TNERC Orders Compensation for Solar Curtailment Losses Affecting 249 MW Solar Projects in Tamil Nadu

Summary

On August 1, 2024, the Tamil Nadu Electricity Regulatory Commission (TNERC) issued a landmark order in favor of M/s. Walwhan Renewable Energy Ltd. and M/s. Walwhan Solar TN Ltd., two companies that operate solar power plants in Tamil Nadu with a combined capacity of 249 MW.[1] The petitioners sought compensation for losses incurred due to the frequent curtailment of their power generation by Tamil Nadu Generation and Distribution Corporation Ltd. (TANGEDCO) and related entities. The TNERC’s decision is significant, as it mandates compensation for these losses and stresses the importance of adhering to the ‘Must Run’ status of solar power projects as per the Indian Electricity Grid Code.

Case Timeline

1. Project Inception: M/s. Walwhan Renewable Energy Ltd. and M/s. Walwhan Solar TN Ltd. entered into Energy Purchase Agreements (EPAs) with TANGEDCO, committing to supply solar power from their 249 MW capacity projects.
2. Curtailment Issues: Since the commencement of operations, the petitioners faced repeated instructions from the Tamil Nadu State Load Despatch Centre (TNSLDC) and Tamil Nadu Transmission Corporation Ltd. (TANTRANSCO) to reduce or stop power generation. These curtailments were often not accompanied by written confirmation and were claimed to be based on economic rather than technical grounds.
3. Revenue Losses: By September 2020, the petitioners estimated a generation loss of 114.17 million units, resulting in a revenue shortfall of approximately INR 78.73 crores.
4. Attempts to Resolve: The petitioners made multiple attempts to resolve the issue with TANGEDCO, but received no satisfactory response, prompting them to file a petition with TNERC.
5. Order Issued: On August 1, 2024, TNERC issued its order after reviewing the arguments and evidence presented by both parties.

Issue Raised

The primary issue in the case was the frequent and allegedly unjustified curtailment of solar power generation by TANGEDCO, TNSLDC, and TANTRANSCO. The petitioners argued that these curtailments violated the ‘Must Run’ status accorded to solar power plants under the Indian Electricity Grid Code, leading to significant financial losses. The petitioners sought compensation for the loss of revenue due to these curtailments and requested that any future curtailments be treated as ‘deemed generation,’ with corresponding charges payable by TANGEDCO.

Appellant’s Arguments and Respondent’s Arguments

• Appellant’s Arguments:
  • The petitioners argued that the curtailments were frequently issued without any written confirmation and were driven by economic reasons rather than technical necessity.
  • They contended that these actions violated the ‘Must Run’ status for solar power plants, as established by the Indian Electricity Grid Code, leading to substantial revenue losses.
  • The petitioners claimed that TNSLDC and TANTRANSCO failed to fulfill their statutory obligations to ensure the smooth transmission of power.
  • They also alleged that TANGEDCO’s actions constituted a breach of the EPAs, thereby entitling them to compensation under the Indian Contract Act.
• Respondent’s Arguments:
  • The respondents, represented by their standing counsel, defended the curtailments by citing operational and safety concerns, arguing that these were necessary to maintain grid stability.
  • They rejected the claim that the curtailments were economically motivated and emphasized that the actions were taken to prevent any potential threat to the grid’s security and efficiency.
  • The respondents highlighted the challenges in managing a grid with an increasing share of renewable energy, which requires careful balancing to avoid instability.

Order

After a comprehensive review of the submissions, evidence, and relevant legal provisions, TNERC issued an order in favor of the petitioners. The key points of the order include:

1. Compensation for Deemed Generation: TANGEDCO was directed to compensate the petitioners for the loss of deemed generation due to the curtailments. This compensation would be based on the generation loss figures provided by the petitioners.
2. Minimization of Future Curtailments: The Commission instructed TANGEDCO, TNSLDC, and TANTRANSCO to ensure that future curtailments are minimized and justified with proper documentation, highlighting the need for greater transparency and accountability.
3. Adherence to ‘Must Run’ Status: The order emphasized the importance of maintaining the ‘Must Run’ status for solar power projects as mandated by national and state policies. It called for improved coordination among the respondents to support the seamless integration of renewable energy into the grid.

Analysis

TNERC’s order is a critical step in addressing the challenges faced by renewable energy projects, particularly solar power, in Tamil Nadu. The decision reinforces the regulatory commitment to promoting renewable energy by protecting the interests of power producers against unwarranted curtailments. It also underscores the need for robust transmission infrastructure and better coordination among grid operators to accommodate the growing share of renewable energy.

The order sets a precedent that could influence future disputes involving curtailment and compensation in the renewable energy sector. By affirming the ‘Must Run’ status of solar power projects, TNERC has sent a clear message that the financial viability of renewable energy projects must be safeguarded to achieve broader energy transition goals. This decision is expected to bolster investor confidence in the renewable energy sector and contribute to the sustainable growth of solar power in Tamil Nadu and beyond.

[1] http://www.tnerc.gov.in//Orders/files/CO-DRPNo1010820240651.pdf