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Enhanced solar purchase obligation can create 1,000 MW capacity

According to reports, the proposal to make Tamil Nadu’s electricity distribution company Tangedco to get 2 per cent of the electricity it sells from solar power plants, will result in the creation of solar power capacity of 1,000 MW in the State, calculations show.

The proposal was put up for public comments in the form of ‘draft amendment’ to its RPO rules by the State’s electricity regulatory commission, TNERC.

(The State electricity regulatory commissions are mandated with the task of prescribing how much the distribution companies and major consumers in the State have to buy from ‘renewable energy’ sources, such as wind, solar, hydel and biomass.)

Tangedco has been cleared by TNERC to procure 75,378 million units of electricity in 2014-15 (incidentally, for ₹26,800 crore) and 78,870 million units in 2015-16 (₹27,834 crore) — including from its own power plants.

Two per cent of these numbers translates to 1,507 MUs in 2014-15 and 1,577 MUs in 2015-16.

Since as a thumb rule, one MW of solar power capacity in Tamil Nadu will generate 1.5 MUs, the State would need a little more than 1,000 MW for Tangedco to buy from.

Today, the State has about 35 MW of solar power capacity.

It is only a ‘draft amendment’, but few doubt that it will become an order of the Commission.

This has reinvigorated the solar industry in the whole country — Tamil Nadu is seen as a very promising State for solar, given the State Government’s ambition to create 3,000 MW in a few years.

In fact, project developers with a cumulative capacity of 700 MW of capacity, who won rights to sell their solar power to Tangedco through a bidding process put through by the distribution company, are ready to sign power purchase agreements. The State had sought to create demand by imposing a ‘solar purchase obligation’ of 6 per cent on specified classes of consumers, but a recent verdict of the Appellate Tribunal for Electricity set aside the obligation.

The sullenness created by the Tribunal’s verdict is now gone, and industry players are looking forward to signing PPAs with Tangedco.

However, it is not clear how Tangedco will meet its obligation in 2014-15, as the State will not have sufficient solar power capacity by then, even if developers begin project construction right away.

The other option for Tangedco — of buying solar Renewable Energy Certificates — is way too costly for the distribution company to consider.

The minimum price of solar Renewable Energy Certificates in the market is Rs. 9.3 a per unit.

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