Solar generators exempt from 'wheeling & banking' fees

Solar energy projects commissioned up to March 31, 2018 are eligible to get the exemption for a period of 10 years

In an effort to promote solar energy generation in the state, the Karnataka Electricity Regulatory Commission (KERC) has exempted solar power generators from paying the wheeling and banking charges, and cross-subsidy surcharge for 10 years from the date of commissioning of their generating units.

This exemption will serve as an incentive to solar power generation units in the state for units established up to March 31, 2018, the KERC said in a statement.

The wheeling and banking charges applicable to renewable energy is about 7 per cent of the power generated and transmitted under open access and wheeling while the cross subsidy surcharge ranges from 7 paise to Rs 4.75 per unit. Exemption from these charges will enable solar power to be sold in the market to open access users at competitive rates, KERC said.

This exemption will enable solar energy producers to save around Rs 3.10 per unit and provide them with the level playing field with other power producers. It will also help them to secure project finance from banks for long-term, a KERC official said.

KERC in its order dated October 10, 2013 had decided not to levy any wheeling and banking charges and cross subsidy surcharge to the solar generators who sell electricity on open access within the state of Karnataka. It was further specified that the exemption is available up to March 31, 2018.

Subsequently, some of the stakeholders sought clarification on certainty of the period of such exemption beyond March 31, 2018, to attract investments and obtain project finance from banks and financial institutions. To address these concerns, the commission issued a discussion paper on July 7, 2014 inviting comments and suggestions from stakeholders. It also held public hearing on the matter on July 31, 2014.

“After considering the view of the stakeholders, the commission notes that at present the cost of generation of solar power being higher than other sources of renewable energy, it is necessary that exemption of wheeling and banking charges and cross subsidy surcharge is extended to solar power generators to enable them to market their power on open access basis,” KERC said in the statement.

While several stakeholders had asked for an exemption from these charges for the period of debt repayment, estimated at 12 years to 15 years, the commission has considered a nominal debt repayment period of 10 years for plants commissioned between April 1, 2014 and March 31, 2018.

The commission issued the order on August 18, 2014 which will be applicable to solar generators selling power to consumers within the state on open access basis for a period of 10 years from the date of commissioning. The benefit of the order is available to projects commissioned during the period from April 1, 2013 to March 31, 2018. This exemption is also extended to captive solar plants for self-consumption within the state, KERC added.

Presently, the state has an installed capacity of 45 Mw of solar energy and another 150 Mw projects are in their various stages of commissioning and go on stream in the next two years. Besides these, the state government has envisaged generation of another 1,000 Mw solar energy by 2018 in its new solar energy policy.

The cost of solar energy generation has come down to about Rs 8-9 crore per Mw compared to Rs 12-14 crore a few years ago. The companies sell solar power at Rs 7.50 per unit to Rs 9 per unit depending on the type of solar energy.