India’s southern state of Tamil Nadu is trying to fix a price of 12c/Kwh with bidders under its 1000 MW solar auction scheme. GWI has been writing about TN’s solar scheme quite a lot due to its impressive size and potential. TN plans to install almost 1 GW of solar power every year for the next 3 years. If this plan comes to fruition, then TN will be India’s largest solar power state by a long margin. Already industrial producers in the state have starting installing solar panel systems on their factories and offices to meet their solar panel obligations. TN is a power deficient state and has been facing major power troubles of late forcing industries to move out. The government is now trying to boost power through solar energy. Readers should note that TN has more than 60% of India’s wind power capacity with almost 8-10 GW of wind energy capacity. Becoming India’s largest solar energy state is not out of the question given its renewable energy history.

Problems of Solar Energy in Tamil Nadu

Some potential problems for solar energy in TN have cropped up and is bugging the solar developers. We have listed out some of the top issues being faced by the solar energy developers in the state there:

1) Timely Payment from electricity distributor – Distribution utilities in India are owned by the state and are heavily indebted loss making companies. This makes getting timely payments from them a tough task. Tangedco has recently been missing payments to wind farm owners in the state which is causing concerns for solar farm developers as well. They are worried that the Letters of Credit issued by the electricity distributor might not be enforceable.

2) Same Tariff for all Sizes – In general, the larger solar power plants are cheaper to construct than smaller solar power plants. This is because of economies of scale which allows cost reduction through procurements, EPC, regulation etc. However the government plans to award the same L1 rate to all bidders. This will tilt the game towards larger solar system owners.

3) Pro rate allotment – The state has seen a huge response for solar power allotment and it is expected that more than 1000 MW will be bid. The government plans to allocate the contracts on a pro rate basis. This will throw the plans of the solar developers for a toss and result in oversized bids by developers.

4) Power Grid Capacity – There is also a concern that the power grid might not have the capacity to transmit the solar power generated by the solar farms. There is also an issue of the availability of power transmission in different parts of the state.

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Highlights of Tamil Nadu Solar Energy Policy

This policy will be known as the “Tamil Nadu Solar Energy Policy – 2012”. The Government of Tamil Nadu will undertake a review of this Policy as and when required in view of any technological breakthrough or any changes taking place in the policy at the National level.

Key Objectives

• To project Tamil Nadu as a Solar Hub
• To generate 3000 MW of Solar Energy by 2015
• To achieve grid parity by 2015
• To encourage indigenous solar manufacturing facilities in the State

Development of Solar Power in Tamil Nadu

Phase (2013-2015)                Target (MW)

2013                                          1000

2014                                          1000

2015                                          1000

Total (by 2015)                     3000

With average solar incidence of 5.5-6 kWh/m2/day, Tamil Nadu is amongst the states with the highest solar insolation in India. To retain its leadership position, Tamil Nadu will promote setting up solar power projects to the extent of 3000 MW over a period of 3 years, as furnished above.

Tamil Nadu will actively promote the solar energy sector by prescribing a certain percentage of electricity consumption through solar energy as mandatory. This will be progressively increased.

TN has been facing some problems in its solar auction due to lack of clarity. It has also not got enough bids due to low prices. However the government seems determined to go ahead and is offering Rs 6.48/Kwh to potential bidders. This is not a bad deal as its looks given that the government is allowing a 5% annual price escalation and other incentives as well. Note Indian solar power bids have fallen continuously over the last few years as global solar panel prices have kept declining. India should take as much advantage as possible of the irrationally low solar power prices.

At a time when Tamil Nadu is reeling under an acute power shortage,nearly 90 prospective investors have evinced keen interest in setting up solar power plants in the state.The states power utility Tangedco has offered to purchase solar power at Rs 6.48 per unit.Negotiations are underway with potential investors, said a senior Tangedco official.

Industry experts say there is no doubt Tamil Nadus solar policy is among the most ambitious in the country.RESolve Energy Consultants director Madhavan Nampoothiri said the states target of 3,000MW in three years is far higher than even the Centres Jawaharlal Nehru National Solar Mission (JNNSM) first phase target of 1,000MW in three years.In comparison,Gujarat had signed power purchase agreements (PPA) for close to 1,000MW in 2011 and Andhra Pradesh is targeting 1,000MW this year.Punjabs renewable energy policy announced in December 2012 targets 1,000MW of solar power capacity by 2022.

Krishnagiri,Ramanathapuram,Tuticorin,Sivaganga,Trichy,Virudhunagar and Tiruvannamalai.While Tangedco called for tenders for producing 1,000MW power for 20 years,bids have come for nearly 499MW,and each bidder has quoted between 1MW to 60MW.