Tamil Nadu Regulator Rejects Plea to Increase Tariff for Solar KUSUM Program

The Tamil Nadu Electricity Regulatory Commission (TNERC) has rejected a petition filed by Tamil Nadu Energy Development Agency (TEDA) to approve a revised benchmark tariff of ?2.97 (~$0.040)/kWh for solar energy generated under Component-C of the Pradhan Mantri Kisan Urja Suraksha evam Utthan Mahabhiyan (PM KUSUM) program. The state plans to solarize 20,000 agricultural pumps with 7.5 HP capacity by installing 11 kW solar systems supporting each pump.
Under Component C of the KUSUM program, the government aims to solarize one million grid-connected agriculture pumps of individual capacity up to 7.5 HP by 2022.
Background
On September 2, 2020, the Commission issued a consultative paper to determine tariff for purchasing solar energy generated under Component-C of the KUSUM program. On November 10, 2020, the Commission set a benchmark tariff of ?2.28 (~$0.030)/kWh.
Subsequently, TEDA filed a review petition proposing implementing the program through farmers who would fund the net capital cost of 40% after availing 60% subsidy, i.e., 30% Central Financial Assistance (CFA) and 30% from the Tamil Nadu government.
According to the nodal agency, as the capacity of the solar systems was small, and the geographical expanse was large, it would be difficult for the renewable energy service company (RESCO) operator to aggregate a substantial number of farmers and install the solar systems. It had also sought a revised incentive of ?1.00 (~$0.013)/kWh for the net exported energy, along with the increase in tariff.
TEDA said that the rates of interest varied significantly among banks starting from 9%. It wanted the Commission to consider an interest rate of 9.5%.
The petitioner also wanted the Commission to consider a grid availability factor of 80% instead of 90% since the availability of three-phase power in rural areas was generally for about 10 hours. It had pleaded for operations and maintenance costs to be increased by 1.8%, with an annual increase of 5.72%.
Commission’s analysis
The Commission stated it had already passed an order setting a benchmark tariff of ?2.28 (~$0.031)/kWh. Hence, the petition did not merit further consideration. It directed the petitioner to abide by the previous order.
Based on the feedback from stakeholders to the consultation paper, the Commission had determined the tariff and payment of incentive starting from ?0.50 (~$0.0065)/kWh capped at ?3.22 (~$0.043) /kWh. It had said that a minimum incentive of ?3,000 (~$40.28) per annum would be paid to the farmer irrespective of the net energy capacity exported.
The Commission had said that for an investment of 40% of capital cost, the tariff of ?2.28 (~$0.030)/kWh was more than viable, it had said.
In August this year, Tamil Nadu proposed installing 5,000 solar pumps for which 70% subsidy would be provided in the state’s first-ever ‘agriculture budget.’ The program will have an outlay of ?1.14 billion (~$15.37 million) and utilize state and union government funds in 2021-22.
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