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The Karnataka Electricity Regulatory Commission has released a discussion paper proposing a new generic ceiling tariff for wind power projects for the period from FY2027 to FY2029. This proposed tariff will act as the upper limit for electricity procurement by distribution companies (ESCOMs) through competitive bidding in the state. The move is part of ongoing efforts to align renewable energy pricing with evolving market trends and technological improvements.
As per the proposal, the Commission has suggested a levelized ceiling tariff of ₹3.24 per unit. This marks a slight reduction from the current tariff of ₹3.34 per unit, which is valid until March 2026. The revision reflects the broader trend of falling wind energy costs globally and in India. Data from the International Renewable Energy Agency highlights that the cost of onshore wind projects declined by nearly 55% between 2010 and 2024. India has also emerged as one of the more cost-competitive markets for wind energy, benefiting from favorable policies and technological advancements.
To determine the revised tariff, the Commission analyzed project data provided by Karnataka Renewable Energy Development Limited. This included details from 52 wind power projects commissioned across Karnataka. Based on this assessment, the Commission has proposed a benchmark capital cost of ₹6.50 crore per MW, which includes evacuation infrastructure expenses. The variation in project costs was taken into account while finalizing this estimate.
The discussion paper outlines several key financial and operational parameters. The Capacity Utilization Factor (CUF) has been proposed at 33%, recognizing improvements in turbine technology and the use of taller towers that allow higher energy generation. The debt-equity ratio remains unchanged at 70:30, in line with existing national tariff norms. Interest on debt is proposed at 9.50%, reflecting current lending conditions in the renewable energy sector.
Operations and maintenance costs have been proposed at ₹10 lakh per MW for the base year FY2027, with an annual escalation rate of 5%. The return on equity has been set at 14%, with income tax treated as a pass-through cost, ensuring developers can maintain financial viability. In addition, the Commission has proposed a depreciation rate of 4.67% per annum for the first 15 years of project life, allowing developers to meet debt servicing requirements effectively.
The paper also highlights that advancements in materials, improved turbine efficiency, and economies of scale have played a significant role in reducing costs. In Karnataka, wind turbine hub heights have reached up to 140 meters, enabling better wind capture and improved performance. These developments have contributed to the declining cost trends reflected in the proposed tariff.
The Commission has invited comments, objections, and suggestions from stakeholders, including distribution companies and industry participants. Submissions must be made to the Secretary of the Commission in Bengaluru by April 9, 2026. After reviewing stakeholder feedback, the Commission will finalize the tariff, which will be applicable for a three-year period starting April 1, 2026.
Once implemented, the ceiling tariff will not only guide competitive bidding but will also determine payments for banked energy purchased by ESCOMs. The proposed framework is expected to support continued growth in the wind energy sector while ensuring cost efficiency and transparency in procurement.
