Solar photo voltaic power projects that would be set up in Tamil Nadu in one year from September 12 will get paid Rs 7.01 per unit of electricity they produce for a period of 25 years.

However, in case a solar power developer wishes to avail himself of the ‘accelerated depreciation’ benefit – a tax saving federal sop – the tariff would be Rs 6.28 a unit.

If a solar power producer wishes to sell his power to consumers directly, the company would pay lower ‘wheeling’ and ‘cross-subsidy’ charges – 30 per cent and 50 per cent respectively, of whatever charges are prescribed for conventional power producers. Wheeling charges are for using the transmission lines of the state distribution company, TANGEDCO; cross-subsidy charges are those levied for defraying the expenditure involved in providing subsidising electricity to poor people.

The tariff is fixed for 25 years, with no annual escalation.

For those who put up solar thermal power projects, the tariff is Rs 11.03 a kWhr (Rs 9.88 if the company avails itself of ‘accelerated depreciation’ benefit.)

The buyer of the power will be TANGEDCO, which will purchase the solar power for meeting its ‘renewable purchase obligation’ (RPO). The RPO is a statutory requirement under the federal Electricity Act, but the respective state electricity regulatory commissions prescribe how much the obligation would be.

In Tamil Nadu, the ‘obligated entities’, (the biggest of which is TANGEDCO), is mandated to buy 0.25 per cent of their consumption or sales from solar projects. The state electricity regulatory commission is considering a proposal to raise this RPO to 2 per cent. According to sources, an order in this regard would come soon.

The TNERC order is expected to spur solar power activity in the state, even though many solar companies feel that the tariff offered is too low.

The state had in 2012 come up with a ‘solar policy’ and a tariff of Rs 6.48 a kWhr with an annual escalation of 5 per cent for ten years was discovered through a bidding process. However, at a time when a dozen companies had come forward to set up about 700 MW of capacity in the state, the issue got tangled in legal issues and things ground to a halt.

The main issue was the 6 per cent ‘solar purchase obligation’, which rode on top of the federal obligation of 0.25 per cent. ‘Obligated entities’ who would have had to pay stiff for solar power purchases went to the Tribunal and got the solar policy set aside earlier this year.

Sources said then that even if the solar RPO in the state is raised from 0.25 per cent to 2 per cent, they would agitate. If they do, the state would have to wait further to see solar projects set up. At present, Tamil Nadu has 109 MW of solar power capacity.

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