Solar PV feed-in tariffs cut in Tamil Nadu

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Since September 2014, new solar PV projects in Tamil Nadu had enjoyed an extremely favorable FIT of Rs 7.01 per unit (USD 0.11 per unit). However, the good times couldn’t last forever, especially with the falling costs of installing solar PV, so the State has now set new tariffs, which are closer to the average FITs in other states around the country.

The new tariffs, which will be in place for one year, were set by the Tamil Nadu Electricity Regulatory Commission (TNERC), and apply to any projects commissioned after 1 April 2016. The new rate is Rs 5.10 per unit, down 27% from the Rs 7.01 tariff that previous projects had enjoyed. It isn’t all that bad, when considering that the average tariffs in others states across India are between Rs 5.5 and Rs 5.7 per unit and the NTPC rates are Rs 4.65 per unit.

The tariffs were calculated in conjuncture with the Central Electricity Regulatory Commission’s capital cost metric, which accounts for all of the costs associated with installing solar PV projects, including all the equipment and the land acquisition.

"The Commission has observed that each bidding by different state utilities for solar energy finds a new low in terms of cost of energy,” said the TNERC order. “Various stakeholders attribute various reasons for such low tariffs. Some of them have said these prices are unsustainable. However, the fact remains that the prices for solar energy continue to fall and has reached as low as Rs.4.34 per unit as on date."

Future still looking good

Although the FITs have been significantly lowered for PV projects in the State, things are still looking good for the future of PV in Tamil Nadu. There is already a significant amount of solar PV capacity installed in the State, to the tune of 581.26 MW, and a large pipeline of projects is in various different stages of development.

As previously mentioned, all of the projects that were commissioned before 1 April 2016 will still receive the favorable FIT of Rs 7.01. This amounts to an impressive 812 MW that have been commissioned, of a total 1,400 MW of projects that have signed power purchase agreements.

Some of the large companies that have solar PV projects commissioned in Tamil Nadu include Adani Group, SunEdison and Welspun, however they also have significant power purchase agreements in place from projects that have not been commissioned, and would suffer under the new FIT, should they go ahead.

There is a significant push within India to increase its solar PV capacity, aiming for 100 GW by 2022, so this reduced FIT shouldn’t inhibit the growth of the industry within the state. In fact, it will most likely result in the size of the projects increasing in response to the new tariff. In Tamil Nadu alone, the peak power requirement is growing 8% every year, so it is still in the interest of the State to greatly increase its PV capacity.