The Tamil Nadu Electricity Regulatory Commission (TNERC) has approved The Tamil Nadu Green Energy Corporation’s (TNGECL) proposal to float a tender to procure 420 MW of solar energy under Component A of the Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) program.

The Commission approved a ceiling tariff of ₹3.1 (~$0.034)/kWh for the projects, lower than TNGECL’s proposed tariff of ₹3.28 (~$0.036)/kWh. It reasoned that the solar projects deserve lower ceiling tariffs because of reduced capital costs resulting from lower GST rates.

It also approved certain deviations in the tender sought by TNGECL.

The Commission also approved the draft power purchase agreement submitted by TNGECL.

Background

In a 2024 order, the Ministry of New and Renewable Energy (MNRE) allotted 424 MW of solar projects under Component A of PM-KUSUM for Tamil Nadu until December 2025.

Due to a shortfall in meeting renewable purchase obligations, the petitioner, TNGECL, proposed floating a tender to procure solar power from individual farmers, farmer groups, cooperatives, panchayats, farmer-producer organizations, water user associations, and developers on behalf of the farmers.

Recently, TNERC set a target of meeting 43.33% of its energy requirements from renewable sources by the financial year (FY) 2030.

In an earlier order, the Commission approved TNGECL’s proposal for the procurement of 424 MW of solar power under Component A of the PM-KUSUM program. The tender was floated without a ceiling tariff.

TNGECL floated a tender for 420 MW of the allotted 424 MW capacity and received two bids totaling 3 MW.

After failing to receive sufficient bids, the petitioner floated another tender to procure 420 MW, but received bids totaling 5 MW.

The petitioner issued a letter of award to the four bidders and approached the Commission to approve the PPA between TNGECL and the bidders.

However, the Commission rejected the petitioner’s request to approve the PPA and directed the petitioner to make the following changes:

• Advertise tenders in Tamil and English newspapers to ensure wider participation
• Call for expression of interest from willing farmers as per the Commission’s guidelines
• Seek the concurrence of Tamil Nadu Power Distribution Company (TNPDCL) for floating a tender for renewable energy projects, keeping DISCOM as a potential buyer
• TNGECL and TNPDCL must assess and notify the renewable energy generation capacity that can be injected into the substation with rural feeders, and the information must be uploaded on the respective websites
• TNGECL must seek the approval of TNERC for any deviations from the stipulated guidelines to ensure that the performance-based incentive (PBI) to the DISCOM from MNRE is not affected
• In case of development of solar projects on the farmer’s land, TNGECL must analyze the possibilities of direct payment of land lease from the DISCOM to the farmer’s account to instill confidence among the farmers
• TNGECL must apply for a trading license with the Central Electricity Regulatory Commission to avail a trading margin for its future projects
• TNGECL must consider the promotion of Component C of the PM-KUSUM program under the agriculture feeder solarization to avail central financial assistance benefits
• TNGECL must consider the proposal to mandate the installation of battery storage capacity up to 15% of the installed capacity in the upcoming solar projects

Further, MNRE revised the guidelines for all three components of the PM-KUSUM program.

It increased the timelines for issuance of the letter of award to 15 months. DISCOMs are now eligible to receive PBI of up to ₹0.4 (~$0.004)/kWh or ₹660,000 (~$7,333.13)/MW per year of installed capacity, whichever is lower. DISCOMs can avail the PBI for five years from the commercial operational date.

MNRE also stated that DISCOMs can pass the PBI to the KUSUM project developer to get a more competitive renewable energy tariff.

TNGECL refloated the tender for 420 MW capacity, incorporating MNRE updates and the earlier Commission’s orders.

The petitioner approached the Commission to approve the revised tender and also sought approval of the deviations in the tender documents against the MNRE guidelines.

Commission’s Analysis

The Commission observed that the petitioner’s deviations from the tender against MNRE guidelines were intended to enable wider participation by farmers.

It acknowledged that the Commission, in earlier orders, had approved the proposal to procure 420 MW of solar power under the KUSUM program.

The Commission also highlighted that the TNGECL focused on obtaining approvals from it but failed to implement the program due to low farmer awareness.

As the payment is made for net generation after accounting for the line losses, the Commission approved the following incentives from the solar project developers:

• Remote metering with an automatic meter reading facility
• Remote closing tripping through a motorized switching system for remote operation from the concerned substation
• Reactive power compensation and harmonics within limits; any TNPDCL charges reimbursed by generators
• Protection as per Indian Grid Code/CERC/TNERC; DSM compliance when implemented

TNERC clarified that developers will not be eligible for compensation for generation loss due to outages, maintenance shutdowns, or unforeseen interruptions.

Noting that the reduction in GST rates led to a ₹0.10 (~$0.0001)/kWh reduction in the cost of solar power generation, the Commission felt it was appropriate to set a ceiling rate of ₹3.1 (~$0.034)/kWh. It noted that the move would benefit power distribution companies by lowering power purchase costs.

The Commission also approved the deviations sought by the petitioner and approved line-loss deduction from developers for net-generation payment, where interconnection is on existing feeders.

It approved the draft tender specifications and PPA submitted by the petitioner.

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