Karnataka sets benchmark capital cost for solar

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The Karnataka Electricity Regulatory Commission has proposed a benchmark capital cost of Rs3.73 crore/MW (Rs37,300/kW) for solar project development in the state.

The figure – used for reference when calculating ceiling tariffs for state tenders – is a tad higher than the Rs3.14 crore/MW proposed in a discussion paper issued by the commission in February and is higher than last year’s Rs3.5 crore/MW for ground mounted solar despite continuing falls in component costs. The rise reflects the safeguarding duty applied to imported solar cells and modules from China and Malaysia as well as application of an higher rate of goods and services tax to certain aspects of PV project development. Both factors have driven up project development costs.

The decline in PV module prices since 2010 had seen the capital cost of solar projects decrease considerably. Between 2010 and the end of 2016 the module cost fell 80% and the benchmark capital cost for PV projects came down from Rs6.05 crore/MW in 2015-16 to Rs5.3 crore the following year.

The benchmark cost set by the Central Electricity Regulatory Commission – which differs from state figures and is used in tenders by national bodies – includes the price of land and solar modules and the cost of mounting structures.

Comparison figures

In December, the Uttarakhand Electricity Regulatory Commission proposed a capital cost of Rs4 crore/MW for projects commissioned on or after April 1.

Last month, the Karnataka regulatory commission directed Karnataka Renewable Energy Development Limited (KREDL) to halt solar projects being developed by state agencies to balance its renewable power purchase obligations with concerns about the financial health of the state’s power distribution companies.

Under the new order, central agencies such as the Solar Energy Corporation of India and the NTPC (formerly the National Thermal Power Corporation) can continue to tender and auction PV capacity with interstate transmission system connectivity.

According to KREDL – the agency which issues tenders for bulk renewable energy procurement for its utilities – the state’s commissioned solar power capacity was 6,127 MW at the end of March and its power companies reportedly have enough solar to meet their RPO for two years.