Government Plans to Introduce Fixed-Cost Components for Renewable Energy Tariffs

Government Plans to Introduce Fixed-Cost Components for Renewable Energy Tariffs

The government is keenly looking forward to changing their tariff arrangement for the usage of electricity in the country through clean energy resources. This is done to improve and boost India’s efforts for promoting Green economy.

The new and renewable energy ministry is examining to initiate a fixed-cost component system to the electricity tariff that is generated from renewable sources such as wind or solar.

The main idea is to prevent all the distribution industries and conglomerates that are reluctant to obtain any electricity that is generated by renewable sources; they’ll have to pay the permanent tariff, even if they don’t purchase electricity.



This kind of fixed tariff system already exists for the electricity generated through conventional ways like gas or coal; this has two fragments – a variable cost and a fixed cost. The fixed cost is the investments that are made during power generation, and the variable cost is the actual cost of fuel.

An individual, who is aware of this plan and asked to remain anonymous, said – “The government is contemplating introducing a fixed component in the renewable energy tariff to prevent states from backing down from buying electricity from renewable energy sources.

Another Government official said that the main aim was to issue a particular component that would allow the developers of renewable energy to overhaul the overdue amount even when the discoms decide not to purchase any electricity. This is highly important for creating awareness and promoting green energy.

A partner at PWC India, Sambitosh Mohapatra said, “While this is a positive development for attracting investments, appropriate planning, and demand projection for procurement strategies, commercial contracts and safeguarding utilities and consumers’ interest must be thought through.

The demand for renewable energy is predicted to grow seven-fold by 2035, and then the share of all renewable sources in the fuel mixture will be 8 percent in 2035.

India stands at third after US and China in terms of consuming energy. The country plans to develop 175GW of renewable energy by the year 2022. India is also the biggest greenhouse gases dispenser after China and US, accounting for a total of 15 percent capacity.

The Government indicates that the country has a capacity of producing 900GW of renewable energy.


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