Government estimates 9-11 per cent IRR for renewable projects

The estimates are based on the assumption of 10.5 per cent cost of debt and 34.61 per cent income tax rate for all types of renewable projects. The capacity utilisation factor for wind, utility-scale solar and small hydro projects were set at 25 per cent, 20 per cent and 40 per cent, respectively. The capital cost (per MW), in the same order of generation source, was seen as Rs 5.9 crore, Rs 4.1 crore and Rs 9.5 crore. The average tariffs (per unit) were Rs 4, Rs 3 and Rs 4.3 respectively.

Even though the analysis did not consider market risks such as payment delays or curtailment which regularly afflict renewable power generators, it acknowledged that realisation of these risks in the operation phase would lead to a reduction in financial rate of return (FRR). IRR has been used as the financial rate of return (FRR) in the study. MNRE has asked stakeholders to send their feedback on the draft by February, 15.