The Tamil Nadu Electricity Regulatory Commission (TNERC) has dismissed the petition filed by Tamil Nadu Green Energy Corporation (TNGECL) for procuring 5 MW of solar power under Component A of the Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) program.

The petition was rejected due to multiple procedural shortcomings, lack of adherence to guidelines, and insufficient responses from bidders.

The Commission found that the tender process violated TNERC’s previous directions and the Ministry of New and Renewable Energy’s (MNRE) guidelines by not setting an upper ceiling tariff, leading to non-competitive pricing.

Background

The case revolves around TNGECL’s attempt to procure 420 MW of solar power under the PM-KUSUM program which aims to increase renewable energy adoption by allowing farmers to set up decentralized solar power projects and sell electricity to the grid.

Initially, TNERC had approved the purchase of solar power under the program with a ceiling tariff of ₹3.30 (~$0.038)/kWh through competitive bidding. However, due to a poor response to previous tenders, TNGECL issued a new tender on February 14, 2024, without prescribing any upper ceiling tariff to attract more competitive bids.

TNGECL argued that the revised MNRE guidelines allowed for more flexibility, including the possibility of passing on the procurement-based incentive of ₹0.40 (~$0.0046)/kWh to renewable power generators. It sought approval for a tariff of ₹3.28 (~$0.038)/kWh, as quoted by the successful bidders.

TNGECL contended that the approved rate was reasonable, considering the rates offered by the Solar Corporation of India at ₹3.22 (~$0.037)/kWh after adding transmission costs and that the procurement-based incentive benefits would further reduce costs for power distribution companies (DISCOMs).

Only four farmers out of seven qualified, with a cumulative capacity of 5 MW and tariffs finalized at ₹3.28 (~$0.038)/kWh. TNGECL requested TNERC’s approval for the rates and ratification of its actions.

Commission’s Analysis

TNERC identified several key issues with TNGECL’s petition. The Commission noted that the tender was floated without an upper ceiling tariff.

It compared the approved tariff of ₹3.28 (~$0.038)/kWh with rates in other states like Madhya Pradesh (₹3.25 (~$0.037)/kWh) and Uttar Pradesh (₹3.10 (~$0.036)/kWh), concluding that the quoted rates were higher than the norm.

Additionally, TNGECL’s stance on whether procurement-based incentive benefits would be passed to DISCOMs or renewable power generators was contradictory and lacked supporting documentation.

Despite approval for 420 MW, only 5 MW of capacity was awarded due to non-adherence to MNRE guidelines, including the failure to publish lists of available land for solar projects and the absence of direct lease rent payment provisions.

Given these issues, TNERC dismissed the petition and suggested that TNGECL reissue a revised tender that complies with MNRE guidelines. TNERC has mandated that before initiating any tender process involving DISCOMs as potential buyers, TNGECL must seek prior concurrence from Tamil Nadu Power Distribution Corporation (TNPDCL).

TNGECL, in coordination with TNPDCL, must assess and publish the renewable energy generation capacity for each substation with rural feeders. To improve participation, TNGECL must develop a dedicated online portal to facilitate land leasing for renewable energy projects, allowing farmers to list available land parcels for developers.

TNERC also instructed TNGECL to advertise tenders widely in Tamil and English newspapers to attract greater participation and issue a formal ‘expressions of interest’ call to identify willing farmers and developers, per TNERC guidelines dated January 24, 2024.

TNERC must approve any proposed deviations from MNRE guidelines to ensure compliance and safeguard procurement-based incentives for DISCOMs.

TNERC also emphasized the need for TNGECL to explore mechanisms for direct payment of land lease fees from DISCOMs to farmers to ensure regular payments and build confidence among landowners.

TNGECL must apply for a trading license to facilitate regulatory compliance and explore trading margin opportunities. Provisions must be included in the letter of award to reduce project capacity if commissioning delays exceed six months from the issuance date. TNGECL should also consider mandating a battery storage component of at least 15% of the installed solar capacity in future tenders to enhance grid stability.

Additionally, the Commission directed TNGECL to explore the implementation of Component C of the PM-KUSUM program for agricultural feeder solarization to avail central financial assistance.

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