Tamil Nadu

Solar power at sky-high rates

VISAKHAPATNAM(ANDHRA PRADESH) 10 -07-2014:10/07/2014: #Unionbudget_2014 # Solar Power: Solor panels at an agriculture farm in Visakhapatnam. The Finance Minister in the Union Budget 2014 announced Rs 500 crore for solar power development projects in Tamil Nadu and Rajasthan. -- Photo:C.V.SUBRAHMANYAM   | Photo Credit: C_V_SUBRAHMANYAM

When the Adani Group signed a Memorandum of Understanding with the Tamil Nadu government on July 4, there were not many voices of dissent. It was viewed as necessary for large-scale solar power generation.

The agreement said that the Tamil Nadu Generation and Distribution Corporation (Tangedco, the State’s power utility) would purchase all the power produced by the 648 MW solar park (to be set up in Ramanathapuram district) at Rs 7.01 per unit for the next 25 years. Soon, however, it was discovered that in Madhya Pradesh, the Adani Group had quoted Rs. 6.04 per unit. Opposition parties in Tamil Nadu instantly smelt a rat and have been demanding a white paper.

The controversy, however, goes back to September 2014, when the Tamil Nadu Electricity Regulatory Commission (TNERC) announced a comprehensive tariff order on solar power, according to which any company that set up and began solar power generation before September 11, 2015 would get a rate of Rs 7.01 per unit. Seven solar power developers — Adani was not one of them — filed reviews asking that the control period be extended to two years instead of one. TNERC did not admit their petitions.

In March 2015, the Adani Group expressed interest in a 1000 MW solar power plant in Ramanathapuram. And on April 1, TNERC extended the control period for one year from that date. TNERC chairman S. Akshayakumar and member G. Rajagopal signed the order. Another member S. Nagalsamy differed and wondered at the need for such urgency.

“It is still a mystery [about] who is instrumental in prompting my colleagues to undertake this exercise, which is not legally correct,” he wrote in his dissent order.

When the price for 2015 had already come down to roughly Rs. 5.87 per unit, Mr. Nagalsamy questioned the rationale behind extending 2014’s price of Rs. 7.01 per unit. In 2014, the price of solar power had come down by 14 per cent, based on which the control period had been fixed for one year, the time requested by Tangedco.

Meanwhile, the Central Electricity Regulatory Commission notified in an order in March this year that the capital cost of solar power had fallen to Rs. 5.86 crore per MW. In short, the price of solar power had dropped by Rs. 1.14 per unit within this short period. With the Tamil Nadu government indicating that it had applications from solar power generators to the tune of 5,366 MW, the extension of the control period at the old rate will translate into a huge loss of Rs. 23,000 crore to Tangedco for the next 25 years, Mr. Nagalsamy said.

TNERC has also expressed concern that additional solar power generation may not happen to the levels of a reasonable Renewable Purchase Obligation (RPO) advocated in the National Action Plan for Climate Change and the National Tariff Policy. TNERC sources, however, say that RPO has been fixed at 0.05 per cent of 65,000 million units supplied by Tangedco, which turns out to be 22 MW.

The State already has 150 MW of solar power, of which 75 MW is purchased at Rs. 3.38 per unit, opted for under the Renewable Energy Certificate (REC) scheme.

It does not end there. The Tamil Nadu Transmission Corporation will have to make a huge financial commitment to create the distribution infrastructure. Sources say a Rs. 435 crore tender has already been floated to transmit power from Adani’s solar park. “Infrastructure has not been created in a decade for evacuating wind energy claiming it to be infirm. What will be the criteria for solar power, which will not provide electricity in morning or evening peak hours,” asks S. Gandhi of Power Engineers Society of Tamil Nadu (PESOT). “To utilise this high-cost solar power, Tangedco may back down on cheaper power,” he fears.

Only this year has Tangedco stopped shelling out money to private power plants fuelled by diesel, furnace oil and naphtha, which are neither clean nor cheap. Over the past decade, these private companies earned Rs. 36,000 crore from Tangedco, which already has accumulated losses of about Rs. 59,000 crore.

Tangedco officials, however, say they had to resort to high-cost power on a large scale beginning 2008, when Tamil Nadu witnessed an unprecedented power crisis, with load shedding periods lasting 12 to 14 hours in rural areas. In 2008-09, Tangedco was spending Rs. 14,482 crore on power purchases, which climbed to Rs. 25,740 crore in 2012-13.

Improved power generation in the wake of the Opposition raking up the issue in the last Assembly session ended the power purchases at exorbitant rates. But now, there is the new controversy over the solar power deal. In a recent statement, Electricity Minister Natham R. Viswanathan charged the previous DMK government with purchasing 20,355 MU of “high cost” power against 11,075 MU by the AIADMK government. “We purchased only when it was absolutely necessary,” he said a few days before the Adani deal controversy broke out. The Minister has gone silent since then.

The ruling AIADMK is yet to react to the controversy over the Adani deal. With Dravidian politics centred on populist schemes, the burden of high-cost power might land upon the high-end domestic users in cities and commercial establishments. The State has around 10 lakh households consuming above 500 units, with five lakh of those in Chennai. Going ahead, it might make sense to install a solar plant both at home and at work.

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