Tuesday, November 6, 2012

Solar developers make a beeline for TN

Good sunshine and chronic power shortage always made Tamil Nadu an attractive investment destination for solar power developers. Now, the State’s solar policy has further sweetened the deal by imposing an obligation on certain classes of power consumers to buy a chunk of solar power.
Industrial consumers, frustrated by long hours of power outage, are now “taking solar very seriously,” says Pasupathy Gopalan, Managing Director of SunEdison, an American.
SunEdison is among the companies that are keen on developing solar projects in the State Most developers prefer to sell power directly to industrial consumers, who luckily for them are mandated to buy solar power under the State-imposed solar purchase obligations. Only NanoPV-Voltech, perhaps because the Indian partner already has business links with Tangedco.


Zynergy’s Managing Director & CEO Rohit Rabindernath finds tariff discovered through ‘reverse bidding’ un-remunerative. Selling to the utility at the ‘average pooled purchase cost’ (Rs 2.54 in Tamil Nadu) and getting tradable renewable energy certificates (RECs) is also not an option for him because no banker recognises REC income.
Further, selling power to Tangedco would call for some kind of payment security mechanism. Otherwise given the payment track record of the utility, no banker will lend on the basis of a PPA with Tangedco, developers say.


Selling power to paying consumers is more lucrative. Zynergy for one is confident of getting tariffs of Rs 9 and above — any income from RECs would be shared with the customer.
These project developers also have some common concerns. The first is about the enforcing solar purchase obligations, for, unless the obligations are fulfilled there would be no RECs.
The second concern is the cross-subsidy charges in Tamil Nadu (Rs 2.07 a unit for an industrial consumer and Rs 3.28 for a commercial establishment), which are levied when a generator sells power directly to a consumer.
Unless exempted from ‘cross-subsidy charges’, developers will have to get into the ‘group captive’ model to avoid the levy. This entails forming a separate company with power purchasers as shareholders. This model is messy and expensive because you need to incorporate separate companies for various projects and customers will have to invest in the equity.
However, many developers seem to be confident that the Tamil Nadu Government will exempt solar power from cross-subsidy levy.
Land availability seems not to be a big deal (unlike, say, in Rajasthan, where land ceiling law is a hurdle). In the last two decades, the wind industry has spawned a number of ‘infrastructure developers’ in the State who provide the service of buying land, organising grid connection and dealing with the local people and panchayats.
Finance, on the other hand, is seen as a challenge. Raising equity is no problem, but securing debt requires working on.
Solar developers believe that the State Government can do something here, perhaps have Tamil Nadu Industrial Investment Corporation provide easy loans.

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