Tamil Nadu is endowed with various renewable resources including wind, solar, biomass, biogas and small hydro. In the past few years, it has emerged as a leading state in renewable energy development. As of March 2017, Tamil Nadu had the highest installed capacity of wind and solar power in the country. Its installed renewable capacity stood at over 10.5 GW, accounting for over 20 per cent of the total installed renewable capacity in the country. That said, there is much more room for growth as the state has tapped only 18-19 per cent of its estimated solar and wind potential of 17.67 GW and 33.8 GW, respectively, as of March 2017.
Tamil Nadu is a frontrunner in the wind power segment, leading in terms of the cumulative installed wind power capacity. With a positive investment environment and a high potential, the development of the segment began early in the state. From 5,887 MW in 2010-11, the installed wind power capacity reached about 7,900 MW in 2016-17. While this represents significant growth, a large chunk of this capacity was installed in 2010-12. From there on, the segment has seen very limited development. During the period 2012-17, the state added only 865 MW of capacity as against 1 GW each in 2010-11 and 2011-12. This was mainly on account of the withdrawal of the accelerated depreciation and generation-based incentive schemes by the central government. These were reintroduced later but not to the state’s benefit. The wind power segment in the state is plagued by larger issues such as payment delays and grid curtailment, which are major hindrances for financiers and developers to invest in this state.
This is in contrast to what is happening in the wind power segment across the country, excluding Tamil Nadu. The Ministry of New and Renewable Energy (MNRE) has taken various policy initiatives including the introduction of bidding, the repowering policy, and the draft wind-solar hybrid policy, new guidelines for wind power development, which have led to significant improvements in the segment. For instance, over 5,400 MW of wind power capacity was added in 2016-17 against the target of 4,000 MW. This addition surpassed the previous year’s capacity addition of 3,423 MW. In addition, 750 MW of the recent 1,000 MW wind power tender based on competitive bidding will be set up in Tamil Nadu by Sembcorp Green Infra, Mytrah Energy and Inox Wind Infrastructure Services. The first of its kind, the tender garnered significant interest from developers.
As wind power development in Tamil Nadu began much earlier in comparison to other states, the majority of high wind potential sites are crowded with low wind capacity turbines based on older technologies. As per the MNRE estimates, almost 60 per cent of the small wind turbines (of less than 400 kW) installed in the state before 2000 are operating at a plant load factor (PLF) of 10-15 per cent. This is significantly lower than the PLF of the new turbines at these sites, which stands at 27-32 per cent. In this context, the central government’s new policy on the repowering of wind power projects is likely to generate positive results. The policy was introduced with the objective to promote optimum utilisation of wind energy resources. It has the potential to turn around the bulk of the 27,000 MW of existing installed wind generation capacity in the country. It is important to note that repowering turbines may require huge investments in the transmission network and affect the financial viability of the project. Although most of the projects are being funded through private participation, there is limited financial involvement from state-owned agencies.
As of March 2017, the state’s installed solar power capacity stood at over 1,800 MW. Tamil Nadu has emerged as a leading state in solar power development with the highest installed solar capacity. During April-December 2016, the capacity addition in Tamil Nadu was the highest at 529 MW, followed by Telangana (445 MW) and Andhra Pradesh (406 MW). The state has seen rapid development in the solar segment with the installation of over 1,400 MW of capacity in the past two years. It houses the Adani Group’s 648 MW solar power plant in Ramanathapuram, which is claimed to be the world’s largest solar plant at a single location.
As per government estimates, an installed capacity base of 2.5 GW will be required to meet the 5 per cent solar renewable purchase obligation (RPO) target in 2017-18. TANGEDCO, however, expects that only 1.6 GW of solar power capacity would be operational by that time, resulting in a shortfall of 900 MW.
In a bid to meet its RPO, Tamil Nadu issued a 500 MW solar power tender in January 2017, after a previous tender of the same size was undersubscribed. However, the tender received bids from 22 project developers to set up only 300 MW of capacity. This is in stark contrast to the recently concluded 750 MW Rewa Solar Park tender, which was oversubscribed by 10 times.
The limited interest can be attributed to several factors such as lack of adequate transmission infrastructure and the poor financial health of the utility. The solar power segment in Tamil Nadu was the first in India to report solar curtailment. It has also seen delayed payments for both wind and solar projects, which is a deterrent for developers. In addition, the threshold tariff for this tender was reduced by 14.7 per cent, from Rs 5.10 per kWh to Rs 4.35 per kWh, although developers have 12 months to commission the projects, increased from 10 months. However, the state is making significant efforts to address these issues. To boost the transmission and evacuation infrastructure in the state, TANGEDCO has begun construction of substations, four of which are likely to be completed by June 2017. In addition, it has joined the Ujwal Discom Assurance Yojana, which will help in improving the distribution company’s finances significantly in the long term.
Recently, the centre revised the solar capacity generation target for solar parks to 40,000 MW from 20,000 MW. To this end, Tamil Nadu has invited expressions of interest from developers for a 500 MW solar park under the MNRE’s scheme for the development of solar parks. Initially, the state had proposed to set up the park in Ramanathapuram district. However, the MNRE asked the state to come up with an alternative plan. Under the scheme, developers are responsible for acquiring land for the park. The state government will identify the developer for the park, after which a grant of up to Rs 2.5 million will be sanctioned for preparing a detailed project report. Thereafter, central financial assistance of up to Rs 2 million per MW or 30 per cent of the project cost including the grid connectivity cost, whichever is lower, will be released as per the guidelines prescribed in the scheme.
The state is also progressing in harnessing its biomass potential of about 1,600 MW, of which 1,160 MW is based on agricultural waste and 429.9 MW on forest and wasteland cultivation. As of December 31, 2016, 897 MW has been installed.
Capacity addition plans
As part of the central government’s target to achieve 175 GW of installed renewable power capacity by 2022, Tamil Nadu has been allotted targets of 8,884 MW of solar power, 11,900 MW of wind power, 75 MW of small-hydro power and 649 MW of biomass-based power. To this end, the state has set its capacity addition target at 5,265 MW for the period 2016-19 in its “Power for All” document.
In the past few years, the state has become a hub of renewable energy development. It has aggressively installed renewable energy capacity to promote green energy and meet its RPO target. However, power curtailment in the past has resulted in solar and wind developers being wary of setting up projects in the state. In order to ensure greater growth in renewables, it is essential that the issues faced by developers are addressed simultaneously. This would go a long way in significantly expanding the state’s renewable energy capacity in the coming years.