TN wind industry gets a boost as regulator hikes average purchase cost

M. Ramesh Chennai | Updated on September 06, 2012 Published on September 06, 2012

The new average pooled purchase cost of Rs 2.54/unit is a 7.17 per cent hike over the previous price of Rs 2.39.

The wind industry in Tamil Nadu received a much-needed booster dose today as the state’s electricity regulatory commission announced the revision of the ‘average pooled purchase cost’ to Rs 2.54 per unit. This is a 7.17 per cent hike over the previous APPC price of Rs 2.39 a unit, which ceases from today.

In its order today, the Tamil Nadu Electricity Regulatory Commission said that the new APPC of Rs 2.54 a unit would “remain in force even beyond March 31, 2013, if no new rate (of APPC) is notified by 31.03.2013.”

The ‘average pooled purchase price’, as the name suggests, is the weighted average price at which an electricity distribution company buys power from various sources. The APPC is notified by the state electricity regulatory commissions.

REC regime

Under the ‘Renewable Energy Certificate’ regime, companies that produce power from renewable sources (wind, biomass, solar, small hydro) have three options to sell their power. They could sell the power to the electricity distribution companies at a ‘preferential tariff’, (which, in Tamil Nadu, has just been hiked to Rs 3.51 a unit). They could sell it to the distribution companies at the notified ‘average pooled purchase cost’ and get tradeable renewable energy certificates and make money by selling them on the power exchanges. This is the ‘APPC+REC’ model. The third option is to sell power to consumers directly, either in the open market or by making the consumers shareholders in special purpose vehicles that own the power projects—the ‘Captive+REC’ model.

Tamil Nadu has a wind power capacity of around 7,000 MW. Wind power companies have preferred either the ‘preferential tariff’ route, or the ‘captive+REC’ route. The capacity under ‘APPC+REC’ route has not been much. It has to be seen whether the hike announced today attracts renewable energy companies to take to APPC.

Industry welcomes hike

But the industry has viewed today’s hike more as a positive indication than as an instrument of change. K. Krishnakumar, Managing Director, Orient Green Power, said that while he welcomed the hike, he expected “at least Rs 2.75.”

Vishal Pandya, Director, REConnect, a consultancy that helps companies secure and trade RECs, said that it was a “positive indication”, especially against the backdrop of the prices of RECs declining.

A sore point with the industry has been that in calculating the APPC, the regulators do not take into account the cost of purchase electricity from all the sources. The high-cost, liquid fuel-based power purchases, which would increase the average purchase price, are not taken into the calculation. The industry has taken the matter to the courts.

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Published on September 06, 2012
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