The Ceylon Electricity Board (CEB) has introduced a new variable tariff formula for Rooftop Solar PV (RTSPV) systems through a circular issued in June, The Sunday Morning learns.
According to the circular numbered 2023/GM/36/DCC (DCC Circular:2023/DCC/COM-12) issued by the Distribution Coordination Committee Chairman on 26 June on the revision of tariff for rooftop solar PV systems to all provincial DGMs, area chief electrical engineers, and area provincial commercial engineers, the CEB has increased the existing fixed tariff applicable for rooftop solar from around Rs. 37 to Rs. 48.
The circular was issued by the CEB (which was seen by The Sunday Morning) and signed by Distribution Coordination Committee Chairman Additional General Manager Eng. T.A.K. Jayasekera and CEB General Manager G.A.D.R.P. Seneviratne. The newly-introduced variable tariffs for projects under different categories including 0-20 kW, 20-100 kW, 100-500 kW, and above 500 kW are Rs. 48.89, Rs. 47.79, Rs. 44.17, and Rs. 43.77 respectively, and Rs. 46.46 for aggregation schemes.
CEB Spokesman Additional General Manager (Generation) Dhammika Navaratne confirmed the issuance of circular No. 2023/GM/36/DCC (DCC Circular: 2023/DCC/COM-12) on 26 June on the revision of tariffs for RTSPV systems, noting that this was a decision taken by a committee appointed by the ministry in this regard.
Prior to the introduction of new tariffs, the feeding tariff – which is a fixed tariff – was kept at Rs. 37 for systems below 500 kW and at Rs. 34.50 for systems above 500 kW.
As learnt by The Sunday Morning, both options are available to investors at present, depending on their investment plan.
However, the circular states that the Cabinet of Ministers has decided to revise the tariff for RTSPV schemes through their decision dated 2 May 2023.
Methodology
The circular states that the tariff will be variable (to be adjusted every 3-6 months’ time) according to the defined methodology over the 20-year contract period.
According to the methodology, as highlighted in the circular, the present tariff will be applied for the initial three-month period from 26 June to 30 September and is applicable to Rooftop Solar PV schemes of ‘net accounting,’ ‘net plus,’ and ‘net plus plus’ within this period.
The tariff will be revised every three months based on the formula provided and any adjustments to the plant capital cost will be made annually and will be reflected in the following calendar year tariff only, it is stated.
“The tariff calculation assumes a loan repayment period of 10 years. As a result, there is a significant reduction in price starting from the 11th year onwards due to the absence of loan capital and interest components. To ensure the continued operation of the plant by the operator beyond the loan recovery period (from year 11 onwards) until the completion of the 20-year contract period, a monthly payment equivalent to 2% of the customers’ payment is required to be deposited in a customer-owned bonded account. The funds in this account can only be withdrawn by the customer with written approval from CEB. This arrangement replaces the need for a performance bond,” the circular states.
Furthermore, it is stated that in the event that the customer fails to supply energy as per the terms of agreement, the CEB has the right to invoke the funds in the bonded account.
The main parameters used in the tariff formula for each three-month update includes the Average Weighted Prime Lending Rate and Treasury bond rate or the Average Weighted Fixed Deposit Rate. The applicable variable tariff will be calculated and published by the transmission licensee every 3-6 months.
The new tariff is applicable to new customers only and these customers will be given the option to choose between the existing flat (fixed rate) tariff, as indicated in circular No.2022/GM/54/DCC dated 16 November 2022 or the proposed variable tariff under this circular at the time of entering into the power purchasing agreement.
Once the power purchase agreement is signed under this scheme, customers are not allowed to switch tariffs for the entire duration of the energy supply contract for 20 years.
Domestic solar industry reactions
It is learnt that some engineers attached to the CEB have raised concerns over the newly-introduced tariffs, claiming that the tariffs were even higher than the unit cost of furnace oil.
They have alleged that the move may be aimed at giving a higher tariff to large-scale investors.
“They are aiming to give very high tariffs to Adani and other foreign investors in this manner. This will be in US Dollars. First they will apply the method to rooftop solar, since the public likes high prices for solar. However, with the new tariff methodology, all customers will have to pay. It will then be slightly modified with USD payment to Adani and other unsolicited deals,” a senior official at the CEB alleged.
Nevertheless, it is learnt that the domestic solar industry and its investors are satisfied with the CEB’s new tariff suggestions.
Speaking to The Sunday Morning, Solar Industries Association (SIA) President Kushan Jayasuriya noted that the variable tariff changed according to the dollar, Central Bank interest rates, inflation, and other parameters.
“If the value of the dollar is low at the time of signing, we will get a lower tariff; if it is higher, we will get a higher tariff. People have the option of selecting this fixed tariff or variable tariffs. At the moment, there is a fixed tariff,” Jayasuriya said.
“A year ago, we were requesting a higher tariff because the dollar rate was high. The Ministry did not change the fixed tariff, but introduced what is known as a variable tariff, in order to ensure the projects remained viable in this volatile condition.
“Previously, Rs. 34.50 was derived when the dollar was Rs. 360 and inflation was high, with interest being about 20%. At the time, Rs. 34.50 was not viable and we expressed the same. The Ministry then informed us that it was unable to provide a fixed tariff at this rate for 20 years considering the economic condition.
“In our experience, it is difficult for a genuine investor to conduct business at this rate. If the dollar rate is Rs. 360, it could at least be considered. With the variable tariff, somebody can take the risk, but the risk goes both ways. The issue is that solar equipment is investment-based power generation,” Jayasuriya explained, adding that this was due to some financial institutions wanting a fixed income from such projects.
“Initially, we hope they will aggressively revise it because the parameters are improving rapidly and after it settles, they will revise it every six months or every year,” Jayasuriya added.
Commenting on Adani investments, Jayasuriya said: “We had a discussion with Ministry officials and we were assured that local investors will also be getting their fair share.”