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Wind energy companies move Madras High Court against auction of Tamil Nadu projects

According to reports, Wind energy companies have moved the Madras High Court against the Tamil Nadu electricity distribution company’s move to auction wind energy projects with a new base price, and the sector regulator’s decision to allow the auction.

Indian Wind Energy Association (IWEA), an industry body of wind energy developers, has moved the high court, challenging a Tamil Nadu Electricity Regulatory Commission (TNERC) order to allow Tamil Nadu Generation and Distribution Co (TANGEDCO) hold a wind auction for 500 MW with the base price set at Rs 3.46 per unit — a record low tariff found in the first and only wind auction in the country held in February.

IWEA in its petition called TNERC’s order issued on June 2 “arbitrary, illegal, unjust and deserving to be quashed”. It argued that since an earlier tariff order of the regulator was valid till April 1, 2018, any fresh tariff related order could only be passed after this period had expired. TNERC had passed a comprehensive tariff order on wind energy, applicable for two years starting April 1, 2016, setting the wind power tariff at Rs 4.16 per kilowatt hour (kWh). Wind energy tariffs so far had been set by state regulators and mostly varied between Rs 4 and Rs 6 per kWh.

Union renewable energy minister Piyush Goyal, however, has been calling for auctioning of renewable energy projects. So, the first wind auction was held in February by Solar Energy Corporation of India, a firm under his ministry. It saw wind energy tariffs fall sharply to Rs 3.46 per unit.

This prompted many states, including Tamil Nadu, Andhra Pradesh and Gujarat, to seek renegotiation of old power purchase agreements (PPAs) signed at higher tariffs, and to ensure that all future PPAs they sign with wind developers should have tariffs not exceed Rs 3.46 per kWh.

Hence, TANGEDCO’s move to hold a wind auction with base price of Rs 3.46 per kWh. Wind developers fear this will lead to a sizeable decline in their profit margins. The Madras High Court’s decision may have direct bearing on other states’ moves to hold auctions for wind projects and reduce tariffs. The court has already held one hearing on the matter.

TNERC, TANGEDCO and IWEA all declined to comment since the matter is sub judice. “The tariff (of Rs 4.16 per unit) has been fixed by the commission taking note of all parameters and factors,” IWEA said in its petition.

“The same has not been questioned by the licensee or any other person. Under such circumstances, the tariff is binding on all. Suddenly, it is not open to the respondents to resort to a reverse bidding process and that too with Rs 3.46 per unit as the upper limit,” it said.

The petition also pointed out that the final guidelines for states choosing to hold wind auctions had not yet been issued by the Centre, though draft guidelines had been circulated. “Tariff can be fixed on the basis of bidding only if the same is enabled by the guidelines fixed by the central government,” it said.

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