The wind energy sector in the state suffers from a number of policy-based challenges, say those in the industry.
For Tamil Nadu’s wind energy sector, the future may not be a breeze. The top producer of wind energy in the country and home to India’s biggest wind farm with an installed capacity of 1,500 MW at Kanyakumari, Tamil Nadu’s generation, however, is slowing.
According to data from the Ministry of New and Renewable Energy (MNRE), Tamil Nadu produced 10,147.1 million units of power from wind energy in 2014-15. It however, saw a dip the subsequent year, falling to 7,273.23 million units of power in 2015-16.
However, in 2016-17, the state witnessed an increase with 11,935 million units of wind energy generated. Growth in wind power generation has since slowed. In 2017-18, Tami Nadu saw a marginal rise in wind power generation by 423 million units, while the next year it grew by 242 million units.
While Tamil Nadu remains the top producer in wind power generation, those in the industry point to the fact that it’s nowhere close to achieving its full capacity.
So why is the state’s wind energy generation slowing and what are the challenges that the industry is facing?
K Kasturirangan, the President of the Indian Wind Power Association (IWPA) says, “The generation is increasing, no doubt. But the quantity by which it is increasing is falling, which means that in due course the generation will show a decline.”
For Wind Energy Generators (WEGs), the issues within the sector are manifold, most crucially the delayed payment scheduled from the Tamil Nadu Generation and Distribution Corporation (TANGEDCO).
“So in the last two to three years, many Wind Energy Generators (WEGs) in Tamil Nadu chose not to produce wind power so that they don’t have to put up with these issues,” says Kasturirangan.
The state’s wind energy sector is plagued by adversaries of two kinds — inherent disadvantages like seasonal availability, unpredictability and challenges that are policy-based, like lack of sufficient facilities for power-banking, payment issues etc. While state-of-the-art technology can indeed help the sector resolve inherent disadvantages, policy challenges also need to be addressed, say those in the field.
One of the biggest challenges that wind energy generators face today is the banking period. Power-banking is the process by which the electricity generated by wind energy is stored in the grid for future use. In this case, the electricity generated by the Wind Energy Generators (WEG) over and above what has already been consumed is generally integrated into the grid. The WEG can then use the remaining units at their convenience any time within the next twelve months by taking it from the grid. This process of storing the electricity for future use is called power banking.
Power banking is costly
Tamil Nadu Electricity Board’s (TNEB) reservations against providing banking facilities to the WEGs stem from the fact that it is expensive and that most of the generators use the power generated from wind for their own captive purposes.
A lot of WEGs in Tamil Nadu generate electricity from wind energy to be used in their own factories or mills. This is called captive consumption. WEGs that produce electricity usually make use of the power banking facility, by which the power generated by the WEGs is made available to them as and when required.
A senior official from TNEB tells TNM that the demand to do away with banking facility is a long-standing one. The Board has made multiple appeals in the past to the Tamil Nadu Energy Regulatory Commission (TNERC), the state regulatory body which sets policies, tariffs etc., for electricity generation and distribution.
“Historically, a lot of wind generators have been enjoying power banking facility from us. Especially those who are involved in captive power generation where they produce power for their own consumption and store the unutilised units during the non-season period. During the off-wind season period, we are forced to purchase power from the open market to supply to the WEGs, which turns out to be expensive for us,” the official says, who points out that Wind Energy Generators enjoy subsidies from the Board.
Following multiple meetings, the TNERC in 2018 reduced the banking period to one month from the existing 12-month period, albeit for new WEGs. In a tariff directive, the TNERC revised the banking period to a month for new WEGs established in the state on or after April 1, 2018. This is a drastic reduction from the earlier one year period, enjoyed by the WEGs set up before April 1, 2018.
Speaking to TNM about the change in banking period brought in by the TNERC, Deepak Krishnan from the World Resources Institute (WRI) says that one-year-banking period resulted in an increase in costs for TANGEDCO, the discom which is a fully owned subsidiary of TNEB.
“Initially banking of energy was allowed over a period of one year, which meant that electricity can be accumulated over the monsoon season, when the wind flow is high, and plan its own production schedule accordingly. But what really was happening was that in summer, the companies that used wind power needed extra units to cope up with the power demand. They all turned to TANGEDCO at that juncture asking it to cater to their demands, since their units were exhausted when it was pushed into the grid for banking purposes. TANGEDCO had to oblige at that point, resulting in higher costs for TANGEDCO since this demand was unexpected as far as TANGEDCO was concerned,” explains Deepak.
