The Hindu Business Line : Cogeneration units demand hike in power tariff; seek exit options in PPAs

Chennai, July 16 Representatives from the renewable energy sector in Tamil Nadu wanted the electricity regulator to fix a tariff that stimulates investment in the sector, especially in the case of the nascent solar energy, and a higher tariff in the case of others – biomass, cogeneration and wind.

They also wanted the regulator to provide for exit options in the power purchase agreements the companies sign with the Tamil Nadu Electricity Board, so that they are free to sell power from the projects to a power trader at a higher tariff rather than be tied down to a lower tariff with the power utility.

In the case of the solar energy sector — solar photovoltaic and solar thermal — experts told a round table organised here today by the Tamil Nadu Electricity Regulatory Commission (TNERC) said that solar grid connected photovoltaic projects were waiting to take off and all that they required was a stimulus in the form of an attractive tariff.

Other states

West Bengal, Rajasthan and Haryana had come with tariffs in the range of Rs 10 to Rs 16 a unit, provided they met certain conditions. In Europe, it was pointed out that some countries offered solar energy projects a tariff of Euro cents 40-42 a unit.

Dr E.V.R. Sastry, Senior Adviser, Centre for Energy Technology, University College of Engineering, Osmania University, and a former adviser to the Union Ministry of Non-Conventional Energy Sources, said investors in solar energy projects needed to have a clear idea of what the revenue stream would be like after 10 years of the project’s commissioning. The life of these plants could be up to 20-25 years and utilities should consider signing power purchase agreements for 20 years rather than restricting them for 10 years.

Mr K.E. Raghunathan, Managing Director, Solkar Energy, a manufacturer of solar energy products, said tariff could at best be a stimulus for investment, not a solution.

Representatives from bagasse-based cogeneration projects and biomass-based power projects wanted a hike in tariff for continued viability. (The tariff is currently Rs 3.15 a unit.) Alternatively, they have asked to be allowed to exit from the power purchase agreement with the Tamil Nadu Electricity Board.

The TNERC had organised this meeting to get the views of players in the renewable energy sector on the power tariff from these sources.

Mr K. Raghunandan, Managing Director, EID Parry, said that the investment costs had soared in recent years due to increasing cost of inputs and cost of funds. Against investments of Rs 3.5 crore a MW in 2005-06, the sugar companies were investing nearly Rs 6 crore a MW in cogeneration projects.

Rising input costs

This was primarily due to the increasing costs of steel and cement, which have more than doubled in the last two years. Interest costs have increased from about 9 per cent to nearly 13 per cent. It would be unviable for units to invest in cogeneration projects at the current tariff of Rs 3.15 a unit, he said.

Mr Ram V. Tyagarajan, Chairman and Managing Director, Thiru Arooran Sugars Ltd, said that the cogeneration units in other States were allowed to sell power to power trading companies, which paid them over Rs 4.80 a unit. Also, the cost of fuel – bagasse, the sugarcane fibre – was continuously on the rise in tandem with the increase in cost of sugarcane. Sugarcane used to cost Rs 850 a tonne in 2005-06, and is now around Rs 1,050 a tonne.

Mr K. Raghu, Chairman and Managing Director, IBPIL, a company operating biomass-based power plants, said the biomass-based units should be allowed to exit from the power purchase agreement finalised with the TNEB, if they find the tariff unviable.

Against a tariff of Rs 3.15 a unit, the cost of biomass – wood and agro waste – alone was Rs 3. Biomass-based units were shutting down because of the unviable tariff.

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