Despite being the state with the highest installed solar capacity of about 1.6GW with 529.15 MW being added in the year 2016/17, Tamil Nadu continues to set an example for other states in its bid to increase the uptake of solar. Within the last week, there have been two key announcements that would encourage those in the state to go solar. The state had initially set a target of achieving 3GW of installed solar power by the year 2019, and these latest set of announcements only further establish the commitment of the state government towards encouraging solar in Tamil Nadu.
The first announcement made in the state assembly is that the Tamil Nadu Government has invited bids for a new tender of 1500MW. Lead by the Electricity Minister, Mr P Thangamani, it was announced that the state plans to increase the installed capacity of the state further by 5GW in a phased manner. For the first phase, 1500MW tender has been issued under the reverse bidding route. According to the policy note issued, Tamil Nadu harnessed more than 1644 million units of solar energy during 2016-17, with an all-time high generation of 1,498 MW achieved on March 27, 2017.
In the other news from Tamil Nadu, the state utility board, Tamil Nadu Generation and Distribution Corporation (TANGEDCO) could be slashing its net metering tariff from Rs 6.63 or Rs 7.23/ kWh to one-third at Rs 2.20/ kWh. This proposal comes on the back of record-breaking low solar tariffs that have been achieved, which makes the current tariffs look obscenely high. A domestic consumer with 'Low Tension' or LT connection today is eligible for a net metering rate of Rs 6.63/kWh while a consumer with 'High Tension' or HT connection receiving Rs 6.91/kWh. In the case of commercial consumers, the rates go up to Rs 7.01 and 7.23 per kWh for LT and HT respectively. With only 91 MW of rooftop capacity so far in the state-approved, it is unclear how this move would help to uptake rooftop solar.
In MYSUN’s view, this proposal if made into a policy could have a negative impact in the push for rooftop solar. Net-Metering has been one of the chief reasons why rooftop solar financially has been so lucrative and slashing the rates will have an impact on the overall return on investment from the project. This decision must be made cautiously as it can have a negative impact and further slow down an already slow moving deployment.
On the new 1500MW tender, we believe, the recent project auctions of solar in Tamil Nadu have proven to be quite disappointing with bids of only 117MW received in the 500MW tender in February and just 300MW bid in the 500MW tender that was floated in November last year. It would be interesting to see in the wake of GST <link to GST Article>just around the corner, and there still a few question marks looming on the effect of the same on solar, what kind of interest will this tender see. Also worth emphasizing is that the maximum upper tariff limit has been set at Rs 4/kWh for the project and a judicious timeline of 12 months for projects up to 50MW and 24 months for projects above 50MW has been given. With rather relaxed time frames and very reasonable upper tariff limit, at least on paper, this looks like a great opportunity.