The tariff for renewable energy technologies will be single-part tariff consisting of the following fixed cost components - return on equity, interest on loan capital, depreciation, interest on working capital and operation and maintenance expenses.
The return on equity without considering taxes will be 19% for first 10 years and 24% from the 11th year. MERC has considered a loan period of 10 years for calculating interest on loan capital. The interest rate will be the average of State Bank advance rate for the previous year plus 1.5%. The depreciation rate for the first 10 years of the tariff period will be 7% per annum and the remaining depreciation will be spread over the remaining useful life of the project from 11th year onwards. Depreciation will be allowed up to a maximum of 90% of the capital cost.
Interest on working capital for wind, small hydro, solar photovoltaic and solar thermal will be calculated on the basis of operation and maintenance (O&M) expenses for one month, amount generated from two months of power sale, and expenses incurred during maintenance of spares. This amount for biomass and cogeneration projects will be calculated on the basis of fuel cost for four months, O&M expenses for one month, amount generated from two months of power sale and expenses incurred in maintenance of spares.
The commission has specified maximum O&M expenses for various categories. It is Rs 6.87 lakh per MW for wind, Rs 17.97 for small hydro between 1 and 5 MW, Rs 12.69 lakh for those between 5 and 25 MW, Rs 21.41 lakh for biomass, Rs 14.11 lakh for co-generation, Rs 9.5 lakh for solar photovoltaic and Rs 13.74 lakh per MW for solar thermal plants. The tariff period for small hydro projects up to and including 5 MW and micro-hydro projects will be 35 years. In case of solar projects, the tariff period will be 25 years.
The tariff period for other type of RE power projects will be 13 years. The proceeds of carbon credit from approved clean development mechanism project will be retained by the generating company.