Jasmeet Khurana, Market Intelligence Consultant at BRIDGE TO INDIA discusses India’s newest state solar policy as a part of his blog series, ‘Understanding the Tamil Nadu Solar Policy 2012′. This is part I of the IV part series.

Tamil Nadu announced its state solar policy last week. The policy aims to achieve an ambitious installation target of 3GW by 2015.

• The policy targets installations through Solar Purchase Obligations, which are separate from Renewable Purchase Obligations (RPOs)
• Though distribution companies (DISCOMs) will be directly responsible to meet RPOs, the burden of purchasing solar power will eventually pass on to consumers through power tariffs
• The state of Tamil Nadu has tried to transfer the obligation as well as its financial responsibility to the select few obligated entities that already pay higher tariffs

For a target of 1.5GW of utility scale projects till 2015, the policy targets an installation of 1,000MW from the fulfillment of Solar Purchase Obligations (SPO). This SPO is different from the solar RPO requirements of 0.05% earlier notified by Tamil Nadu Electricity Regulatory Commission (TNERC) for the current financial year. These obligations have been mandated at 3% till December 2013 and 6% from 2014 onwards on various power consumers such as Special Economic Zones (SEZs), IT parks, industrial consumers guaranteed with 24/7 power supply, colleges, residential schools and all buildings with a built up area of more than 20,000 square meters.

So far, though distribution companies are directly responsible to meet RPOs, the financial burden of purchasing, for example, solar power is eventually passed on to the consumers through power tariffs over time. In Tamil Nadu’s case, the financial situation of its distribution company, TANGEDCO, is weak and according to official estimates it has been known to be running a loss of around INR 50,000cr as of March 2012. It is also known to have defaulted on payments to wind power producers, for well over a year. Under these circumstances, banks would have been particularly wary of lending to any project developer selling power to the distribution company.

Under its new policy, the state has tried to transfer the obligation as well as its financial responsibility to the select few obligated entities like the industrial consumers, IT parks, SEZs, etc. that already pay higher tariffs. This has been done by allowing developers to sell directly to these obligated entities. Moreover, till it is clarified by the state regulator, these consumers have the dual obligation: direct obligation of the SPO and the impact on tariffs that will result due to the earlier notified RPO.

Follow this space for part II of ‘Understanding the Tamil Nadu Solar Policy 2012′ on ‘Tamil Nadu Solar Policy burdens consumers, but only a select few’.

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