Nothing was happening for a long time in what was believed to be the ‘most happening place’ for the solar industry — Tamil Nadu. Most of the reason for the non-happening had to do with the presence of only one member in the State’s electricity regulatory commission.
Now, with the appointment of S. Rajagopal, the current Director-Finance of the state electricity generation and distribution utility – Tangedco – as another member of TNERC – the Chairman is yet to be appointed – the solar industry believes that there are sunny days ahead.
Rajagopal is expected to be administered the ‘oath of secrecy’ by the state’s electricity minister early next week. The general expectation is that the Commission will buck up and take long-pending decisions, the most crucial of which is the signing of the power purchase agreements with those who have won rights to put up solar projects and sell electricity to Tangedco through a bidding process that was run a year ago.
The PPA-signing is a big event that the entire solar industry has been anxiously awaiting — about 700 MW of solar projects worth Rs 5,000 crore could get off the mark once the PPAs are signed.
The PPAs could not be signed because the Commission had not approved them. The Commission didn’t do that for three main reasons. First, it feels that the tariff discovered through last year’s bidding process — Rs 6.48 per kWhr with 5 per cent annual escalation for 10 years — is rather high. Tangedco’s point of view is that the tariff being market-determined, ought to be approved by the regulator. Second, some industry bodies have filed cases against the imposition of the ‘Solar purchase obligation’ on specified classes of consumers. The Commission prefers to wait until the cloud over this is cleared. Business Line learns that the Court’s judgement on this will come in the third week of this month. Third, the Commission had only one member — and, therefore, did not want to take major decisions.
Rajagopal joining TNERC is expected to remove the first and the third of the hurdles.
Terming his appointment as a “positive sign”, Bikesh Ogra, President of Solar Business of Sterling & Wilson (of the Shapoorji Pallonji group), notes that “the fact that the newly-appointed member comes with recent Tangedco background sends strong signals to the industry.” Ogra expects that TNERC will now be able to fast-track the PPAs.
Others note that it is not just the PPAs, but a whole lot of other regulations relevant to the solar industry are expected to be decided upon by the Commission.
For instance, the Commission is yet to determine charges that solar power producers should pay if they wheel their power to their customers using the State-owned grid lines, charges for defraying the State’s burden of subsidising the poor and whether or not the power producers could ‘bank’ their power and draw it back at some other date.
Vivek Jayakumar, Executive Director of the solar consultancy, Arbutus, also feels that Rajagopal’s appointment would “accelerate the state’s solar programme.”
How much will come?
Amidst all this — and now being the beginning of a new year — there is a lot of lively speculation in the industry as to how much solar capacity will get added in Tamil Nadu in 2014.
The optimists put it at around 500 MW, since many projects are ready to take off the moment the PPAs are signed. The sceptics feel that none of the projects conceived for implementation under the Tangedco bid, will come to fruition this year. They feel that such of those investors who eyed the tax-saving ‘accelerated depreciation’ benefit will be interested in the projects, given that the projects cannot be completed by March-end. Secondly — and more importantly — they feel that it is proving to be very difficult to obtain grid connection, another hurdle-ridden process.
Tamil Nadu will be key to the solar programme of the entire country. There being an election this summer, the industry sees little chance of project awards under the Centre’s National Solar Mission, though a substantial capacity addition under the Mission could come next year. Then, there are only three other States that have active solar initiatives — Madhya Pradesh, Karnataka and Punjab — all adding to a capacity of less than 350 MW.
The Tangedco-awarded solar projects constitute a major chunk of the industry, there are tens of other projects — mostly under 1 MW — happening in the State all the time. Industries and commercial establishments are going in for solar in the belief that the ‘solar purchase obligation’ will come for sure one day or the other, and also for some energy security. Profit-making entities find solar worthwhile when looked at in conjunction with the tax-saving accelerated depreciation. These are all small projects scattered across the State — and that’s how ‘solar’ should be. A good guess is that these will add up to between 100 and 150 MW this year.
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