Government estimates IRR for renewable energy projects at 9-11 percent

In a recent development, the Ministry of New and Renewable Energy has issued a draft report, where they have proposed the Internal Rate of Return (IRR) for major projects of renewable energy should be 9% to 11%.

It can be noted for further references and record that the estimated IRR for solar and wind-based projects will be 9%-11% but small hydropower projects will fetch an IRR between 9%-10%.

These assumptions are made on the basis of zero incentives or subsidies from the government and reflecting envisaged return rates, without any subsidy, which will empower these projects to be self-reliant.

These estimates are made on the assumption that the cost of debt will be 10.5 percent and 34.61 percent rate of income tax for all sorts of new and renewable power projects. The capacity utilization of wind, solar and small hydropower projects are set at 25%, 20% and 40% respectively.

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