HPERC Announces FY 2026-27 Levelized Tariffs for Distributed Solar Projects

Background and Context

The Himachal Pradesh Electricity Regulatory Commission (HPERC) has finalized the generic levelized tariffs for solar power projects with capacities up to 5 MW for the financial year 2026-27. This regulatory move follows a consultative process initiated in January 2026, where the Commission sought input from industry stakeholders regarding capital costs, capacity utilization factors (CUF), and operational expenses. Developers had expressed significant concerns regarding the viability of projects in the state, citing the high costs associated with transportation, civil works, and grid evacuation infrastructure inherent to Himachal Pradesh’s mountainous topography.

Key Details

The determined tariffs vary based on project capacity and location, ranging from ₹3.34/kWh to ₹3.52/kWh. For projects outside urban and industrial zones, the tariffs are set at ₹3.47/kWh (up to 1 MW), ₹3.40/kWh (1-3 MW), and ₹3.34/kWh (3-5 MW). In contrast, projects within urban and industrial areas command higher rates: ₹3.52/kWh (up to 1 MW), ₹3.46/kWh (1-3 MW), and ₹3.40/kWh (3-5 MW). These rates apply to Power Purchase Agreements (PPAs) signed between April 1, 2026, and March 31, 2027, with a commissioning deadline of March 31, 2028. Additionally, a royalty of ₹0.05/kWh will be levied on projects exceeding 1 MW.

In its final order, the Commission set the normative capital cost at ₹33.58 million/MW. Despite industry pushback, the Commission maintained the normative CUF at 21% and capped O&M expenses at ₹1.09 million/MW, with a 3.84% annual escalation. The debt-to-equity ratio remains fixed at 70:30.

What This Means for EPCs and Developers

For EPC contractors and developers, the HPERC order offers a degree of financial certainty for small-scale distributed solar projects. By establishing clear levelized tariffs, the Commission has effectively de-risked projects that would otherwise be subject to the volatility of competitive bidding. However, the retention of the 21% CUF benchmark presents a technical challenge. EPCs must focus on high-efficiency module selection and optimized site engineering to ensure these performance levels are met despite the state’s weather variations and grid constraints. The allowance for higher capital costs in urban and industrial zones acknowledges the difficulty of project execution in these regions, providing a necessary buffer for developers.

What Happens Next

With the tariff order now in effect, developers are expected to finalize their project pipelines for the upcoming fiscal year. The Commission has explicitly excluded projects under competitive bidding and net metering from this framework. Stakeholders will now focus on the execution phase, specifically monitoring whether the fixed tariffs are sufficient to offset the rising costs of global supply chain logistics and the specialized civil works required for Himalayan terrain. Future regulatory discussions may revisit the integration of battery storage systems, a topic that was raised but not fully addressed in the current order.