CERC Stays Close to Staff Paper Recos In Methodology For Computing Escalation For RE Projects

In a suo moto (An order decided of its own accord, without a petitioner), the Central Electricity Regulatory Commission (CERC) has decided on a key aspect of Renewable Energy projects. That is, the methodology for Computing the Escalation Rates and other Parameters for the Purpose of Bid Evaluation and Payment for Procurement of Power from Renewable Energy Projects Complemented with Firm Power from any other source through Competitive Bidding. This is important, because unlike renewable power tariffs which are fixed, non renewable fuels like coal and gas are subject to multiple other factors that can impact prices.

That, plus issues of calculating return on projects, cost of equity and debt also matter, on specific base assumptions like 70 percent debt and 30 percent equity, for instance. Thus the methodology truly matters, as it can have significant impact on specific projects, now that we have an increasing number of RTC + other fuels projects being built, with more in the pipeline. Renewable+ other fuels projects are also being pushed in India to support stranded capacity, besides the obvious reason of making RE based supply more predictable.

The order is part of CERC’s mandate, and follows a staff paper on the same issue that was released on February 23 this year for feedback and suggestions by the commission, followed  by a meeting of stakeholders on April 12, 2021. Many of the relevant firms in the sector attended the meeting.

The CERC received a plethora of suggestions from firms , and chose to go with a few of them in its final order.

To see the full order, pls click here.