Generic Tariff for Rooftop Solar Systems Up to 10 kW Increased to ₹4.02/kWh in Karnataka

The Karnataka Electricity Regulatory Commission (KERC) has issued an order setting the generic tariff for solar power projects (including rooftop solar projects) for FY 2022 and FY 2023.
The Commission has set a tariff of ?3.10 (~$0.042)/kWh for grid-connected MW scale solar power projects of capacity less than 5 MW and ?3.19 (~$0.043)/kWh for grid-connected rooftop solar projects of 1 kW to 2,000 kW (excluding 1 kW to 10 kW).
For grid-connected residential rooftop solar projects of 1 kW to 10 kW capacity, the Commission has set a tariff of ?4.02 (~$0.054)/kWh (without capital subsidy) and ?2.67 (~$0.036)/kWh (with capital subsidy).
The new tariffs will be applicable for new solar projects for which the power purchase agreements (PPAs) have been entered into on or after April 1, 2021. The order will be in force from April 1, 2021, and applicable for the control period of FY 2022 and FY 2023.
Background
Through its order dated May 22, 2020, the Commission had extended the earlier tariff order’s validity for FY 2021. In an earlier order in 2019, the Commission had determined the levelized tariff of ?3.08 (~$0.048)/kWh for large solar projects, ?3.07 (~$0.041)/kWh for 1 kW to 2,000 kW scale rooftop solar projects and ?3.99 (~$0.054)/kWh for 1 kW to 10 kW for domestic consumer’s rooftop solar projects.
The Commission issued a discussion paper to determine tariff on February 3, 2021, inviting suggestions from the stakeholders. It also held a public hearing in the matter on August 4, 2021, and said it would allow net metering for rooftop solar projects for capacity up to 500 kW.
In July, the KERC had proposed net metering for rooftop solar installations up to 500 kW from the earlier suggested cap of 10 kW.
Commission’s analysis
The Commission adopted the useful life of the solar power projects as 25 years from the date of the commissioning of the projects. It proposed adopting a levelized tariff for 25 years to ensure certainty of revenue streams to the investors.
The Commission allowed 0.5% of the net generation as an annual degradation factor commencing for large-scale projects from the fifth year onwards. It adopted the minimum capacity utilization factor for solar power projects at 21%.
To determine the tariff, the Commission considered a debt-equity ratio of 70:30 for all solar power projects.
The state regulator considered the capital cost of ?35.05 million (~$471,919)/MW to determine the tariff. It allowed operation and maintenance expenses at ?670 (~$9.02)/kW for solar rooftop projects and ?503,000 (~$6,772)/MW for ground-mounted solar projects with an annual escalation of 5.72%.
The Commission adopted the marginal cost of a funds-based lending rate of 10% per annum to calculate the interest on the working capital. The return on equity was considered as 14% per annum.
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