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Early signing of solar PPAs unlikely in Tamil Nadu

According to reports, Tamil Nadu’s electricity generation and distribution utility TANGEDCO has sought the approval of the State electricity regulator for signing power purchase agreements with solar power developers with total capacity of 226 MW.

The first hearing on the petition was held at Tamil Nadu Electricity Regulatory Commission (TNERC) on Monday.

Sources familiar with the Commission’s procedures say that early approval of the PPAs is difficult – mainly since there are ticklish legal issues to be resolved but also because of the impending elections and the currency of the model code of conduct.

The 226 MW corresponds to the first set of letters of intent given to solar power developers who won rights to (set up solar power plants and) sell electricity to TANGEDCO through a 2012 tender.

In that year, the Tamil Nadu government came out with its solar policy, the hallmark of which was the obligation imposed on specified classes of electricity consumers to buy specified quantities of solar power. The ‘solar purchase obligation’, or SPO, was hailed as a precedent-setting move, one that would create demand for solar power.

In 2012, TANGEDCO came out with a solar tender – the winners would set up solar power plants in the state and sell the electricity to TANGEDCO at rates discovered by the tendering process. Post the tender, the rate was fixed at ₹6.48 a kWhr with 5 per cent annual escalation for ten years; the tenth year rate would stand for a further ten years. TANGEDCO would sell the power to the obligated consumers – the tender was linked to the SPO.

Developers of 226 MW of capacity were first issued letters of intent. Then, TANGEDCO offered to buy solar power from other developers on the same terms that evolved through the tender. At the end of the process, around 700 MW of capacity came to be ready for signing power purchase agreements.

Tamil Nadu then became a hot solar destination and was the only other large solar programme in the country, after the 750 MW Phase II of the Jawaharlal Nehru National Solar Mission.

However, some of the obligated consumers went to the Appellate Tribunal for Electricity, which struck down the SPO on technical grounds. The quashing of the SPO gave rise to two issues – whether there would be any demand for solar power, and whether the tender itself, which was linked to the SPO, was valid.

Amidst this confusion, TANGEDCO has now petitioned TNERC for approval for buying power from 226 MW of capacity.

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