INDIA’S F-I-T TO GROW NEW ENERGY

India's 1.1 Billion Move to Feed-in Tariffs
Paul Gipe, September 30, 2009 (Wind-Works.org)

"…[India] has made a strategic move to use a comprehensive system of feed-in tariffs to develop its renewable energy potential…China had previously announced feed-in tariffs for wind energy only…[but] is expected to reveal feed-in tariffs for solar energy later this year.

"India's Central Electricity Regulatory Commission (CERC)…announced…new regulations launching a system of feed-in tariffs for renewable energy, including both wind and solar energy…[Now] 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 feed-in tariffs."

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"…[India’s National Action Plan on Climate Change] calls for five percent of electricity generation in India to be from renewable sources by 2010 and to increase one percent per year for the next ten years…[The CERC] feed-in tariffs strengthens India's position in the run up to the climate change negotiations in Copenhagen…China's introduction of feed-in tariffs [and other New Energy policies] are also seen as positioning the developing world…in regard to laggards in the developed world, such as the US, Canada, and Australia…

"…[It] remains uncertain whether CERC would set specific tariffs or whether each project would apply for tariffs individually…CERC's regulations are merely a primer on how to calculate tariffs for each technology. CERC said they 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…Unlike the practice in the US, where federal tax subsidies play such an important part in project finance, the Indians specify a [before tax] "normative return on equity" used in the calculations of 19 percent pre-tax during the first 10 years, and 24% after 10 years. This is comparable to the method used in Europe."

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"CERC also said that developers can approach the commission for project-specific tariffs as well as take the posted tariffs…[and] CERC has posted a public notice on its web site dated September 23, 2009 calling for comments…The new regulations spell out what assumptions need to be made to calculate the tariffs…[T]he discount rate used in determining the tariff will be the average weighted cost of capital. Further, the tariffs, defined as the levelized cost of energy, are derived from the specific "useful life" of each technology…As successfully used in Germany and France and now proposed in China, India's new regulations will vary the tariff for wind energy…They specify the capacity factor, or Capacity Utilization Factor in Indian English, to be used in four bands of wind power density in watts/m²…

"Key elements…[1] Includes all renewables…[2] Tariffs based on cost of generation plus profit (19% ROE)…[3] Contract terms: 13 years…[4] Contract term for Solar PV & Solar Thermal: 25 years…[5] Contract term for hydro <3MW: 35 years…[6] Wind tariffs based on resource intensity…[7] First review within three years, except for solar PV which begins after one year…[8] Market size: ~1.1 billion people…"