CENTRAL ELECTRICITY REGULATORY COMMISSION New
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CENTRAL ELECTRICITY REGULATORY COMMISSION New Delhi Petition No. SM/005/2015(Suo-Motu) Coram: 1. Shri Gireesh B. Pradhan, Chairperson 2. Shri A. K. Singhal, Member 3. Shri. A.S.Bakshi, Member Date of Hearing: 19.03.2015 Date of Order: 31.03.2015 Order Determination of Benchmark Capital Cost Norm for Solar PV power projects and Solar Thermal power projects applicable during FY 2015-16 1. The Commission notified the Central Electricity Regulatory Commission (Terms and Conditions for Tariff determination from Renewable Energy Sources) Regulations, 2012 (hereinafter “the RE Tariff Regulations”) on February 6, 2012. 2. The Benchmark Capital Cost Norms as stipulated under Regulation 57(1) for Solar PV power project and under Regulation 61(1) for Solar thermal power project are applicable for solar power projects for the year FY 2012-13. 3. The first proviso of Regulation 5 of the RE Tariff Regulations, 2012 provides that the Commission may annually review the benchmark capital cost norm for Solar PV and Solar thermal power projects. 4. Under Regulation 5 of RE Tariff Regulations, the Commission vide Order dated 3rd March, 2015, proposed to determine the Benchmark Capital Cost Norm for Solar PV power projects and Solar thermal power projects for the year 2015-16 (Petition No. 005/SM/2015) and invited comments/suggestions /objections from the stakeholders. Public Notice was issued 1 inviting comments/suggestions/objections on 3rd March, 2015. Last date of submission of comments/suggestions/objections was 18th March, 2015. 5. In response, written comments/suggestions/objections were received from the following stakeholders: 1 Punjab Energy Development Agency (PEDA) 2 Himachal Pradesh Electricity Regulatory Commission (HPERC) 3 Orient Green Power Company Limited 4 Essel Infra Projects Ltd. 5 Root Hydrocarbons Limited 6 Shri. Saumendra Aggarwal 7 JITF Urban Infrastructure Ltd. 8 Federation of Indian Chambers of Commerce and Industry (FICCI) 9 IL&FS Energy Development Company Limited 10 HERO Future Energies Pvt. Ltd. 11 Vikram Solar Private Limited 12 WAAREE Energy Limited 13 Jindal Power Limited 14 Association of Power Producers (APP) 15 UJAAS Energy Limited 16 Inox Wind Limited 17 Green Infra Limited 18 Adani Power Limited 19 NTPC Limited 20 Maha Cogen Green Power Producers Association 21 Green Energy Association (GEA) 22 Cogeneration Association of India 23 Hindustan EPC Company Limited 24 Chhattisgarh State Power Distribution Company Limited (CSPDCL) 25 ACME Solar Energy Limited 26 Rudraksh Energy 27 Welspun 28 Tata Power Company Limited 6. Subsequently, a public hearing was held on 19th March, 2015 and the following stakeholders made submissions during the hearing: 1 ACME Solar 2. UJAAS 3. Green Energy Association 2 7. The Commission has considered the comments/suggestions/objections received from the stakeholders on benchmark Capital Cost of Solar PV projects and has decided as under:- Consideration of the views of the stakeholders and analysis and findings of the Commission on important issues I. Solar PV A. Module Costs: Domestic Manufacturing prices should also be considered (PEDA, HERO Future Energies Pvt. Ltd. IL&FS Energy, WAAREE) Average trading price should be considered (0.59 US$ for Crystalline and 0.62$ for Thin Film) Freight & Insurance costs should also be considered (HERO Future Energies Pvt. Ltd.) Currently, the average Landed Cost of Module in India including the Sea and Inland Freight from Global Tier I Suppliers (As it is a statutory Requirements of Banks & Multi-Lateral Institutions to purchase Modules from Tier I suppliers with proven “Performance Track Record and Technology”) ranges from .55 to .60 USD/Wp with an average of around .57 USD/ Wp. In India, severe PID issues have been observed in the existing plants and a degradation of upto 30% has been observed due to severe climatic conditions in India. To counter this, most of the suppliers have upgraded the Bill of Materials to reduce this effect increasing the cost of the product. Despite the above mentioned material cost escalation, in the coming year 2015-16, as per the Technology Improvement Road Map and Cost Reduction Road Map from Tier I suppliers the expected reduction in the prevailing price is estimated to be maximum .01-.02 USD/Wp which is likely to bring down the cost band to .54 - .58 USD/Wp with an average of .56USD/Wp for the Module suitable for Indian climate. Also, the average of daily Exchange rate data available at RBI for the period starting from January 01, 2015 till March 18, 2015 is 62.20/USD and is expected to further increase. Hence it is requested to consider the exchange Rate of at least INR 62/ USD. (ACME) Module costs calculated are for DC capacity of 1 MW. Should