Blog by Team REConnect

TN lifts ban on inter state open access

According to an article in Times of India (refer), Tamil Nadu has allowed consumers and generators in the state to procure and sell power from/to outside states.

The directive comes in continuation to commitment given by Hon’ble CM of TN -  that there would be no scheduled power cuts in the state and also grated “must-run” status to all windmills.

A statement from Raj Bhawan reads -

“In exercise of the powers conferred by sub-section (1) of Section 11 of the Electricity Act, 2003 (Central Act 36 of 2003), the Governor of Tamil Nadu hereby rescinds the Energy Department Notification No. II(2)/EGY/104(c)/2009, published at page 1 of Part II—Section 2 of the Tamil Nadu Government Gazette, Extraordinary, dated the February 17, 2009,”

Following this directive it can be expected that power business in Tamil Nadu becomes more competitive with time.

Wind producers in TN favouring power forecasting & scheduling

As per an article in The Hindu, Tamil Nadu a leader in wind power generation (installed capacity of around 7200 MW) in the country has, off late, been disappointing its wind power producers. TN’s state distribution company (TANGEDCO) has been shying away from purchasing power generated from these generators owing to poor evacuation facility and a “Banking” clause which empowers generators to claim the power previously injected into the grid.

Wind power producers have been making huge losses as TANGEDCO continues to discard the power that is being generated from these wind machines. But a positive side as a consequence of this, seems to be tilting in favour of forecasting & scheduling. Hon’ble CERC had recently barred all commercial settlements envisaged under the RRF mechanism.

Wind power producers (in same article) are betting on forecasting & scheduling to serve as a saviour for them. They say that an estimated declaration of power to be injected, beforehand, is expected to address most issues of TANGEDCO.

More on RRF mechanism can be learned by visiting the following links -

Link 1

Link 2

Link 3

Tamil Nadu drafts RPO targets for FY15 & FY16

Tamil Nadu Electricity Regulatory Commission (TNERC) recently issued a draft order on RPO targets for FY15 & FY16. The following are the targets proposed by the commission: 

Column 1 Column 2 Column 3
Year Minimum quantum of total renewable purchase obligation in %age ( in terms of energy in kWh) Minimum quantum of solar renewable purchase obligation in %age out of total renewable purchase obligation mentioned in Column 2 (in terms of energy in kWh)
2014-15 11.00% 2.00%
2015-16 11.00% 2.00%

This implies that obligated entities (Distribution Licensees only)  in Tamil Nadu will now have to consume a minimum of 9% of non-solar power/RECs and 2% of solar power/RECs to comply with RPO targets in FY15 and FY16. The order is yet to be finalised and comments on the same have been invited no later than 24.02.2014.  

Solar RPO target is a highlight as it has been taken up from currently 0.05 % to 2 %. This shows TN’s strong commitment towards fostering solar generation in the state. Given the fact that a recent judgement by ApTel had set aside state’s ambitious solar policy (for a relevant blogpost – click here), this particular step from TNERC is laudable.

Present draft order can be accessed here.

Previous final RPO order can read by clicking here.

ApTel sets aside Tamil Nadu Solar policy

As per reports, Tamil Nadu’s ambitious solar policy, once assumed to be a game-changer for fostering solar power in the state, has been set aside by the Appellate Tribunal of Electricity (ApTel). A capacity addition of 3000 MW was envisaged under the solar policy till 2015.

“Solar Purchase Obligation (SPO)”; policy’s main driver of demand, has been confronted with a lot of criticism. Various consumer associations had approached relevant forums against such a binding mandate which required solar energy consumption to be 6% (from Jan 2014) out of total energy consumption. According to an article in The Hindu (dated July 7th 2013), Tamil Nadu Electricity Consumers Association (TECA) went to ApTel in June 2013, saying that consumers will not have the required solar energy capacity. According to submissions in the present order by the appellants, TN requires an installed solar capacity 720 MW in the year 2013 and 1500 MW in 2014, to make solar power available for compliance with SPO and RPO targets.

TANGEDCO as a respondent in the order has said that solar RPO of 0.05 % ceased from being into effect from the time SPO was introduced by the state commission.

TANGEDCO, last year, had floated tenders which has currently around 700 MW of solar projects awaiting execution of power purchase agreements. The solar power price discovered through, competitive bidding mechanism,was Rs. 6.48 per unit. Following this recent ApTel order, TANGEDCO is in a fix whether to scrap solar power purchase obligation or to buy power from solar projects and subsequently move TNERC to raise tariffs, to accommodate additional cost of buying costlier solar power.

A copy of this order can be found here.

Media Articles are available in the following links-

The Hindu Businessline

The Hindu  – (dated 6th Nov 2012)

Our relevant blogpost can be read here.

Link to Tamil Nadu’s Solar Policy 2012

Financial Restructuring plan for DISCOMs almost ready

The readiness of Financial Restructuring Plans (FRP) in some states is heralding good times ahead for present cash-strapped distribution companies.

Distribution companies of Rajasthan, Uttar Pradesh and Tamil Nadu have proactively finalized the process and have already issued bond to lenders, while Haryana is in the process of issuing such bonds. According to data provided in an article of Business Standard, these  four states (out of 7) constitute major chunk of debt (1.9 lakh crore INR).

As per a senior PFC official –  UP will overcome its short-term liabilities by 2014 and TN by 2017. This is expected to bring liquidity in the market and strengthen a timely financial settlement mechanism for power generators.

To encourage reduction of AT&C losses, a transitional financial mechanism has been put in place. The mechanism provides liquidity support equal to the value of additional energy saved through loss reduction. Going forward the emphasis needs to be on increasing tariffs for subsidized consumers rather than subsidizing consumers.