While the regulator reduced banking period for new WEG installations, it also increased banking charges (in terms of units) for the existing WEGs, also known as legacy WEGs, from 12% to 14%. This move created significant impact on the WEGs, who are now allowed to withdraw only 86 units of power from the grid for every 100 units they have generated and added to the grid. WEGs were earlier allowed to withdraw 88 units of power.
Sector experts point out that this has made wind power generation more expensive for WEGs.
Erratic payments from discom
While TNERC tightened the noose on one side, several wind energy generators say that they are left with no guarantee of payments from TANGEDCO for the power units added to the grid.
Many WEGs in Tamil Nadu have payments outstanding for the last 20 months, says K Kasturirangan of IWPA, . He adds that along with the lack of regular payment, clauses in the Power Purchase Agreements (PPA) entered between the WEGs and the discom restrict generators from seeking other means to sell power and get paid. This discourages many from entering the sector.
The senior TNEB official admits that delayed payments are due to TANGEDCO reporting huge losses, over Rs 7500 crore for 2017-18. He argues, however, that giving options for WEGs to review or cancel the PPAs will lead to the opening of a Pandora’s box. “It can really affect our energy security because we calculate our own availability and forecast based on these kind of PPAs. So if the PPAs start getting cancelled or reviewed, then it totally upsets our planning,” he explains.
Pointing out that payment issues are not unique to Tamil Nadu alone, Deepak Krishnan says, “Breaking a contract with TANGEDCO right now and selling power to someone is a challenge as of now, because the main question then is ‘Where do you sell?’.” He also adds that if the plan is to sell to some customers in north India, then the next issue would be to figure out how to go about it.
“If gradually all generators are moved to a competitive market, then it can become much more interesting, because when you operate in a market, all buyers (utilities and other big factories) will have to put some earnest deposit money before the contract starts etc. This will at least ensure payments to generators, easing up the situation a little,” he adds.
Solar eating into wind’s share
Deepak also flags another major problem that is reportedly facing Tamil Nadu’s wind energy sector and by extension the renewable energy sector. Solar energy, he says, is slowly eating into the market share of wind energy.
“When a state is planning its energy bills across its next five to ten years, it would have factored in some mix of thermal with renewable energy. In the renewable energy, for example, 25% would have been for wind and 15% for solar. Theoretical assumption is that as solar cost starts falling lower and lower, they would effectively start eating into the thermal share. But what has happened is because of the cost decrease, and the notion of the discom that without thermal the system won’t function well, the obvious victim has been wind energy,” he explains.
Moreover, the Union government’s move to cut the tax benefit for WEGs from 2017-18 has also disincentivised the generation of wind energy.
Need for reliable power source
Since wind and solar energy are intermittent energy sources, the state’s electricity board is dependent on thermal power plants for ensuring that the grid is steady. Given that the demand for electricity peaks after sunset, relying on wind or solar power to be the source for base load supply is out of the question. This non-reliability also puts the state a few steps back from being a 100% green-energy state.
“The problem with thermal generation is that you cannot switch it on and off instantly. It takes several hours for any plant to light up the boiler after shut down. It also increases the wear and tear of these plants, adding to the cost since these plants are designed only for a stable load. So it is always advisable to have these plants running at some technical minimum. Our experience is that it is not technically feasible to keep running them at very low capacity utilisation,” says the TNEB official.
The officer, however, adds that in spite of sophisticated forecasting models, the discom isn’t able to predict the unexpected increase or fall in wind energy generation. “That really creates a problem for us in terms of grid management. We are expected by law to operate within a very narrow band of frequency and if we violate, we will be liable to pay a penalty to the national regulator,” he says, further explaining that having a dependable, solid source for supplying base load is crucial.
Can renewable energy take over?
Globally, the attention is on climate change which puts enormous focus on reducing emissions and switching to renewable forms of energy. With Tamil Nadu, being one of the top producers of wind power in the world, can the state be expected to replace thermal power with renewable sources soon?
No, says the TNEB official and brings back the discussion to supplying base load power to maintain the power grid.
“Across the world, there is always a base load either by thermal or gas or hydel. But unfortunately in Tamil Nadu, we have very limited scope for gas and hydro electricity. Hence we have to depend on thermal power since it is the only stable source of power,” he explains. However, he says that apart from ensuring a base load supply, it is possible to keep adding more renewables to the mix.
Deepak Krishnan also agrees with this point and says that it is prudent to look at the whole thing as an energy basket with different proportions of variables like solar, wind, nuclear, thermal, etc. But, he also points out that unless market conditions are made open and competitive and technology advances to an extent where renewable energy can be stored for a longer duration, thermal power will continue to rule the roost.