TN wind tariff too low, says industry

The Indian Wind Turbine Manufacturers’ Association (IWTMA) has said that the recent tariff order of the Tamil Nadu Electricity Regulatory Commission, which fixed the feed-in tariff for wind energy at ₹2.86 a kWhr, is too low.

The Commission has arrived at the tariff of ₹2.86 per kWhr, taking the capital cost of setting up a MW of wind power capacity at ₹5.25 crore.

“We are of the opinion that the correct tariff calculation should be between ₹3.10 and ₹3.20,” the Association Secretary General, DV Giri, told BusinessLine .

The tariff fixed by the commission is the per-unit price that the state’s electricity utility Tangedco will pay wind energy companies that put up wind power capacity in the State between April 13, 2018 and April 12, 2020. These companies will get that tariff (₹2.86) for 25 years from the date of commissioning of the projects.

The earlier tariff that was fixed by the commission was ₹4.16, which was the least for all the states in the country.

Competitive bidding

Some industry observers have noted that the fixed tariff is only of academic interest, because the norm in the industry today is to determine the price at which electricity will be purchased by utilities on the basis of competitive bidding.

In successive bidding rounds in the recent past, wind tariffs have been only falling, and reached a low of ₹2.43 a kWhr in Gujarat.

The industry is also sore with the changes in the ‘banking facility’, which allows a generator to supply power when he can and call for it back later – again for supply to the utility.

This facility is particularly useful to wind power generators who can produce power only during the windy months between April and September – they can ‘bank’ the power with the grid and ask for it back later, say, during non-windy months, after paying ‘banking charges’.

‘Banking’ charges

The Commission has hiked the banking charges from 12 per cent to 14 per cent of the energy supplied, but importantly, has reduced the period within which the energy can be asked back from one year to the one month.

“It is grossly unfair that the banking period has been reduced from a financial year to one month,” Giri said.

The Commission has weighed in the argument of the utility, which finds the ‘banking facility’ a loss-maker because often it has to buy power at a higher cost to re-supply. Tangedco has argued it loses Rs 1,900 crore due to banking of wind power.

The Association has said that the process of competitive bidding does not give an opportunity to medium and small sized companies to put up power plants (because they would never be able to give a competitive tariff quote.)

It had often demanded for reservation of a certain capacity for projects under 25 MW, for which a fixed tariff would be paid (and not tariff determined competitively.)

“This has not been addressed at all,” Giri said.

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