TNERC Introduces Amendments To Regulate Renewable Energy Purchase Costs In Tamil Nadu

Introduction

The Tamil Nadu Electricity Regulatory Commission (TNERC) has introduced various amendments to its Renewable Energy Purchase Obligation (RPO) Regulations.[1] These amendments aim to regulate the cost of purchasing renewable energy by distribution licensees in the state, addressing concerns related to rising conventional fuel costs and their impact on the viability of renewable energy projects.

Explanation (key points)

Background

The increasing cost of conventional fuels has led to a surge in the Pooled Cost of Power Purchase (APPC) for distribution licensees in Tamil Nadu. This has created a challenge for renewable energy generators, as the preferential tariffs set for their power often fall below the APPC. This disparity has made it difficult for renewable energy projects to be economically viable.

Pooled Cost of Power Purchase (APPC)

The APPC is the average price at which a distribution licensee purchases electricity from various sources, including self-generation, long-term suppliers, and renewable energy. However, the amendment excludes purchases from traders, short-term purchases, and renewable energy sources from the calculation of APPC.

The Amendment

The key amendment introduced by TNERC is the imposition of a cap on the APPC applicable to renewable energy generators. When the APPC exceeds the preferential tariff set for a specific renewable energy category in a particular year, the distribution licensee will only be required to pay 75% of the preferential tariff to the renewable energy generator.

Legal Context

The amendment is based on previous judgements from the High Court of Madras and the Appellate Tribunal for Electricity (APTEL). Both courts ruled that the 75% cap on APPC for renewable energy should only be applied when the APPC exceeds the preferential tariff for that year. This legal precedent provides a strong foundation for the TNERC’s decision to introduce the cap.

Conclusion

These amendments by TNERC aim to strike a balance between encouraging renewable energy development and ensuring affordability for distribution licensees. By capping the APPC for renewables, the commission hopes to prevent a situation where rising conventional fuel costs disproportionately impact the cost of renewable energy, thereby ensuring the continued growth and viability of renewable energy projects in Tamil Nadu.

[1] http://www.tnerc.gov.in//Regulation/files/Reg-120820240331Eng.pdf