Load shedding; better option than buying power: DISCOMs

The country where power consumers are made to face long hours of power shortage (sometimes up-to 6 hours in some parts), seems to be having this shortage “artificially” created. Cash strapped distribution companies are resorting to power outages than buying additional power from newly commissioned power plants. It is pertinent to note that for DISCOMs “profitability” issue is deterring them to buy additional power. Cost of procuring power for these companies is costlier than their usual selling business.

According to an article in ET (click here), about 18000 MW of new power capacity is  idle as there are no buyers. This capacity if utilized completely is expected to serve around 2 crore households. Only Rajasthan, UP and Tamil Nadu are the states who have invited bids to buy long term power in over 2 years.

For these idle power projects, its getting harder to sign Fuel Supply Agreements (FSAs) as it is a mandate, under the agreement, that only those projects can draw more coal which have signed power purchase agreements(PPAs). In this condition, the projects have no other option but to aggravate inadvertent contribution to NPAs (Non performing assets) in power loans from banks.

TN’s APPC for FY14

Hon’ble TNERC has increased APPC for FY 2013-14 to Rs.3.11/kWh from Rs.2.54/kWh last year. This represents a formidable hike of 22.45%. The tariff is effective from 01.04.2013.

While the APPC has been revised to Rs 3.11, the tariff payable is restricted to 75% of the preferential tariff of the NCES category.

In the case of wind, this will translate to Rs 2.63 (75% of Rs 3.51), resulting in an effective increase of only 3.6%.

In our opinion, there are several potential issues with this:

1) At the outset, the definition used for calculating APPC in TN differs from the one used in other states and one suggested by CERC. By excluding power purchased from liquid fuel sources and short-term power, the APPC determined is lower.

2) The recent amendment by CERC in REC regulations says that a project receiving tariff ‘at APPC’ shall be eligible for RECs. The artificial restriction of 75% of preferential tariff may cause REC eligibility issues as it deviates from the CERC regulation.

Earlier, hon’ble KERC and APERC too revised their APPCs to Rs.3.07/kWh and Rs.2.69/kWh respectively.

The copy of the order can be assessed here.

Tamil Nadu announces it Solar Policy

After Andhra Pradesh, Tamil Nadu also announced its Solar Policy last week . The policy aims to achieve an ambitious target of 3000 MW by 2015 in phased manner with capacity addition of

  • 1500 MW from utility scale projects
  • 350 MW from roof top installations
  • 1150 MW under REC mechanism.

The utility scale projects are also expected to be developed through competitive bidding process.

1000 MW out of 1500 MW utility scale capacity to be funded by Solar Purchase Obligation (SPO) which is 3% till Dec’13 and scaled up to 6% from Jan’14 and balance 500 MW through Generation based incentive (GBI) by the government. SPO is applicable on all HT Consumers (HT Tariff I to V) & LT Commercial (LT Tariff V). Domestic consumers, huts, cottage & tiny industries, power looms, LT industrial consumers and Agricultural Consumers are exempted from SPO.

On the other hand TNERC also has specified 0.05% of Solar RPO. With state policy in effect, there will be dual RPO imposed on HT and LT Commercial consumers. The state commission might have to realign the Solar RPO to align the RPO structure to meet the policy objective.

The key difference from other states’s solar policy is the Net-Metering arrangements where power producers have to install a separate meter to measure their generation and feed excess power to grid for roof top projects. The current REC policy recognises only grid connected RE projects under REC. With Net Metering, even small scale roof-top solar projects can participate into REC. The GBI being offered is Rs. 2/kWh for first two years, Rs. 1/kWh for the next two years and Rs. 0.5/kWh for the subsequent two years. All new government/local buildings shall necessarily install solar rooftop.

Other initiatives and exemptions:

  • Solar water heating systems mandatory for Public Buildings and Industries using hot water boiler/steam boiler using fossil fuels.
  • Wheeling & Banking Charges applicable as per TNERC orders.
  • Exemption of Electricity Duty for 5 years for using solar power from projects of self consumption/sale to utility.
  • Tax Concessions as per TN Industrial policy.
  • TEDA designated as single window clearance agency who would be coordinating power evacuation approval, approvals related with connectivity to substation, approvals from pollution control board etc.
  • Empowered committee to accord project clearances.

Contributed by Nalin Deshpande

Wind industry in Tamil Nadu gets attractive after rise in APPC

The wind industry gets more attractive after the announcement of new Average Pooled Power Cost in Tamil Nadu.There has been 7.17 % hike over the previous APPC price of Rs 2.39 per unit. The new price from now onwards will be Rs. 2.54 per unit.

In the past wind power companies have preferred either the ‘preferential tariff’ route, or the ‘captive+REC’ route over ‘APPC+REC’ route for selling their power. After the hike the APPC route will be much more attractive to pull the wind generators to prefer this route.

According to the Hindu Business Line , the industries in Tamil Nadu have welcomed the hike. K. Krishnakumar, Managing Director, Orient Green Power, said that he expected “at least Rs 2.75.”

Vishal Pandya, Director, REConnect, said that it was a “positive indication”, especially against the backdrop of the prices of RECs declining.





TNERC revises APPC for FY 2012-13

In a recent announcement by Tamil Nadu Electricity Regulatory Commission (TNERC), the average pooled power cost has been increased by 7.7% to Rs.2.54 per unit for FY 2012-13. The previous APPC was Rs.2.37 per unit. The hike in APPC price will attract the wind generators to take the APPC route.

The above rate will be applicable till further amendment by TNERC.