Tariff of ₹5.34_kWh to Apply on Tamil Nadu's Bagasse-Based Cogeneration Projects

The Tamil Nadu Electricity Commission (TNERC) has issued the tariff order for bagasse-based cogeneration projects. The order will be applicable for power procurement by distribution licensees (DSCOMs) from bagasse-based cogeneration projects.

The total renewable power capacity in Tamil Nadu is 14.14 GW, out of which bagasse constitutes 710.9 MW.

The Commission said that the order’s control period would be from the date of issue of this order to March 31, 2022, and the tariff period will be twenty years.  The Commission set the useful life period of the projects as 20 years.

The order came into force on October 16, 2020. The tariff set in this order will be applicable for all bagasse-based cogeneration projects commissioned during the order’s control period.


Tariff Structure

The variable cost, open access charges, cross-subsidy surcharge, reactive power charges, and grid availability charges will apply to all the bagasse-based generators, irrespective of their commissioning date.

Generally, the two-part tariff is adopted when the fuel cost varies from time to time. The variable component of tariff takes care of such price escalation, and the Commission adopted the two-part tariff to accommodate the fuel cost escalations.

As per the order, the Commission decided to retain the capital cost of ₹52 million (~$706,668)/MW, but with the due deduction of ₹2.5 million (~$33,974), it amounted to ₹49.5 million (~$672,694)/MW.

In its order, the Commission decided to adopt a plant load factor (PLF) of 60%. Any generation beyond the normative PLF of 60%, the Commission allowed the variable cost and an incentive of ₹0.25 (~$0.003)/kWh.

The state regulator decided to adopt the debt-equity ratio of 70:30 and the depreciation rate of 4.5% per year. The return on equity was set at 16.96% (pre-tax).

Per the order, the operation and maintenance (O&M) expenses for the FY 2020-21 was set at ₹2.45 million (~$33,294)/MW. It will be increased by 5.72% every year from the second year onwards. The generating company will levy a late payment surcharge of 1% per month if the payment is delayed beyond 45 days.

For the variable cost, the Commission adopted ₹3.12 (~$0.04)/kWh for the FY 2020-21 and ₹3.27 (~$0.044)/kWh for the FY 2021-22. The variable cost will apply to all projects commissioned after May 15, 2006.

Considering all the above factors, the Commission arrived at the tariff of ₹5.34 (~$0.07)/kWh for the financial year (FY) 2020-21 and ₹5.52 (~$0.075)/kWh for FY 2021-22.

Tamil Nadu Tariff Bagasse Power Projects

Other Charges

The state regulator decided to retain the transmission, wheeling, scheduling, and system operation charges at 70% of the conventional power rate. For generators that are availing renewable energy certificates (RECs), the transmission charges, wheeling charges, scheduling, and system operation charges will be 100% of the normal rate applicable for conventional power plants.

It also decided to retain the levy of cross-subsidy surcharges at 60% of that applicable to conventional power.

The Commission noted that the energy purchase agreement (EPA) would be valid for a minimum period of twenty years. It also directed the DISCOMs to execute the contract within a month of receipt of the generator’s application.

Recently, the Ministry of New and Renewable Energy (MNRE) extended the validity of its biomass-based cogeneration program. In its notice, the MNRE said that the program to support the promotion of biomass-based cogeneration in sugar mills and other industries would be extended without any change in scope, nature, coverage, and without creating any additional posts.

Earlier, the Ministry invited Expression of Interest to assess the potential of biomass power and bagasse cogeneration in India. Last year, MNRE issued a notice clarifying the eligibility of power generated from the co-firing of biomass in thermal power plants as renewable energy. The government said that the power generated from the co-firing of biomass in thermal power plants is renewable energy and is eligible for meeting the non-solar renewable purchase obligations.

Regulatory updates in the renewable energy sector are hard to follow for the developers, which is why Mercom has introduced real-time ‘Regulatory Updates’ for its subscribers.

Image credit: Jonathan Wilkins, CC BY-SA (3.0)