Tamil Nadu Sets Benchmark Tariff of ₹2.28/kWh for Solar Pumps, ₹1/kWh Farmers Incentive

The Tamil Nadu Electricity Regulatory Commission (TNERC) has passed an order setting a benchmark tariff of ₹2.28 (~$0.031)/kWh to set up 20,000 agricultural solar pumps under component-C of the KUSUM program.

The Commission also set a ₹1 (~$0.013)/kWh incentive for farmers for exporting surplus energy back into the grid.

Background: 

The Tamil Nadu Energy Development Agency (TEDA) had filed a petition with the Commission asking it to approve its proposal to set up 20,000 pumps with 7.5 HP capacity and install 11 kW solar modules for each of them. TEDA was the renewable energy service company for the project.


It asked the Commission to approve a benchmark tariff of ₹4.53 (~$0.061)/kWh for the power generated by the projects set up under the program. This included a ₹1 (~$0.013)/kWh incentive to farmers for the net energy injected into the grid from these projects. It also sought permission to finalize the investment proposal or tariff-based reverse bidding process and submit the final tariff rate for the Commission’s approval.

However, the Tamil Nadu Generation and Distribution Company (TANGEDCO) in its response, sought the Commission to approve a benchmark tariff of ₹3.08 (0.042)/kWh for the proposed projects and a rate of ₹1 (~$0.013)/kWh for farmers for the net energy exported to the grid.

The Commission factored in capital costs, capacity utilization factor (CUF), grid availability factor, the life of the project (25 years), interest on loan, depreciation, interest on working capital, among other factors, and then arrived at a levelized cost of electricity (LCOE) of ₹2.28 (~$0.031)/kWh.

Tamil NaduThis would be the maximum solar energy tariff for the 20,000 solar pumps at agricultural farms under component-C of the KUSUM program. The Commission added that it was in agreement with TEDA’s proposal to introduce energy export from the projects because it also allows for the incentive mechanism to be fine-tuned for farmers’ benefit. In its proposal, TEDA had said that the incentives would encourage the usage of these pumps during the daytime and reduce night-time grid power usage.

The Commission noted that the minimum incentive should be subject to the condition that the solar project is functional. A project will be considered functional if at least 50% of the project’s generation capacity has been achieved during the period for which the minimum incentive is proposed to be paid.

The generation potential will be calculated based on the capacity utilization factor and grid availability parameters the Commission used in its LCOE calculation. The minimum incentive was set at ₹3,000 (~$40) per year for a 7.5 HP pump and an 11-kW solar system. The maximum was set at ₹15,000 (~$202) per year.

An energy meter to record gross solar power generation and a service connection energy meter with programmable time-of-day (TOD) feature must be installed at each farm, the Commission said. The solar power generation meter must be sealed jointly by TANGEDCO and the RESCO (TEDA), while the service connection meter is to be sealed by TANGEDCO.

Previously, Mercom reported that the TNERC issued a consultative paper for establishing tariffs to purchase power from solar energy generated under Component C of the KUSUM Program. It had proposed a tariff of ₹2.09 (~$0.029)/kWh as the upper ceiling tariff under the KUSUM-C program for 20,000 pumps.

Notably, KUSUM that was launched in July last year, has recently undergone a revamp. While the targets have been ramped up, the central assistance has been reduced. Following this, another set of clarifications were announced.