The Tamil Nadu Electricity Regulatory Commission (TNERC) has fixed the generic tariff for solar photovoltaic (PV) procurement in the state.

The TNERC has set ₹3.04 (~$0.044)/kWh without accelerated depreciation (AD) and ₹2.80 (~$0.040)/kWh with AD as the generic tariff for solar PV in Tamil Nadu. The tariff came into effect from April 1, 2019.

The tariff will apply to the procurement from all solar PV projects of capacity 1 MW and above. The control period of this order will be one year, and the tariff will be applicable for 25 years.

The state electricity regulatory commission has set a generic tariff for solar PV as it believes a generalized tariff mechanism will provide incentives to the investors to use efficient equipment to maximize returns and for selecting the suitable site.

According to the TNERC, in most auctions held in various states, the solar tariff has hovered around the ₹3 (~$0.04192)/kWh mark. However, in Tamil Nadu, the tenders floated by Tamil Nadu Generation and Distribution Corporation (TANGEDCO) has received no response from bidders so far. A generic tariff will attract developers and investors to Tamil Nadu, believes the TNERC.

Incidentally, the last solar PPAs that the TANGEDCO had entered was back in September 2017 for 1,500 MW of solar PV at a tariff of ₹3.47 (~$0.0537)/kWh.

The TNERC has fixed the capital cost of solar PV projects at ₹33.5 million (~$0.4681 million)/MW, capacity utilization factor (CUF) at 19 percent and debt to equity ratio at 70:30. The operation and maintenance expense is calculated at 1.4 percent of the capital cost with escalation at 5.72 percent per year from the second year.

The commission has ordered that 70 percent of cross-subsidy surcharge applicable to conventional power will be levied on solar, 50 percent of the charges applicable for conventional power for transmission, wheeling, scheduling, and system operation charges will be imposed on solar. For solar projects under Renewable Energy Certificates (REC), 100 percent of the applicable charges for conventional power will apply.

In February 2019, the state commission through a consultative paper had proposed feed-in-tariff for solar PV in the state.

Recently, the Tamil Nadu Energy Development Agency (TEDA) issued the state’s Solar Energy Policy 2019, targeting 9 GW of installed solar PV capacity in Tamil Nadu by 2023. In India, solar tariffs have fallen to a record low of ₹2.44 (~$0.035)/kWh, and in most states, the implementing agencies are setting up ceiling tariffs below ₹2.90 (~$0.042)/kWh mark. In such a scenario, a feed-in tariff of ₹3.04 (~$.044)/kWh will be a huge relief for solar project developers. It may also ensure that the state’s solar targets are met on time.

According to Mercom India’s Solar Project Tracker, Tamil Nadu has an installed capacity of approximately 2 GW solar PV. The state has 1.6 GW of solar PV projects under development.