The National Electric Power Regulatory Authority (Nepra) has fixed upfront levelised tariff for biomass power projects at Rs 8.6957 per unit for 30 years, to be applicable from Commercial Operation Date (COD). Keeping in view the potential of around 1,000MW from biomass, as indicated by the Ministry of Energy, the authority decided to initiate proceedings for determination of new upfront tariff for generation of electricity from biomass power projects.
Accordingly, a draft upfront tariff proposal was developed on the basis of information available with the Authority.
During the hearing, Punjab Bio Energy and other representatives of PPDB stated that the project cost of $0.8 million is on lower side as compared to cost allowed in the cases of SSJD and Lumen Energia. The representatives of Punjab Bio Energy submitted that the efficiency is directly linked with the project cost. Punjab Bio Energy submitted that the project cost should be $1.86 million instead of proposed $0.8 million. The feasibility study for the PPDB has been conducted by AF Consultant. According to the representative of the AF Consultant, the project cost in the feasibility study based on European technology is $1.53/MW. The representative of AF Consultant submitted that this is comparable with the other technologies and the project cost for reliable technology needs to be allowed for operational period.
The authority considers that the project cost of $1 million recommended by the AEDB for incineration projects is reasonable. According to the tariff determination, the upfront tariff has been worked out on the basis of the interest rate of 6 percent being offered under the SBP scheme. In case of commercial local financing, the tariff shall be computed using applicable KIBOR plus a premium of 300 basis points. In case of commercial foreign financing, the tariff shall be computed using applicable LIBOR plus a premium of 450 basis points. In case negotiated rates/spread is less than the said limits, the savings shall be shared by the power purchaser and the power producer in the ratio of 60:40 respectively.
According to the IRENA and REN21, the maximum construction period of biomass power plant construction period is from 18 to 24 months. The Nepra in baggasse-based power generation projects allowed 24 months construction period from the date of acceptance. From date of financial close, the construction period is 18 months. In the light of the available research on the issue and already precedence available in other countries, the 24 months construction period is sufficient for the biomass power projects.
The authority has further decided to allow financial close time of six months from the date of acceptance of tariff and construction period of eighteen months from the date of financial close for this upfront tariff. The applicability period of this tariff shall be two years from the date of issuance of this tariff. In baggasse-based Upfront Tariff Cost of working capital based on KIBOR plus 2 percent spread for 45 days fuel invoice receivables was allowed in line with other projects. In the instant case 45 days fuel inventory and 30 days receivables were proposed. No comments received regarding the working capital. Accordingly, based on 45 days'' inventory and 30 days'' invoice receivables cost of working capital has been assessed as Rs 1,255/kWh. The working capital component of tariff will be adjusted quarterly based on variation in three months KIBOR.
The power producer ie Central Power Purchasing Agency (CPPA-G) shall submit relevant authentic documentary evidence to the Authority, for adjustment within 15 days of COD of the relevant company. In case the premium on LIBOR/KIBOR is higher than the determined premium, no adjustment on the basis of actual higher premium will be allowed. The interest during construction shall be adjusted at the time of COD on account of actual project financing mix and variation in quarterly LIBOR/KIBOR (where applicable) over the approved reference rates. The interest during construction shall be reassessed for the allowed construction period of eighteen months, starting from the date of financial close of the relevant company, on the same computation basis as already adopted, by applying 3 months KIBOR/LIBOR of last day of the preceding quarter (plus allowed spread thereon), on the basis of phasing for debt injection considered in the computation of upfront tariff. The power producer shall submit relevant authentic documentary evidence to the Authority for the aforesaid adjustment within fifteen days of the COD of the relevant company.