The Central Electricity Regulatory Commission (CERC) has unveiled a draft proposal for setting the levelized generic tariff for renewable energy projects set to come online between August 1, 2026, and March 31, 2027. This proposal, released on July 3, 2026, is crafted under the CERC Renewable Energy Tariff Regulations, 2024. The Commission is inviting stakeholders, developers, and other interested parties to contribute their insights and suggestions by July 21, 2026, before the tariffs are finalized.
The draft encompasses a range of renewable energy technologies eligible for generic tariff determination, including small hydro projects, biomass power projects utilizing Rankine Cycle technology, non-fossil fuel-based cogeneration projects, biomass gasifier-based power plants, biogas-based projects, and refuse-derived fuel (RDF)-based municipal solid waste (MSW) projects. However, solar, wind, hybrid renewable energy, and energy storage projects will continue to be governed by the project-specific tariff mechanism as outlined in the existing regulations.
CERC has decided to maintain the existing capital cost norms for all eligible renewable energy technologies, citing that the current benchmark capital costs remain in line with market conditions and thus no revision is necessary for FY 2026-27. The Commission has also retained the normative debt-equity ratio of 70:30 for tariff calculations, incorporating a loan interest rate of 10.71%, calculated using the average one-year SBI Marginal Cost of Funds Based Lending Rate (MCLR) plus 200 basis points. The post-tax return on equity remains unchanged at 15% for small hydro projects and 14% for all other eligible renewable energy technologies. The discount factor for tariff calculations has been proposed at 9.38% for small hydro projects and 9.08% for the remaining technologies.
CERC has proposed to uphold the existing useful life of renewable energy projects. Small hydro projects will have a useful life of 40 years, while biomass, biogas, and cogeneration projects will retain their 25-year life. RDF-based municipal solid waste projects will have a useful life of 20 years. The annual escalation rate for operation and maintenance expenses has been kept at 5.25%. Additionally, biomass and bagasse fuel prices have been revised upward by applying an annual escalation factor of 3.45% over the values adopted during the first year of the current control period.
Under the proposed tariffs, small hydro projects in specific regions like Himachal Pradesh, Uttarakhand, West Bengal, Jammu & Kashmir, Ladakh, and the North Eastern States have been assigned a levelized tariff of ₹6.69 per kWh for projects below 5 MW and ₹6.02 per kWh for projects between 5 MW and 25 MW. For projects located in other states, the proposed tariffs are ₹7.70 per kWh for capacities below 5 MW and ₹7.49 per kWh for projects between 5 MW and 25 MW.
For biomass-based power projects, the proposed tariffs vary according to technology, fuel type, and cooling system, generally ranging between ₹9.5 and ₹11.6 per kWh before accelerated depreciation adjustments. Biomass gasifier-based projects have proposed tariffs ranging from around ₹9.3 to ₹10.5 per kWh, while biogas-based power projects have been assigned a tariff of ₹11.17 per kWh. RDF-based municipal solid waste projects have been proposed a tariff of ₹10.69 per kWh, which reduces to ₹10.14 per kWh after considering accelerated depreciation benefits.
The Commission has also clarified that any subsidy, grant, or incentive received from the Central or State Government that has not been considered while determining tariffs will be adjusted in future tariff payments. After reviewing the feedback received during the consultation process, CERC is expected to issue the final generic renewable energy tariff order for FY 2026-27.
This development is a significant step towards promoting renewable energy in India, offering a stable and predictable framework for investors and developers in the sector. As the final tariffs are finalized, it is expected to further boost the growth of renewable energy projects in the country.
