KERC Revises Solar Tariffs in Karnataka, Sets Rates Up to INR 3.89 Per Unit

The Karnataka Electricity Regulatory Commission (KERC) has approved new generic tariffs for distributed solar photovoltaic (DSPV) and solar photovoltaic (SPV) projects in Karnataka, with the revised rates coming into effect from August 25, 2026 and remaining applicable until June 30, 2029, or until further orders.

The tariff order covers grid connected DSPV and SPV projects using net metering, gross metering and net billing mechanisms. The Commission has also specified separate tariffs for domestic consumers, projects covered under the PM Surya Ghar Muft Bijli Yojana, and systems using domestic content requirement (DCR) and non DCR solar cells.

For domestic consumers installing 1 kW to 10 kW systems without capital subsidy, KERC has fixed the tariff at INR 3.89 per unit. For systems installed under the PM Surya Ghar Muft Bijli Yojana with capital subsidy, the tariff has been set at INR 1.96 per unit for capacity up to 2 kW, INR 2.14 per unit for capacity above 2 kW and up to 3 kW, and INR 2.58 per unit for capacity above 3 kW.

For DSPV and SPV projects other than domestic systems of 1 kW to 10 kW, KERC has approved different tariffs depending on whether DCR or non DCR solar cells are used. The tariff for DCR category projects is INR 3.11 per unit, while the tariff for non DCR projects is INR  2.34 per unit.

These rates apply to net metering projects from 1 kW up to 1,000 kW, excluding domestic consumers in the 1 kW to 10 kW category. For gross metering and net billing, the tariff applies from 1 kW up to the sanctioned load, again excluding the domestic 1 kW to 10 kW category.

For virtual net metering and group net metering projects, KERC has fixed the tariff at 75 percent of the applicable tariff for the corresponding DSPV project category.

The Commission said the new tariff framework was required after the previous generic tariff order dated July 9, 2025 expired on June 30, 2026. KERC had issued a discussion paper on June 17, 2026 and subsequently considered written submissions from stakeholders and views expressed during a public hearing held on July 14, 2026.

KERC also extended the validity of its July 9, 2025 tariff order from July 1, 2026 to August 24, 2026 to protect power purchase agreements executed under the Karnataka Electricity Regulatory Commission Implementation of Solar Rooftop Photovoltaic Power Plants Regulations, 2016.

According to the Commission, Karnataka had 6,354.74 MW of installed solar power capacity under PPA mode as of April 30, 2026, including 920.74 MW of DSPV capacity. KERC observed that smaller consumers had not shown sufficient interest in installing distributed solar systems despite significant potential, particularly among domestic consumers.

To encourage smaller residential installations, KERC has adopted a capital cost of INR 45,000 per kW for non subsidy residential DSPV systems between 1 kW and 10 kW. The cost includes taxes, duties, GST, transportation and an additional premium and is based on the Ministry of New and Renewable Energy benchmark cost for residential solar installations of 3 kW and above.

For DSPV systems other than domestic consumers in the 1 kW to 10 kW category, KERC has fixed the capital cost at INR  27,090 per kW for non DCR systems and INR  36,015 per kW for DCR systems.

The Commission said the non DCR capital cost was based on market prices available in April 2026. The average solar module cost was considered at INR 13.8 per Wp excluding GST, while the module cost for DCR systems was assessed at INR 22.3 per Wp. The balance of system cost was considered at INR 126 lakh per MW.

Land costs have not been included in the capital cost calculation because DSPV systems are generally installed on consumer premises, including rooftops. Land costs have also been excluded for virtual net metering projects, where solar plants may be located within the distribution licensee's area.

KERC has introduced separate DCR and non DCR categories in the tariff framework in view of the Ministry of New and Renewable Energy's July 18, 2026 memorandum on ALMM List II requirements. The Commission noted that net metering and open access renewable energy projects have been provided a limited exemption from ALMM List II requirements for solar PV cells until December 31, 2026, after which projects commissioned under the applicable categories will have to comply with the provisions.

For DCR category projects, applicability of the higher tariff will be subject to inspection and certification by the concerned distribution licensee under a uniform procedure for identifying solar modules containing DCR cells.

KERC has retained a useful plant life of 25 years and adopted a 25 year levelized tariff and PPA tenure. The Commission said  that the 25 year period provides certainty of cash flows for investors and is consistent with the life considered by manufacturers and other regulatory commissions.

The Commission has retained a capacity utilisation factor of 19 percent for DSPV projects. It rejected proposals for lower CUF assumptions, noting that available technologies have not yet established an exact CUF based on sufficient data.

The normative debt equity ratio has also been retained at 70:30. KERC has adopted an interest rate of 10.80 percent for a 13 year debt repayment period, based on the State Bank of India's three year MCLR of 8.80 percent plus 200 basis points.

For working capital, the Commission has approved an interest rate of 11.20 percent, based on the one year MCLR of 8.70 percent plus 250 basis points. Working capital has been calculated as one month's receivables for DSPV projects.

KERC has retained operation and maintenance expenses at 1 percent of capital cost, with an annual escalation of 5.72 percent from the first year of operation. For the 1 kW to 10 kW domestic category, the O&M cost works out to INR 450 per kW, while it is INR  270.90 per kW for non DCR projects and INR  360.15 per kW for DCR projects in the other DSPV category.

The depreciation rate has been fixed at 5.385 percent per annum. KERC will allow depreciation on 90 percent of the capital cost over the first 13 years, corresponding to the loan repayment period, while the remaining 10 percent is treated as salvage value and recovered over the balance 12 years of the project's useful life.

The Commission has allowed a return on equity of 14 percent and adopted a discount rate of 11.76 percent based on the weighted average cost of capital. No auxiliary consumption has been allowed for DSPV systems.

KERC said that benchmark tariffs for large MW scale solar projects, including feeder level solarisation under PM KUSUM Component C and CM SKY, may be determined separately based on project characteristics, technical requirements and whether capital subsidies are available. Tendering for such projects will continue based on the benchmark tariff fixed by the Commission.

The new tariffs will apply to new DSPV and SPV projects for which PPAs are entered into or applications are submitted and which are commissioned from August 25, 2026 until June 30, 2029, unless the Commission issues further orders. The PPA tenure for these projects will remain 25 years.