring power at generalised tariffs, since they often garner a lower tariff rate.

Recently, the Bihar Electricity Regulation Commission (BERC) released the states levelized tariff rates for solar PV projects at ₹4.17/kWh, the rates drop down to ₹3.98/kWh with Accelerated Depreciation. However, wind and solar generalised tariff rates set by MERC do not have the provision for Accelerated Depreciation. Yet, are still ₹1.26/kWh lower than the rates set by BERC.

Small Hydro Projects (SHPs) have been provided tariff rates based on the capacity of the projects along with the provision of accelerated depreciation. Rates are set between ₹5.36/kWh and ₹3.66/kWh based on the project capacity. MERC has the fixed generic tariff for biomass-based power projects at ₹7.30/kWh without AD and ₹7.44/kWh with AD.

We believe the rates further signal tough times for the solar and wind energy sectors in particular, as a combination of global volatility, relentless pricing pressure and high debt levels loom. There has already been enough talk about growing consolidation, which in this case, can only serve a purpose up to a point. with the country committed to  a massive renewables push, too much consolidation could also lead to loss of pricing power through the auctions method, or worse a standstill between powerful players and the government over pricing.