Wind sector wins concessions on federal tariff guidelines

INDIA: Electricity regulator acts in response to industry criticism that proposed calculation basis for wind-power tariffs was too low.

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India's federal electricity regulator has agreed to increase the normative costs of wind-energy projects - the value at which generators sell to distributors - to be used for calculating levelised tariffs, after intense lobbying by the wind industry.

The new regulations, issued by the Central Electricity Regulatory Commission (CERC), increase the normative capital cost of wind-energy projects from INR 52.5 million/MW ($1.06 million/MW) in 2011-12 to INR 57.5m/MW in 2012-13.

In December, CERC had suggested a cost of INR 51.93 million, but this was opposed by the Indian Wind Turbine Manufacturers Association (IWTMA), which argued that the country's low wind densities require high hub heights to access higher wind speeds, thus increasing costs. The association had asked for the notional capital cost to be set at INR 62.31 million/MW. An IWTMA spokesman said CERC has been meeting with industry representatives and the matter is still being discussed.

"The project costs vary with the technology, size of the projects, cost of the infrastructure such as land and transmission networks, and statutory charges and fees," CERC explained. It says higher land prices and higher costs associated with new technologies have also been factored in.

Wind-power projects would have to ensure minimum capacity utilisation of 20-32%, depending on the average wind density in their area. Operations and maintenance expenses have been factored in at a rate of INR 900,000/MW. These will increase by 5.72% each year, as proposed.

The tariffs will apply for at least 13 years, which is the time considered to be the "useful life" of a project. After this, CERC expects that competitive sale of power would lower costs and producers will pass on the benefit to the consumer.

The new rules, which were due to come into effect on 1 April, will be used to calculate tariffs for projects connected to the grid over the next five years.

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