Several biomass-based power plants in TN lying idle

In a state that is reeling under a severe power shortage, several biomass-fired power plants adding to a capacity of close to 60 MW are lying shut, as the tariff offered by state utility are not economically viable.

TANGEDCO, the state-government owned power generation and distribution company, pays the biomass plants with which it has a power purchase agreement between Rs 4.20 and Rs 4.65 a unit.

The tariff was approved by the Tamil Nadu Electricity Regulatory Commission in 2009, and should have come been revised from the year beginning April 2011. The revision, however, did not happen.

TNERC has told the companies that the existing tariff would continue till December this year. (The biomass power companies are asking for application of the revised tariffs—whenever it comes—with retrospective effect from April, but it is not clear if this will happen.)

Since (unlike wind and solar plants) biomass plants need feedstock and have to pay for it on a weekly basis, and since the feedstock prices have risen over the last two years, several units have found operations unviable and are consequently shut.

This was confirmed to Business Line by Mr Santosh Kamath, Secretary, Biomass Power Producers Association, Tamil Nadu.

Upon the representations of the power producers, TANGEDCO has allowed them to “move out of the PPA” if they choose to, and sell their electricity to third parties. The decision was taken about ten days ago.

In Tamil Nadu, power producers are allowed only ‘intra-state open access’, which means they can sell directly to other consumers within the state only, and not to those in other states. The power producers are thus denied a larger market. (Some hold this to be a breach of the Electricity Act, 2003, because the under the legislation a state may disallow inter-state sales only in times of an emergency.)

But selling to third parties has its downsides. While Tamil Nadu disallows generators within the state to sell outside, it allows consumers to buy from other state, and its own TANGEDCO purchases regularly from the open market.

Today, several coal-based power plants from outside the state sell their power into the state and this power is cheaper. TANGEDCO buys power on a limited term contract at Rs 3.87 a unit.

The biomass-based power producers are unable to compete against this and are not confident of sell all of their production directly to consumers.

They have been asking TANGEDCO to allow them to sell any “surplus” power—after selling whatever they could to third parties—to TANGEDCO, but sorry, TANGEDCO is not game.

Thus the biomass players are left with two options—either sell the power at the un-remunerative, PPA-fixed prices, (and wait for the payment for God knows how long), or sell only whatever they can to other consumers who have the option of buying cheaper power from the market.

Neither option being viable, many units have shut. (Business Line is withholding their names at their request.)

The way out

Of course, if a power producer opts out of the PPA, his generation is eligible to get Renewable Energy Certificates which can be traded in the market for at least Rs 1.50 a unit.

This makes things slightly better, but the issue is, the State Load Despatch Centre will have to accredit the generators, for REC eligibility.

How quickly these plants get re-started depends upon how quick the SLDC is.

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