In a strongly-worded judgment, the Tamil Nadu Electricity Regulatory Commission (TNERC) has informed the state load dispatch centers (SLDC) that it cannot curtail solar generation.
Curtailment of power is a reduction in the output of a generator, typically on an involuntary basis, from what it could otherwise produce given the resources available. Curtailment of solar generation has long been a challenge in the Indian power industry and occurs for a variety of reasons, including a lack of transmission access or transmission congestion.
“Curtailment has especially been a problem in Tamil Nadu for years which is one of the reasons why developers hesitate to build solar projects in the state. In the past DISCOMs have flouted ‘must run’ status of solar in the state, particularly in high wind energy density areas when wind and solar generation peak simultaneously. In Tamil Nadu curtailment is largely due to the utilities opting to buy cheaper power,” said Raj Prabhu, CEO of Mercom Capital Group.
The state order came after the TNERC examined a petition filed by the National Solar Energy Federation of India (NSEFI).
NSEFI had requested that the TNERC direct utilities to stop issuing backing down (curtailment) instructions to solar projects as this is resulting in huge losses to the solar developers. It has asked for the utilities to strictly enforce “Must Run” status on all solar power projects in the state.
Moreover, it has asked them to consider deemed generation to solar projects for the loss of generation due to outages or backing down instructions. The request is also made to provide deemed generation charges to the solar projects for the loss of power generation units due to backing down instructions issued by SLDCs, the Tamil Nadu Generation and Distribution Corporation (TANGEDCO), and the Tamil Nadu Transmission Corporation (TANTRANSCO).
NSEFI also revealed an interesting fact that the Tamil Nadu SLDC is procuring more wind power and issuing backing down instructions to solar power projects, without providing any reasons. To prove this point, NSEFI also provided a chart to show how the share of solar power is minuscule in comparison to wind power procurement.
NSEFI argued that the only reason for regular backing down is to avoid the commercial impact of procuring high-cost solar power. The backing down data of various state-owned and private distribution companies indicates clearly that the curtailing was only for those projects with a tariff of ₹7.01 ($0.10)/kWh.
NSEFI argued that TANGEDCO was not meeting its solar power purchase obligation (as listed below) considering that if 1,591 MW of solar power projects were allowed to generate power at its full capacity, they could have generated only 2371.33 MUs (@ 19% CUF, 90% plant availability and auxiliary consumption of 0.5%). This implies that the TANGEDCO is interested only to increase the installed capacity of solar power but not to allow such commissioned projects to run at their full capacity.
There are another 3,374 MW of projects – solar with 2,424 MW and wind with 950 MW that are soon to be commissioned. If new projects are allowed to come up until the earlier solar power projects’ generation is procured, there could be a further increase in the curtailment of projects with a tariff of ₹7.01 ($0.10)/kWh. All of the above reasons called for immediate action by the commission to rule against curtailment.
While examining the petition, the TNERC observed that developers are facing a loss on account of back down instruction and that since the tariff for the solar project is based on a single part tariff, backing down directly impacts the revenue of the solar projects and deprives it of full recovery of annual fixed charges.
The state commission observed that the SLDC and TANGEDCO, in turn, had submitted that “Must Run” status cannot be viewed in isolation from grid stability.
The TNERC noted that it is understandable that in the absence of forecasting and scheduling mechanism for the renewable power and until the creation of adequate balancing sources to address the variability of these renewable sources, it may not be possible to evacuate 100 percent of the generation.
After hearing the points made by the state agencies, the commission observed that even in the absence of such regulations, SLDC cannot curtail renewable power generation at their convenience. Operation of solar projects and their “Must Run” status cannot be curtailed unless under exceptional circumstances of maintaining grid security and safety and that too as a last resort after exhausting all measures including backing down of conventional generators.
The Tamil Nadu commission has ordered that the SLDC can resort to backing down only on rare occasions to ensure the grid safety and reliable 24×7 power supply to the state. “It is necessary to log each event of backing down whenever such instructions are issued with the reasons which lead to that unavoidable decision. A quarterly return on the curtailments with the reasons must be sent to the commission,” the order stated.
Warning the state utilities, the commission has stated, “Any whimsical backing down instructions will attract penal action under Section 142 of the Electricity Act on the officials concerned”.
Regarding deemed generation charges, the commission noted that there is no provision in the agreement signed with the utility for payment of deemed generation charges. Therefore, the TNERC said it could not provide relief on the matter.
This order passed by the Tamil Nadu commission comes as a refreshing development for solar energy project developers in the state. Mercom has previously reported about how solar project developers in the country continue to face curtailment issues and when it comes to states like Tamil Nadu, Andhra Pradesh, Karnataka, among others, the issue of curtailment is more challenging, falling somewhere between 10 and 25 percent.
The Ministry of Power (MoP) had also taken note of the issue of solar curtailment and proposed to set up a compensation mechanism for existing renewable energy projects which will enable them to protect cash flows to some extent from grid curtailments and will also ensure a favorable operating environment for the renewable energy sector.
“This is a strong step taken by TNERC towards administering solar’s must run status. Strong enforcement going forward will assure the investment community that Tamil Nadu is committed to solar energy,” added Prabhu.