be calculated for achieving 1 MW AC capacity, which should be 1.1-1.15 times of DC capacity. (Rudraksh). Average Trading prices should be considered. (Hindustan Power) 3 Prices should be; 0.70 US$/ Wp for Domestic Modules and 0.60 US$/ Wp for Foreign Modules to factor in price for Domestic Manufacturers, Cost of better quality modules. Moreover, as the Solar modules are imported and prices quoted above are on CIF basis, additional $0.02/Watt may also be considered to cover inland transportation over and above the quoted prices. (Renew Power) Hon’ble CERC has considered 0.52 US$/ Wp as module price and Rs. 61.06/ US$ as exchange rate. It may be noted that the module price considered is at the lowest end of the price spectrum of modules even as per data quoted by the Hon’ble CERC. Even the Chinese, Taiwanese module spot prices depicted in the report is higher than that considered by the Commission. While the considered module prices do not reflect the existing situation, it also does not promote sourcing quality products from Tier 1 manufacturers and which would be needed to generate reliable power over a period of 25 years. Considering the average of latest traded price , we request the Honorable CERC to consider $0.595 per Wp at present as the benchmark price for foreign modules used in the country for capex calculation instead of $0.52 per Wp taken by the Honorable CERC. Considering the mandated domestic content based projects to come up in the country the Honorable CERC may consider the cost of Indian made modules and cells to be 15-18% higher than the average of the Chinese module costs. It is suggested that the cost of Indian made modules and cells to be 17% higher than the average of the Chinese module costs; making cost of Indian modules to be $ 0.69 per watt. Moreover, as the Solar modules are imported and prices quoted above are on CIF basis, additional $0.02/Watt may also be considered to cover inland transportation over and above the quoted prices. (Welspun) Project cost should be considered as Rs.6.52 Cr/MW. (Jindal Power) Good quality imported modules not available at 52 cents (WAREE) Allocated cost in modules like third party insurance, freight, customs, PID free additional charges not considered. (WAREE) Benchmark cost for Domestic Content Requirement projects should be formulized separately (WAREE) While all other RE technology costs are indexed and increased only Solar projects costs have been decreased, this will create irreparable damage to growth of this technology. Reduction in capital costs will lead to compromise of material and quality. (Green Energy Association) As per present market prices the cost of modules are as per following table (Green Energy Association, UJAAS) 4 Basic price PID free, Third Freight including Ammonia party from Cost and Transit freight ,Salt and insurance Indian Total Module charges at insurance Type upto Mist like Indian port to (US$/WP) Indian compliant Munich re port site (US$/WP) port (US$/WP) (US$/WP) (US$/WP) (US$/WP) Imported 0.54 0.01 0.01 0.01 0.01 0.0075 0.5875 Domestic Modules with 0.68 0.01 0.0075 0.6975 domestic cells Domestic modules with 0.6 0.01 0.01 0.6275 imported Cells Module price should be considered at USD 0.56. (Jindal power). Module cost should be $0.64 per Wp. Domestic costs should be 17% higher. (Association of Power Producers) Capital cost should be Rs. 650 lakhs/MW (Green Infra) Capital cost should be Rs. 685.69 Lakhs + 1 Cr. more for domestic (Vikram Solar) Module cost should be 1.16 times to consider conversion of DC Module capacity end to AC Contracted Capacity. (Adani) Module price should be 0.619 USD/Wp and Capital cost should be 691.09 (NTPC) B. Exchange Rates Should be considered as 62 (INR to USD) as per recent rates. (Rudraksh) We suggest that while arriving exchange rate, forward currency market rate should be considered for arriving at conversion of module prices in INR terms. It is suggested that the exchange rate for USD/ INR be taken as INR 65.43/USD. (Renew Power) We suggest the currency future market data from NSE be taken as the basis for determination of benchmark exchange rates for future procurement for the following 5 reasons: a) NSE currency market is used by most of institutions/corporate for hedging purposes to manage their currency risk. b) Most of the procurement activity will happen from the period commencing September 2015 after the financial closure timelines of bids happening today. Since most of the procurement (including those for JNNSM Phase-II and various ongoing state bids) is going to commence from September, 2015, it is suggested that the exchange rate for USD/ INR be taken as Rs. 65. Similar analysis may be carried out for the exchange rate for Euro/INR. (Welspun) Present rupee to dollar price is Rs.63 and no hedging cost has been considered.