India's Solar Industry receives a shock judgment for the Appellate Tribunal of Electricity

India’s Electricity Act of 2003 ushered in major reforms in the power sector, allowing the creation of state and central electricity regulators as well as the Appellate Tribunal of Electricity. People having grievances with the orders of the SERCs and CERC could appeal to the Tribunal for redressal. Tamil Nadu recently passed a major solar policy, aimed at creating 1 GW of solar capacity each year over the next 3 years. The funding of this policy was to be done mainly by putting an obligation on large industrial and commercial customers to buy at least 6% of their electricity from solar energy sources by 2016. The government also started a reverse auction process to set up 1000 MW of solar power in the state. This power bought by TANGEDCO would be sold to the industrial customers, who could not meet their obligations on their own or through private solar power purchases. A number of industrial customers and auto players set up solar power plants and some private players also developed solar parks, which would make it easy to get clearances and connectivity for utility scale power plants.

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However, the whole development is under serious threat after APTEL overturned the SPO order of the state, which is being implemented by the TNERC. APTEL has ruled that the state cannot force industrial customers and others to buy solar power percentage. This will put all the current solar development in the state under a pall of uncertainty. This will also make it tough for other states to implement solar policies in the future, given the adverse judgment. India plans to make solar power the center of its energy policy, given the huge amount of radiation that the country receives and the paucity of alternative fuel sources. A stable long term policy framework is necessary for the sector to evolve. With judiciary and regulators mixing government policies, there is little certainty for investors and lenders in a sector which is very new. The government needs to define a well thought policy to promote solar power sector in India. Ad hoc policies and regulations which result in unexpected outputs is not the way to go. The APTEL ruling adds to the investor risk after the Gujarat government recently petitioned the state regulator to reduce the feed in tariffs which had been fixed under contract for 25 years by the state.

Hindu Business Line

The Appellate Tribunal for Electricity (APTEL) has set aside the Tamil Nadu Electricity Regulatory Commission solar order.Acting on a petition filed by the Tamilnadu Spinning Mills Association, which said it was aggrieved over the order’s mandate that industries (and some other specified categories of consumers) needed to buy specified quantities of solar power, which is expensive.

The TN Government’s ‘policy directive’ was issued under Section 108 of the Electricity Act, 2003, which empowers state governments to issue such directives “in matters of policy involving public interest”.Consequent to this, TNERC issued a suo moto order, entitled ‘Issues relating to Tamil Nadu Energy Policy, 2012′, which in effect, technically expanded the State Government’s solar policy.Now, APTEL has set aside this order.