Solar and wind power represent more than a third of the installed electricity generation capacity in Tamil Nadu, a share that is expected to increase in the coming years
Even as India makes rapid strides in transitioning to renewable energy, the southern state of Tamil Nadu has outshone other provinces by being placed among the top 10 markets in the world in terms of renewable energy usage.
According to a new study by the Institute for Energy Economics and Financial Analysis (IEEFA), an international research agency, Tamil Nadu is ninth among global energy markets — countries, regions and states — that have achieved high use of renewable energy. Unsurprisingly, the list is topped by Denmark, with wind and solar comprising half its total power installations. South Australia comes a close second. Tamil Nadu is the only Asian market to make it to the top 10.
Tamil Nadu can double its wind energy capacity and increase its solar capacity six-fold by 2027, the IEEFA said in a report titled Electricity Transformation in India: A Case Study of Tamil Nadu, that was released a week earlier than the global survey.
Tamil Nadu operates the most diversified electricity generation fleet in India, with renewables representing 35% of installed capacity as of March 2017, nuclear 8% and hydroelectricity 7%. Coal-fired power capacity represents 45%, or 13.4 GW.
Asked whether disparate geographic locations could be compared in this manner, Gerard Wynn of IEEFA in London told indiaclimatedialogue.net, “We selected the nine countries and regions in the study according to wind and solar as a percentage of total net generation.”
“First, we prioritised very high renewables markets with over 20% like Denmark, South Australia, etc. Below these, there are now several markets at around 15%,” Wynn said. “Here we selected more pragmatically, for example, according to data availability, which favoured Tamil Nadu, and also to achieve some representation from non-OECD markets.” The Organisation for Economic Co-operation and Development, or OECD, is a group of 35 mostly rich countries.
“They (IEEFA) have focused on studying (and calling these regions) markets. Tamil Nadu, Texas and California fit into this definition since they have the basic essentials for operating a market — producers, consumers, transmission operators, system operators,” Deepak Krishnan of the World Resources Institute in Bengaluru told indiaclimatedialogue.net. “The authors are more likely to have excluded bigger markets like Nordic Pool and PJM (Pennsylvania, Jersey and Maryland in the US), etc., which encompass two or more states, rather than excluding smaller areas. Therefore, once the definition and criteria for market is established, if Tamil Nadu comes ninth as per the analysis, I’d have no reason to differ.”
IEEFA believes Tamil Nadu can raise its wind-generation capacity to reach 15 GW in less than 10 years with solar totalling 13.8 GW.
“The upshot is cheaper electricity for customers and a return to profitability for TANGEDCO (Tamil Nadu Generation and Distribution Corporation),” Tim Buckley, IEEFA’s director of energy finance studies, Australasia, and lead author of the report, told indiaclimatedialogue.net.
TANGEDCO reported a loss of INR 139.85 billion (USD 2.1 billion) in 2013-14. Subsequent reforms have reduced its losses to INR 37.83 billion in 2016-17 and lower its energy deficit from 12.3% in 2011-12 to a record low of 0.6% in 2015-16. IEEFA expects it to break even in the next financial year and record a net profit for the first time in two decades.
“IEEFA bases its forecast on a clear tipping point achieved in 2017: new renewable investments are being underwritten at tariffs of Rs 2.43-3.00/kilowatt-hour (kWh), below the average paid to the National Thermal Power Corporation for thermal power in 2016/17 of Rs 3.20/kWh,” the report says.
It notes that Tamil Nadu accounted for nearly one-fifth of the 15.15 terawatt-hours (TWh) of the country’s total renewable energy in 2016-17. It is well known that the southern state was one of the pioneers in wind energy, with some plants over 25 years old.
Tamil Nadu is followed by Maharashtra, Karnataka and Gujarat in wind power capacity. It features third in solar energy after Andhra Pradesh and Rajasthan, despite having the world’s second-largest single-site solar farm with an installed capacity of 648 MW.
“With on-going production issues at the Kudankulam nuclear facility and significant coal availability limits due to the distance from the northeast Indian coal fields, renewables and hydro have both provided important grid diversification and peak demand support in 2017,” says IEEFA.
