Proactive Measures: Tamil Nadu remains favourable for open access projects

By Nallasivan C, Assistant Executive Engineer, TANGEDCO

The Tamil Nadu power sector is of strategic importance to the nation in view of its 2070 net zero commitments. Tamil Nadu is already a pioneer state in providing 24×7 power to all sectors. The state has achieved 100 per cent village electrification with no de­mand-supply gap and has the fourth highest peak and energy demand in India as well as the highest energy consumption in south India. The state’s economy and power sector growth have constantly outpaced the national average. Further, the state government is committed to mitigating the climate chan­ge effects by bringing out policies conducive to promote renewable energy generation. The government intends to make re­newable energy a people’s movement just like rainwater harvesting.

Achievements in the renewable energy sector

The state is blessed with various forms of renewable energy sources. Tamil Nadu is a pioneer in renewable energy, having an installed renewable energy capacity of 17,514 MW. Of this, about 9,936 MW and 6,412 MW are contributed by wind power and solar power respectively, while 969 MW is accounted for by biomass/bagasse cogeneration.

Its contribution towards renewable energy has made India one of the top five countries in the global renewable energy market. The state has achieved its current level of renewable energy development largely through government subsidies, such as depreciation benefits and generation-based incentive mechanisms.

The state stands in the first position in wind capacity addition. In addition, it hou­ses the first solar farm PV in India installed at Sivagangai. Further, the largest single location solar project was first deployed in Tamil Nadu. The state also ranks third in state-wise renewable energy installed capacity and fourth in state-wise solar ca­pacity deployments as of December 2022. It is also the first state in India to es­tablish a fully functional renewable energy management centre (REMC).

Tamil Nadu has a further significant un­tapped renewable energy potential of over 38 GW (other than offshore wind). It is also a preferred state for offshore wind development with an offshore wind potential of 31 GW.

Challenges in renewable energy integration

One of the key issues in renewable energy integration is that wind and solar generation are intermittent in nature. Thus, due to diurnal and seasonal variations and a shorter timescale, renewable power has a greater impact on grid balance. There is an estimated 30-35 per cent variation during the months of June to Sep­tember, and a 5-10 per cent variation during the remaining months.

Thus, intermittency is a huge challenge for operators, planners, regulators and policymakers. The REMC has been established to take on the critical responsibilities of forecasting and scheduling this generation.

Open access attractiveness in the state

There are a couple of factors that make op­en access economically attractive for potential consumers in Tamil Nadu. The state has no demand-supply gap with surplus generation. Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) has developed an excellent transmission system over the years to evacuate the power generated from the renewable power plant to the load centre. The streamlining of open access regulations, timely discom approvals, early commissioning of projects, customs duty exemption on certain components of wind electric generators and inc­rease in captive power projects due to cost saving benefits are driving the gro­wth of the open access segment in the state.

Commercial and industrial consumers are realising that open access has the dual advantage of climate mitigation and reduction in the operating cost. Renewable energy-based power through open access has become less expensive for industrial and commercial consumers than power from conventional sources. An added advantage is the state’s favourable banking policies and adequate metering and energy accounting infrastructure

Prior to the notification of the open access regulations in May 2006, wind electric generators alone were permitted to adjust generation against HT consumption and bank their energy after adjustment. Elec­tricity banking was first introduced by the state of Tamil Nadu in 1986, primarily to pro­mote captive and third-party open access wind energy generation. The energy generated in a month has to be adjusted against the consumption of that month and the balance unutilised energy gets banked. This banking charge started at 2 per cent in 1986, escalated to 5 per cent in 2001, and remained at 5 per cent till 2009. The banking period underwent ch­a­n­ges many times and banking period was revised several times from three months to one year, then to two years, and again to three months, etc. The Tamil Nadu El­ec­tricity Regulatory Commission fixed the banking charges at 12 per cent in the 2016 wind tariff order. The banking charges were increased to 14 per cent in the 2018 wind tariff order. There is no facility of banking wind energy for third-party power purchase in Tamil Nadu.

The excess generation or unutilised banked energy (energy after adjustments from April to March) shall be at 75 per cent of the respective wind energy tariffs for normal wind energy captive users and 75 per cent of the pooled cost of power purchase as notified in the orders of the commission from time to time for captive generators under the renewable energy certificate (REC) scheme.

TANGEDCO has successfully implemented the first-of-its-kind automatic meter reading (AMR) in India on a large scale for open access billing, real-time monitoring for wind energy generators, solar generators, thermal generators and HT consumers. A secured billing mechanism has been developed to avoid revenue loss through open access software on integration with the HT billing software. The AMR billing software has been implemented in TANGEDCO through open access energy accounting software for wind electric generators (from February 1, 2019), solar energy generators (from August 1, 2019), thermal generators (from May 2020), and biomass and bagasse generators (from September 2020). Its successful implementation has resulted in many economic and operational benefits.

Issues and solutions in the open access segment

There are various challenges for open access in the electricity sector, which require significant refinements in the regulations. Banking has always remained a bone of contention between distribution licensees and wind energy generators. In certain states, large industrial and commercial consumers are using open access as a mechanism to switch frequently between market and discom-regulated tariffs. This creates greater volatility in the load to be served by the discom, making power procurement planning difficult. Further, several states are trying to avoid the development of captive projects due to the loss of their revenue stream by power-intensive industrial customers.

A key recommendation is that a single renewable purchase obligation (RPO) can be fixed instead of categorising solar and non-solar for the state. Considering the renewable energy resources of the state, state-specific RPOs can be fixed, and REC trading can be made accordingly. Moreover, the Forum of Regulators must initiate proceedings to deliberate on open access issues so that terms and conditions can be developed to implement re­finements uniformly across states without hurting either developers or discoms. Finally, the mismatch in the perspective of the centre and the states ab­out the power sector needs to be ad­dressed in the National Tariff Policy.

On the positive side, Tamil Nadu has always promoted open access projects. For instance, the limit for open access was brought down from 1 MW to 100 kW of connected load for HT consumers almost a decade ago. Considering all the above, Tamil Nadu is currently most favourably placed for next-level energy transitions in the country.