CERC's Draft Generic Renewable Energy Tariffs: A Step Towards a Sustainable Future
The Central Electricity Regulatory Commission (CERC) has taken a significant step towards promoting renewable energy projects in India by releasing 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, under the CERC Renewable Energy Tariff Regulations, 2024, is a crucial development in the country's energy transition.
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.
One of the key aspects of this 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 that the tariffs remain competitive and financially viable for developers.
The Commission has also retained the normative debt-equity ratio of 70:30 for tariff calculations, which is a positive sign for the renewable energy sector. 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, is expected to provide a stable financial environment for project development.
The post-tax return on equity remains unchanged at 15% for small hydro projects and 14% for all other eligible renewable energy technologies. The discount factor used for tariff calculations has been proposed at 9.38% for small hydro projects and 9.08% for the remaining technologies, which is a reasonable approach to ensure the financial viability of these projects.
CERC has proposed to continue the existing useful life of renewable energy projects, with small hydro projects having a useful life of 40 years, while biomass, biogas, and cogeneration projects will continue with a 25-year life. RDF-based municipal solid waste projects will have a useful life of 20 years. The annual escalation rate for operation and maintenance expenses has also been retained at 5.25%, which is a prudent decision to ensure the long-term sustainability of these projects.
The proposed tariffs for small hydro projects vary depending on their location. Projects located in Himachal Pradesh, Uttarakhand, West Bengal, Jammu & Kashmir, Ladakh, and the North Eastern 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. For projects located in other states, the proposed tariffs are ₹7.70 per kWh for capacities below 5 MW and ₹7.49 per kWh for projects between 5 MW and 25 MW.
For biomass-based power projects, the proposed tariffs vary according to technology, fuel type, and cooling system, generally ranging between ₹9.5 and ₹11.6 per kWh before accelerated depreciation adjustments. Biomass gasifier-based projects have proposed tariffs ranging from around ₹9.3 to ₹10.5 per kWh, while biogas-based power projects have been assigned a tariff of ₹11.17 per kWh. RDF-based municipal solid waste projects have been proposed a tariff of ₹10.69 per kWh, which reduces to ₹10.14 per kWh after considering accelerated depreciation benefits.
One of the most significant aspects of this proposal is the recognition of the need for adjustment in future tariff payments for any subsidy, grant, or incentive received from the Central or State Government that has not been considered while determining tariffs. This approach ensures that the tariffs remain fair and equitable for all stakeholders.
In conclusion, the CERC's draft proposal for determining the levellised generic tariff for renewable energy projects is a crucial step towards a sustainable future. By retaining existing capital cost norms, normative debt-equity ratios, and useful lives, the Commission has ensured that the tariffs remain competitive and financially viable for developers. The proposed tariffs for different renewable energy technologies are also reasonable and fair, taking into account the specific requirements of each project. The recognition of the need for adjustment in future tariff payments is a positive sign for the sector's long-term sustainability.
As an expert in the field, I believe that this proposal will play a significant role in promoting renewable energy projects in India. The proposed tariffs will provide a stable financial environment for developers, encouraging them to invest in renewable energy projects. The recognition of the need for adjustment in future tariff payments is a positive sign for the sector's long-term sustainability, ensuring that the tariffs remain fair and equitable for all stakeholders. Overall, this proposal is a step in the right direction towards a sustainable future for India's energy sector.
