TN utility has wires crossed

Tangedco, Tamil Nadu’s power utility, often argues that its financial performance is compromised if it loses its high-tariff-paying consumers such as the commercial and industrial entities on account of rooftop solar. And it has expended substantial effort to curb the uptake of rooftop solar by consumers in the State.

In sync with the Indian Electricity Act, 2003, in the near future there will be no high-tariff and low-tariff consumers but at most two tariffs by voltage level (HT and LT), with direct government subsidies for eligible consumers.

If Tangedco’s average cost of supply per unit in 2021 is approximately ₹8.20/kWh, then all consumer tariffs are below this average cost of supply, resulting in a net loss to Tangedco for every unit supplied to the consumer.

Therefore, for every unit of electricity that consumers generate and self-consume from a solar energy system, one unit less of loss-making energy is to be delivered by Tangedco to the consumer.

Tangedco’s tangle

If Tangedco keeps resisting distributed renewable energy generation by creating grid connection barriers, consumers will invest in energy storage and start using grid power as a backup.

Should Tangedco reduce its role to only providing standby grid power, or should it not proactively create incentives for consumers to use the grid for the export of their surplus solar energy, thereby optimising its main asset — the distribution network?

Tangedco purchases energy from various generators at tariffs determined by the Electricity Regulatory Commission on the basis of a levelised cost of energy calculation only and not with reference to consumer tariff structures and cross subsidies.

The same must be done for consumers who produce and export energy from rooftop solar, the applicable electricity tariff of the consumer or the amount of unit self-consumed from the rooftop solar system by the consumer should have no bearing on the tariff determination.

Discoms must only be concerned with the energy transactions that take place at the point of supply (the energy meter), which is the import from the grid and the export to the grid.

Consumers cannot be expected to compensate the discom for a reduction in grid energy consumption on account of self-consumption of solar energy or energy conservation or efficiency measures or the conversion of a power-intensive enterprise to a less power intensive enterprise.

Energy suppliers cannot force consumers to purchase from them a certain quantity of energy or demand compensation for energy consumption reduction.

Energy generation close to the point of consumption, as it is the case with rooftop solar, results in multiple upstream benefits. These include: avoided energy purchase costs, avoided transmission and distribution losses, avoided capacity costs for generation, transmission and distribution.

Additionally rooftop solar has substantial environmental and social benefits, such as reduced carbon emission and reduced air pollution. The current discussion around rooftop solar and its potential impact on the Tangedco’s health have so far ignored these upstream benefits.

Rooftop solar target

As of March 2021, the installed capacity of rooftop solar capacity in Tamil Nadu is 325 MW and according to the Tamil Nadu Solar Energy Policy, the target by 2023 is 3,600 MW.

This installed capacity represents only 9 per cent of the target.

Even when fully met, the total solar energy generation will account for less than 4 per cent of the total energy demand in the State, a miniscule share that cannot be held responsible for Tangedco’s losses.

The discussion around rooftop solar needs to be de-linked from Tangedco’s financial performance and the consumer tariff structures, including cross-subsidies.

A stable policy environment, fair feed-in tariffs, and a hassle free interconnection process for rooftop solar energy are needed for Tamil Nadu to regain its renewable energy leader status.

The writer is with Auroville Consulting

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