India's Central Electricity Regulatory Commission (CERC), based in New Delhi, has announced new regulations that include a system of feed-in tariffs (FiTs) for renewable energy, incentivising both wind and solar energy.
According to the National Action Plan on Climate Change, five percent of electricity generation in India is to come from renewable sources by 2010, and will increase one percent per year for the next 10 years. The announcement from CERC on FiTs strengthens India's position in the run up to the climate change negotiations in Copenhagen.
With China's introduction of FiTs for wind power this year and other recent advancements for the clean energy industry announced by the Government, Asia's two economic giants seem to be getting ahead of the game in comparison to many in the developed world, including the USA, Canada and Australia. Neither the USA nor Canada has a climate change action plan, or a national goal of renewable energy in either nation's electricity supply.
CERC's regulations are merely a primer on how to calculate tariffs for each technology. CERC said it had focused on setting preferential tariffs for the period of debt repayment while maintaining an "adequate IRR" - or internal rate of return. Yet there are no tariffs in CERC's published documents.
Interestingly, CERC specifies the tariffs before tax. This is in contrast to the practice in the USA, where federal tax subsidies play such an important part in project finance. India specifies a "normative return on equity" used in the calculations of 19% pre-tax during the first 10 years, and 24% after 10 years. This is comparable to the method used in Europe.
CERC also said that developers can approach the commission for project-specific tariffs as well as take the posted tariffs.
Below is a summary of key elements in the Indian program.
- Includes all renewables;
- Tariffs based on cost of generation plus profit (19% ROE);
- Contract terms: 13 years;
- Contract term for Solar PV & Solar Thermal: 25 years;
- Contract term for hydro <3MW: 35 years;
- Wind tariffs based on resource intensity;
- First review within three years, except for solar PV which begins after one year;
- Market size: ~1.1 billion people.
India's 1.1 billion people together with China's 1.3 billion and the bulk of Europe's 300 million inhabitants - about one-third of the world's population - have committed to developing renewable energy with the aid of the feed-in tariff scheme.