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Gujarat implements levelized cost of energy to Solar Power

Friday, July 17, 2009 Leave a Comment

There are lot of renewable energy jargons which are not understood by common man. I will try to throw light upon each one as and when I come across such article which is useful for common man and companies alike.

Lets start with Levelised energy cost (LEC, also called Levelised Cost Of Energy or LCOE).  It is an economic assessment of the cost the energy-generating system including all the costs over its lifetime: initial investment, operations and maintenance, cost of fuel, cost of capital. A net present value calculation is performed and solved in such a way that for the value of the LEC chosen, the project's net present value becomes zero.

In short, LEC is the minimum price at which energy must be sold for an energy project to break even. This would be particularly higher for renewable energy systems as the initial investment cost is too high. Many countries such as Spain and US has already adopted to levelized cost of energy.

Recently, Astonfield Solar (Gujarat) Private Limited, a special purpose vehicle floated by Kolkata-based Astonfield Renewable Resources Limited (ARRL), has approached the Gujarat Electricity Regulatory Commission (GERC) seeking determination of tariff for 25 Mw of solar power at Rs 19.92 per kWh (Kilowatt hour) for 25 years.

Astonfield is setting up a 200-Mw grid-connected solar photovoltaic (PV) power plant in Gujarat, for which it has tentatively identified Kutch, Banaskantha, Patan and Surendranagar districts.
In a tariff petition for a 25-Mw solar power project, the company has proposed a levelised tariff of Rs 19.92 per kWh for the next 25 years. The tariff is based on the cost formula worked out by the company.

The company has urged the power regulator to also consider Rs 438.37 crore as the project cost while determining the tariff. This project cost is for 25 Mw of grid-connected solar power. For the entire 200 Mw, the company is pumping in around Rs 3,600 crore. (Source Business Standard)
"GERC has already invited comments, suggestions and objections from stakeholders such as power distribution companies in the state and the tariff will be fixed after hearing the stakeholders," said a senior official of GERC.

It may be mentioned here that the Gujarat government, in its solar power policy, has fixed the solar power tariff at Rs 13 per kWh for the first 12 years. The tariff applies to all the projects commissioned by December 31, 2010. However, the cost of solar power varies from project to project.

"Based on the location and cost of the project, the cost of power generated from solar energy may range between Rs 13 and 18 per kWh," the official added.

This is a very important step towards promotion of solar energy and other renewable sources. We have to understand that the companies coming to set-up plants in renewable energy space would also want to make to profits. Let them make it as it would help them to invest more in R&D and thus come out with lower initial costs options in future. We all need to work together for a better future.


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