Bridge India

Weekly Update: Tamil Nadu solar market in peril

In Tamil Nadu (TN), the Solar Purchase Obligation (SPO) order, mandating HV power consumers to buy 3-6% of solar power, has been set aside by a TN appellate tribunal on technicalities. To that extent, the judgement is a temporary win for the consumer bodies TNECA and TNSMA. The cornerstone of the judgement is that there was poor coordination between the various state and regulatory bodies, primarily the TN government, the state utility (TANGEDCO) and the electricity regulatory commission (TNERC). This is apparent from the following tribunal observations.

  • TNERC issued the SPO order at the behest of the TN government without any independent analysis and in breach of its duties. The SPO order contradicted RPO regulations and instead of imposing both RPO and SPO at the same time, TNERC should have amended the RPO regulations
  • TNERC issued the SPO order without any regard for state solar capacity or consequential impact on issues such as banking of power, transmission and wheeling charges, cross-subsidy surcharges (CSS), etc
  • The SPO order was discriminatory as it applied only to HT and LT consumers, and not to TANGEDCO, in violation of RPO regulations

The ruling is a serious setback for the TN market, for which the SPO was the main short term driver. The judgement is final and the TN government will now have to go back to the drawing board with its solar policy. PPAs for 690 MW of LOIs for solar projects will likely not be signed. This is a sorry end for a policy initiative that was bold but flawed.

As the Tribunal noted TNERC did not consider detailed implications of the SPO order rendering it difficult to implement and open to disputes. However, none of the grounds on which the decision has been based is insurmountable.It is obvious that TN is facing a severe power crisis and there is strong political will behind greater thrust on renewable energy. We believe that this is eminently sensible, particularly, in a radiation rich state such as TN.  And while the policy makers, in their haste, may have stepped on a few banana skins, they will ultimately get their act together and implement the SPO regime, admittedly with a time lag of possibly 1-2 years.  But by that time, we should be approaching grid parity, hopefully.  And who knows, we may not even need SPO then!

We recall Mahatma Gandhi’s famous quote, “First they ignore you, then they laugh at you, then they fight you, then you win.”

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