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Tamil Nadu takes wind out of power business

According to reports, at a time when Tamil Nadu is grappling with an acute power situation, the state’s policy on wind energy is driving investors to other states. Several companies like Orient Green Power Ltd (OGPL), Techno Electric and Gamesa, which have brought substantial wind investments to Tamil Nadu, are applying the brakes on their investment plans and are taking their windmills to Karnataka, Rajasthan and Maharashtra.

Tamil Nadu, which has 40% of the country’s wind generating capacity, added only 150MW this half year and will augment 50MW more by yearend, compared to the 1,100MW it added last year, said Wind Turbine Manufacturers Association chairman Ramesh Kymal. With the significant dip in capacity additions comes the uncertainty in businesses of biggies like Vestas and Suzlon.

Vestas has not officially confirmed about exiting India operations, but it is scaling down investments here. Suzlon is almost pushed to a position where it has no choice but to reduce its production levels. Inadequacy of grid capacity to evacuate and transmit the power generated has proved the biggest problem for the industry.

“There are not enough transmission lines, and the existing grids don’t have the capacity to transmit the power from south Tamil Nadu to consumers in the northern parts of the state,” said OGPL managing director P Krishnakumar. OGPL is now focusing on Andhra Pradesh and Gujarat, and won’t be making any investments in Tamil Nadu for another two years, Krishnakumar said.

The increase in power tariff by 12 paise to Rs 2.51 a unit is also a reason for investors pulling out of Tamil Nadu. “There was a hike in tariff, but it wasn’t attractive enough for us,” Krishnakumar said. States like Maharashtra and Karnataka are luring investors with tariffs such as Rs 5.50 and Rs 4 respectively. Kymal said the introduction of transmission charges for captive investors (companies which generate power and consume it themselves) has also driven away investors.

“Also, the electricity board has not been making payments to power suppliers on time for about a year now, because of which banks don’t lend to companies” he said. Adding to their woes is the introduction of cross subsidy charges, which is levied by the state electricity distribution company on the industrial consumer to make good the loss incurred due to power subsidy. “The challenges will remain, and we might look at coming back to Tamil Nadu by May 2014, but not earlier,” Krishnakumar said. Kymal, who is also Gamesa MD, said, “We are moving to Maharashtra, Rajasthan and Karnataka since the electricity boards there make payments on time and tariffs are attractive there,” he said.

Tweaking the policies to benefit all parties and repowering existing plants rather than only focus on new investments could help the industry, say experts. “With some of the best wind sites in Tamil Nadu that now have very old turbines, the state offers potential for repowering (replacing older, lower capacity less efficient machines with the latest technology machines). If such a policy were to be introduced, Tamil Nadu is likely to be an attractive destination,” an industry expert and the founder of Panchabuta a renewable energy focused newsletter, Vineeth Vijayaraghavan said.

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