The Central Electricity Regulatory Commission (CERC) has issued a draft proposal for determining the levellised generic tariff for renewable energy projects to be commissioned between August 1, 2026, and March 31, 2027. This proposal, released on July 3, 2026, is a significant development in India's renewable energy sector, offering a comprehensive framework for the pricing of various renewable energy technologies. The Commission has invited stakeholders, developers, and other interested parties to submit their comments and suggestions by July 21, 2026, before the tariffs are finalized.
A Broad Scope
The draft covers a wide range of renewable energy technologies, including small hydro projects, biomass power projects based on Rankine Cycle technology, non-fossil fuel-based cogeneration projects, biomass gasifier-based power plants, biogas-based projects, and refuse-derived fuel (RDF)-based municipal solid waste (MSW) projects. However, solar, wind, hybrid renewable energy, and energy storage projects will continue to be governed through the project-specific tariff mechanism as provided under the existing regulations.
Capital Costs and Debt-Equity Ratios
One of the key aspects of the proposal is the retention of existing capital cost norms for all eligible renewable energy technologies. According to CERC, the current benchmark capital costs remain broadly aligned with market conditions, and therefore no revision has been proposed for FY 2026-27. This decision ensures a stable and predictable environment for investors and developers in the renewable energy sector.
The Commission has also retained the normative debt-equity ratio of 70:30 for tariff calculations. This ratio provides a balanced approach to financing renewable energy projects, allowing for a mix of debt and equity financing. The proposed loan interest rate of 10.71%, calculated using the average one-year SBI Marginal Cost of Funds Based Lending Rate (MCLR) plus 200 basis points, further supports the financial viability of these projects.
Tariffs and Useful Lives
The proposed tariffs for renewable energy projects vary depending on the technology, location, and other factors. For instance, small hydro projects located in specific states have been assigned a levellised tariff of ₹6.69 per kWh for projects below 5 MW and ₹6.02 per kWh for projects between 5 MW and 25 MW. Biomass-based power projects, biomass gasifier-based projects, and biogas-based power projects have proposed tariffs ranging from ₹9.5 to ₹11.6 per kWh, ₹9.3 to ₹10.5 per kWh, and ₹11.17 per kWh, respectively.
The useful lives of renewable energy projects have also been retained, with small hydro projects having a useful life of 40 years, biomass, biogas, and cogeneration projects having a 25-year life, and RDF-based municipal solid waste projects having a 20-year life. The annual escalation rate for operation and maintenance expenses has been retained at 5.25%, ensuring a stable cost structure for these projects.
Subsidies and Incentives
The Commission has also clarified that any subsidy, grant, or incentive received from the Central or State Government that has not been considered while determining tariffs will be adjusted in future tariff payments. This provision ensures that the tariffs are fair and equitable, taking into account any additional financial support provided by the government.
Conclusion and Future Outlook
The CERC's draft proposal for generic renewable energy tariffs is a significant step towards a more sustainable and resilient energy sector in India. By providing a clear and stable framework for the pricing of renewable energy projects, the Commission is encouraging investment and innovation in this critical area. As the Commission issues the final generic renewable energy tariff order for FY 2026-27, the renewable energy sector can look forward to a more prosperous and environmentally friendly future.
(Personally, I think this proposal is a well-thought-out and balanced approach to renewable energy pricing. The retention of existing norms and the consideration of various factors in tariff determination demonstrate a commitment to stability and fairness. However, it is crucial to monitor the impact of these tariffs on the market and ensure that they encourage the development of sustainable and cost-effective renewable energy solutions.)
