According to reports, after a promising start, Tamil Nadu’s solar power programme seems to be in a limbo. Although the State electricity generation and distribution utility, Tangedco, is ready to sign power purchase agreements with solar investors for a total capacity of 708 MW, it is unable to because the Madras High Court has stayed the ‘solar purchase obligation’.
The SPO is key to the creation of demand for solar power, without which Tangedco would not be able to sell solar power to the specified consumers who are ‘obligated’ to buy.
The tariff discovered by a bidding process put through by Tangedco was Rs 6.48 per unit, with a 5 per cent annual escalation for the first ten of the proposed 20 year PPA period.
There is another case on the same issue being heard by the Appellate Tribunal for Electricity.
At a time when solar investors are hoping that the courts would rule upholding the State’s solar power policy, the State electricity regulatory commission, TNERC, came out with a draft solar tariff order.
The key point of the ‘comprehensive tariff order on solar power’ is that it proposes a flat tariff of Rs 5.78 a unit.
The draft order has been put up in the public domain for comments.
Saturday is the last day for submitting the comments. TNERC has not made the comments public, but a number of investors and experts have given their comments to Business Line.
Basically, these comments say that the proposed tariff of Rs 5.78 has been determined on the basis of several fallacious assumptions. For instance, the Commission has assumed a capital investment of Rs 7 per MW of installed solar PV capacity, but one comment said that this assumption is “far removed from ground reality.” With detailed calculations, one solar company has shown that the cost cannot be less than Rs 8 crore per MW.
Further, global solar module prices are going up, and would get only costlier because of the rupee depreciation.
The company has also pointed out that the Commission has not taken into account the cost of replacement, at least three times during the life of the project. Equally specious is the assumption of 19 per cent ‘capacity’. Nowhere in Tamil Nadu could any solar project deliver 19 per cent capacity utilisation, the solar company said.
“It is not clear as to why the Commission has chosen not to take live data from the C-WET (Centre for Wind Energy Technology, which has done extensive solar resource assessment in Tamil Nadu).”
Another unfounded assumption is the rate of interest taken. “Which financer today gives loan for 12 per cent?” asks another solar industry insider.
“It would have been better if TNERC had directly contacted key lending institutions such as IREDA, PFC or REC, instead of relying on just a Web site where information is not updated,” says another comment.
Comments have been received criticising assumptions of depreciation rate (3.6 per cent), interest on working capital (12.5 per cent) and power needed for running of the solar plants (auxiliary consumption).
But what if the draft solar tariff of Rs 5.78 is unviable? The worst fallout could be that no investor would come forward to put up projects for that tariff, right?
Asked this, the head of a solar company said that investors (such as himself) were worried about the impact this proposed tariff would have on the projects won under the Tangedco bid — where the tariff of Rs 6.48 with 5 per cent annual escalation, works out to Rs 8.64 across the entire 20-year PPA period.
The tariff of Rs 5.78 sets a wrong benchmark, said the expert.