IEEFA Report: Tamil Nadu Should Focus on Lower Cost Wind and Solar Instead of Coal

The southern state of Tamil Nadu could become a model for low-cost renewable energy generation in India, according to a new report by the Institute for Energy Economics and Financial Analysis (IEEFA).

“Tamil Nadu provides an excellent case study of the potential to transform a regional electricity system, progressively increase reliance on renewables even whilst at the same time lowering the average cost of electricity supply and sustaining a strongly growing economy,” the report said.

Tim Buckley, the lead author of the IEEFA report, noted that Tamil Nadu accounted for approximately 18.5 percent (one-fifth) of the India’s total renewable energy generation between the years 2016 and 2017.  The population of the state is approaching 72 million, with the country’s total population at 1.3 billion.

Tamil Nadu already operates the most diversified electricity generation fleet in India. As of March 2017, the state’s energy mix comprises 35 percent renewable capacity, 8 percent nuclear, and 7 percent hydroelectricity. Coal-fired power capacity accounted for 45 percent or 13.4 GW, the report said.

The IEEFA report also suggested that Tamil Nadu is capable of doubling its wind energy capacity by the year 2027 and, in the same period, it could also increase its solar capacity six-fold.

In the report, Electricity Transformation in India: A Case Study of Tamil Nadu, the IEEFA also predicted that Tamil Nadu’s wind-generation capacity could reach 15 GW and its solar capacity could reach 3.8 GW in the next 10 years if the state made the wise choice of not investing extensively in thermal plants.

The report sounded a warning on Tamil Nadu’s plans to build 22,500 MW of expensive coal-fired power plants. This capacity, the report noted, is almost double the entire existing coal-fired fleet in the state.

Instead, the report said the state should focus on the favorable investment advantages and lower tariff costs for wind and solar power. Building more non-pithead coal-based plants at a time when existing plants are being used only 62 percent of the time as opposed to the optimal 80 percent makes no sense, it said.

Buckley said this would serve a twofold purpose for the state by providing cheaper electricity for customers and making Tamil Nadu Generation and Distribution Corporation (TANGEDCO) profitable again. The IEEFA report noted that excessive debt, expensive Power Purchase Agreements (PPAs), and underfunded agricultural sector subsidies have led to TANGEDCO’s recurring and heavy losses.

“IEEFA bases its forecast on a clear tipping point achieved in 2017: new renewable investments are being underwritten at tariffs of ₹2.43-3.00 (~$ 0.038-0.047)/kWh, below the average tariff paid to NTPC, India’s largely central government-owned power generator, for thermal power in 2016/17 of ₹3.20 (~$0.048)/kWh,” Buckley said.

Since the rapid reduction in solar tariffs can turn the power utilities profitable, the report suggests that any additional demand should be met with solar and wind technologies.

According to Mercom’s India Solar Project Tracker, Tamil Nadu is already one of the top solar states in India with over 1.6 GW of installed solar capacity. The state also has a strong pipeline of ~2 GW pf projects under development.

In January 2018, Mercom also reported that the Tamil Nadu Electricity Regulatory Commission (TNERC) had proposed draft regulations for the forecasting, scheduling, and deviation settlement of solar and wind power generation call for TNERC to impose deviation charges on developers for the over and under injection of the renewables.

The drive to increase renewable generation is also set to be helped by a proposed 500 MW solar park in Ramanathapuram, Tamil Nadu. The Ministry of New and Renewable Energy (MNRE) gave its in-principle approval to TANGEDCO for the development in December 2017.