Nepra announces higher tariff for wind power

ISLAMABAD: The National Electric Power Regulatory Authority announced on Thursday an enhanced upfront levelised tariff of 14.66 cents per unit for wind power projects.

The tariff will apply to wind power projects with installed capacity of 5-250MW and those achieving financial close by Dec 31 next year. The increased tariff will be valid for the first 1,500MW.

The tariff was determined on the basis of a proposal put forward by the Alternative Electricity Development Board which said that success could be ensured only if the tariff was lucrative, with margins of profit and made business sense of investments in the sector.

For the first time, Nepra set aside a normal course of tariff setting mechanism through in-house verification and approved the higher tariff in view of “the current power crisis, including acute shortage of electricity, over-reliance on thermal power, persistent trend of increase in oil prices in the international market coupled with depletion of gas reserves in the country and the high cost of generating electricity from imported fuels”.

Considering the advantages of generating electricity from wind, like shorter construction period, no fuel costs, no dependence on imported fuel, Nepra said it decided to facilitate the development of wind power.

Nepra had first approved an upfront tariff of 9.5 cents per unit in April 2006. It claimed that while a few projects opted for the upfront tariff none of them ultimately materialised. Apart from that, Nepra had determined tariffs for different wind projects that ranged between 10.2 to 11.9 cents per unit. On the basis of these tariffs, a project of FFC Energy of 49.5MW achieved financial close in June this year while Zurlu project installed a plant of 6MW.

Nepra said it had approved an increased tariff because it thought that determining tariff on a case-to-case basis under a cost-plus regime was bound to cause some delays due to nature of the process involved.

It said the upfront tariff would minimise uncertainty and reduce tariff approval time to 10 working days of filing of application from usual four to six months.

In a positive development, however, the regulator on the request of the AEDB has decided that the power purchaser (the government entities) would not take the wind risk, which would now be the responsibility of the investor.

Nepra said the upfront tariff was a “take it or leave it package deal”. Any request for modification in tariff or any term of the deal, to meet the specific or unique requirements of any project would not be considered by Nepra. The upfront tariff will remain applicable for 20 years of project`s life.

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