Tamil Nadu announced a new Solar Policy in February 2019. The policy aims at a State-wide capacity of 9,000 MW by 2023, of which, 5,400 MW is expected to come from the utility category (Central government schemes, preferential sale to Tamil Nadu Generation and Distribution Company or TANGEDCO, wheeling and Renewable Energy Certificate- based projects), and the remaining 3,600 MW from the consumer side (on-site solar).

Tamil Nadu’s previous Solar Policy, in 2012, envisaged a capacity addition of 3,000 MW to be added by 2015. However, this target was not achieved in 2015, and even as on January 1, 2019, the State had only achieved a total installed capacity of 2,431 MW of solar energy, which is about 81 per cent of the 2015 target.

In the 2019 policy, one expected the government to address some of the challenges experienced with the 2012 policy. The thrust of the new policy remains on additions to the utility category of solar projects where large-scale solar producers sell their produced power to (a) the utility (TANGEDCO) for a gross feed-in tariff or; (b) to a third party for a mutually agreed rate; or (c) use the energy for self-consumption at another location (for which they pay a “wheeling” charge to the utility).

While the policy is ambitious on paper, the State needs to be prepared to handle the following technical and financial challenges:

Technical : If the policy target (9000 MW) is achieved by 2023, the State could ideally meet nearly 50 per cent of its expected day-time peak demand through solar generation. Tamil Nadu’s peak electricity demand has been growing at a compound annual growth rate (CAGR) of 2.63 per cent between FY 2014 and FY 2018. A simple extrapolation to 2023 gives us an expected peak demand of 17,080 MW.

The challenge for the State will be to plan and ramp up its generation fleet to compensate for the reduction in solar generation as day turns into evening and then night. Until the advent of cheaper storage solutions, usage of coal and gas units are inevitable; which come with technical challenges of maintaining and operating the units optimally.

Financial : As on January 1, 2019, the State had achieved a total installed capacity of 2,431 MW of solar. Until last year, a significant component of the utility scale projects has come from bids conducted by TANGEDCO, under the 2012 policy. However, TANGEDCO recently decided to stop conducting wind and solar auctions, and instead purchase renewable energy from Solar Energy Corporation of India (SECI).

SECI has brought out tender documents in order to fill the 1,600 MW gap in the Solar Renewable Portfolio Obligation (RPO), and to respond to the tepid response to earlier tenders put out by TANGEDCO because of the latter’s poor record in making payments to energy suppliers and its loss of ₹7,760 crore in 2017-18 ( ₹4,348 crore in 2016-17).

The arrangement with SECI is a back-to-back one, between the solar developer and TANGEDCO, which means that the issues haven’t been resolved fully. A fundamental rework of TANGEDCO’s financials is required to bring the company back to a credit-worthy situation, and be seen favourably by developers.

What more can be done?

Given the financial challenges, it is necessary to go for a more distributed approach to fulfilling the Solar RPO obligations and to reduce the transmission and distribution (T&D) losses. The draft Solar Policy sought a hybrid and distributed approach of utility as well as consumer category systems. This could have potentially avoided the tender-related issues and ensure that Solar RPOs are met in a more manageable manner. However, this provision did not make it to the final policy document.

The Tamil Nadu Solar Policy 2019 could have been a springboard for the State to regain its leadership position within India. Looking only at the utility category of solar energy, the State needs to undertake the following to realise its stated ambitions:

A well-planned generation fleet that can accommodate the diurnal cycles of solar energy.

An honest and fundamental revamp and reform of TANGEDCO’s financials to make the utility attractive to developers.

Regular tracking of the utility to ensure adherence to RPO norms.

Better feed-in tariff and long-term certainty to small-scale consumers

The writers are Associate Director (Energy Programme) at WRI India, and Senior Researcher at Citizen Consumer and Civic Action Group, respectively

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