The Tamil Nadu Generation and Distribution Corporation (TANGEDCO) has issued a request for selection (RfS) to procure 500 MW of solar power from developers in Tamil Nadu through reverse auction. The bid submission deadline is November 18, 2016.

As mandated by the Tamil Nadu Electricity Regulatory Commission (TNERC), TANGEDCO has established the tariff at an upper limit of Rs.5.10 (~$0.0763)/kWh without accelerated depreciation. With accelerated depreciation, developers can benefit from an additional Rs.0.54 (~$0.008)/kWh. The applicable tariff will be calculated after deducting the discount offered by the bidder from the upper limit tariff.

Developers can bid for a minimum of 1 MW and maximum of 50 MW at a single location. The Capacity Utilization Factor (CUF) should be in the range of 17 to 19 percent calculated on a yearly basis.

Project developers in Tamil Nadu have been facing curtailment issues for some time and to address this, TANGEDCO will compensate developers for grid unavailability of more than 175 hours a year. A CUF of 19 percent will be used to calculate generation compensation. Depending on the size of the project, developers still have to take a significant loss, especially on larger projects. “TANGEDCO is a high risk off-taker due to their history of late payments and curtailment. Companies that plan to bid for these projects will be doing so at their own risk. Solar projects already have the ‘must run’ status, which means solar power gets top priority and cannot be curtailed. Compensation for grid unavailability contradicts the ‘must run’ policy,” said Raj Prabhu, CEO and Co-Founder of Mercom Capital Group.

In case the power generation exceeds the maximum specified CUF of 19 percent, TANGEDCO will purchase the excess generation at an average pooled purchase cost, the PPA tariff or the applicable preferential tariff, whichever is less. In cases where generation is less than the minimum CUF specified of 17 percent, the developer will pay TANGEDCO for the actual shortfall in terms of units at the prevailing forbearance price fixed by the Central Electricity Regulatory Commission (CERC).

The 500 MW of solar power to be auctioned is solely to meet TANGEDCOs Renewable Purchase Obligation (RPO). The TNERC has a solar RPO target of 2.5 percent for the financial year (FY) 2016-17 and 5 percent for FY 2017-18. To meet RPO targets, close to 1,200 MW of solar power is required for the current financial year, and approximately 2,400 MW of solar power is required for FY 2017-18.

According to Mercom’s India Solar Project Tracker, the state has a total installed solar capacity of 1.6 GW, which is about 19 percent of cumulative solar installations in India.