Tamil Nadu latest to push solar companies for post-auction tariff cut

NEW DELHI: States continue to put pressure on renewable energy companies to cut tariffs for projects awarded when costs were higher, ignoring concerns raised by banks, which say their loans are at risk and that such practices would discourage further lending and investment in the sector.

The latest state to seek lower tariffs is said to be Tamil Nadu. The Tamil Nadu Generation & Distribution Co (Tangedco) wants the winners of a solar auction held in January-February to reduce tariffs to Rs 3.47 a unit from Rs 4.40 per unit, matching the winning bid in a subsequent auction.

“There were meetings between Tangedco officials and the winning developers on July 21 and again on August 10,” said a person familiar with the development. “Tangedco has not put anything in writing, but that is what it wants. It will not sign PPAs for a higher tariff.”

Indeed, in Tamil Nadu government circles, there was indifference to the fate of the earlier solar auction since a bigger sale held later achieved a much lower tariff.

“If the developers want to cancel their projects, they can do so,” said an official. “Tangedco has found a lower tariff. No PPA has been signed as yet. It is entirely Tangedco’s choice.”

Tangedco officials refused to comment on the matter.

Some developers who claim to have acquired land and made other investments in anticipation of their projects are set to file a petition with the regulator to compel Tangedco to accept the tariff of Rs 4.40 per unit. They will emphasise that Tangedco flouted the Tamil Nadu Electricity Regulatory Commission’s order of June 13 directing it to sign all power purchase agreements related to the first auction and submit them within a month.

If they file the petition, it will be Tangedco’s second run-in with renewable energy developers this year. Wind developers have taken it to court to stop efforts to hold another auction while a TNERC order setting a levelised wind tariff remains valid till the end of the current financial year (as reported in ET’s August 7 edition).

The first tender for the 500 MW solar auction received a tepid response due to stringent conditions such as a project completion deadline of 12 months. Bids were received for 292 MW from 20 entities. The biggest bidder was Rays Power Infra Pvt, which sought and won 100 MW at Rs 4.40 per unit. The project size eventually went down to 224 MW with 16 bidders. In June, the discom obtained regulatory approval for a uniform rate of Rs 4.40 per unit.

By then, Tangedco had auctioned 1,500 MW of solar projects, relaxing some tough conditions and easing the completion deadline to 24 months. Mining major Neyveli Lignite Corporation bid for the entire lot but was ultimately awarded 449 MW. The 18 winning bids – of the 25 put in – varied between Rs 3.47 and Rs 3.97 per unit and here, too, all winners were asked to match the lowest bid, which they did.

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