In his 2016 e-book, Tamil Nadu’s Electricity Demand-Supply by 2050, Mysuru-based energy analyst Shankar Sharma observes, “Various studies reveal that the state possesses a huge potential (of about 810,000 MW) from renewable energy sources as a comparison to a projected demand of less than 55,000 MW at an average compounded annual growth rate of six per cent between now and 2050. This clearly indicates the huge and as yet untapped natural resource that can readily replace conventional forms of energy generation and also supplement environmental upgradation and societal well-being.”
“The literature from around the world indicates that the aggressive penetration of REs in electricity networks similar to that of Tamil Nadu to the extent of 90% to 95% of the power capacity is techno-economically feasible by 2050. However, a simulation study of Tamil Nadu system by 2050 with 100% renewable energy by the state government will be of great assistance to move forward with a high degree of confidence.”
After the IEEFA report, Sharma notes, “My study of Tamil Nadu’s overall electricity demand and supply scenario for the year 2050 had come to a similar conclusion. But what is needed is a good combination of highest possible efficiency, optimal demand side management, and responsible energy conservation efforts while effectively deploying distributed type of renewable energy sources all over the state.”
The IEEFA report, however, has a caveat. It points out that Tamil Nadu is simultaneously constructing 22 GW of expensive coal-fired power plants, which is almost double the existing coal-fired capacity in the state, in spite of the favourable investment climate for renewables and lower tariffs for wind and solar energy.
“Building more non-pithead coal-based plants at a time when existing plants are only being used 62% of the time as opposed to the optimal 80% makes no sense,” IEEFA says. “This will be borne out in time with the cancellation of many new, costly coal-based plant proposals such as the 4,000 MW Cheyyur Ultra Mega Power Project.”
“There are many factors that could undermine the continued transformation of the Tamil Nadu electricity base,” Buckley told indiaclimatedialogue.net. “The first amongst these risks are the thermal power plants under construction or planning across the state. Should these plans come to fruition, this would crowd out alternatives and create a material economic barrier to Tamil Nadu pursuing renewable energy opportunities to their full potential.”
“The second obstacle is the dire financial profile of TANGEDCO, including Aggregate Technical and Commercial (AT&C) loss rates of above 20%,” he said. “This is a major financial barrier to transition, given renewable energy requires policy clarity and certainty, plus secure long term power purchase agreements (PPAs) with viable, bankable counterparties.”
Manu Aggarwal of the Council on Energy, Environment and Water (CEEW), a think tank based in New Delhi, elaborated the problems that wind generation faces. “Good wind resources attracted significant deployment of capacity in Tamil Nadu, the highest among all states,” he told indiaclimatedialogue.net. “But reasons such as transmission infrastructure not keeping pace with the deployment of wind capacity and seasonal wind generation (mostly in June to September) make Tamil Nadu a natural candidate for relatively higher curtailment of wind energy use as compared to other states.”
“Overall, the quantum of wind energy loss was 5,000 million units (MUs) in 2015-16, 3, 420 MUs in 2013-14 and 1,155 MUs in FY 2012-13. These numbers are relatively old and the situation has improved much since then,” Aggarwal said. “However, grid operations need to be made much more transparent in Tamil Nadu, to estimate the true quantum of curtailment. Till that happens, true estimation of curtailment is anyone’s guess.”
Strong state support
The IEEFA cites strong government support as being responsible for the state’s success. Some 20 years ago, to meet the deficit in supply for its burgeoning industries, the state government introduced a favourable feed-in tariff for wind. It encouraged industries to set up their own units. As a result, the Tamil Nadu Spinning Mills Association owns around 3,000 MW of wind farms, nearly 40% of the state’s total capacity. When solar followed in the second burst of renewable energy, there were favourable tariffs again.
Asked about his prognosis of the future of renewable energy in Tamil Nadu, S. Nagalsamy, a retired member of the Tamil Nadu Electricity Regulatory Commission, told indiaclimatedialogue.net, “I am optimistic, provided the grid management is carefully handled. Wind and solar generate power at different times of the day and different seasons. It isn’t possible to have these 24 hours a day. They need to be supplemented, to meet the deficit, by hydel and gas.”