Maharashtra's tariff structure renders solar power unviable

State electricity regulatory commission's power tariff structure favours private wind energy producers

 
By Aparna Pallavi
Last Updated: Saturday 04 July 2015

Solar power, recognised as the most abundantly available and least environmentally harmful source of power in India, might become unviable for the well-endowed state of Maharashtra. Reason: the Maharashtra Electricity Regulatory Commission’s (MERC) discriminatory tariff structure. Not only has MERC approved the lowest rate in the country for solar power produced by the state's power generation company, but it has also shown its bias towards privately produced wind energy by approving the highest tariff in the country for it.

Sources in Maharashtra State Power Generation Company Limited (MAHAGENCO) say on condition of anonymity that such a discriminatory tariff structure will make solar power unviable for it.

In the name of encouraging wind power production, MERC has on its own approved a tariff of Rs 5.81 per unit, which is the highest in the country. States like Gujarat, Karnataka, Tamil Nadu and Andhra Pradesh have fixed much lower tariffs for wind power (see table).

Renewable power tariff in different states
State Wind power (Rs per unit) Solar PV (Rs per unit) Solar thermal (Rs per unit)
Maharashtra 5.81 7.69 10.71
Gujarat 4.23 10.37 12.91
Karnataka 3.07 14.50 11.35
Andhra 4.70 17.91 15.31
Tamil Nadu 3.51 18.45 15.51


What is more, while customers have had to pay for the installation cost of wind power units, the units themselves have been given a free hand to earn windfall profits by selling power to large private operators like industries, malls and multiplexes. Without taking any risks, wind-power producers are making as much as 25 per cent profits per year, say sources.

What's ironic is that the decision that MAHAGENCO should produce its own solar power was taken with a view that customers should get the benefits of the high tariff rates awarded to renewable energy. The Maharashtra State Electricity Generation Company Limited (MSEDCL) is bound by MERC directives to purchase a fixed amount of renewable energy every year. Last year it had been ordered to purchase 0.25 per cent solar power. MAHAGENCO had taken the decision to install solar power plants at Chandrapur and Dhule under this vision.

However, MERC has thrown a damper on Maharastra’s solar power dreams by fixing a low Rs 7.69 per unit for photovoltaic (PV) and Rs 10.71 for solar thermal power, which is the lowest in the country. MAHAGENCO sources suggest that at this rate running its solar power units will become unviable, and it will be forced to buy expensive wind power from private operators to fulfil its renewable energy quota.

In recent years, MERC has been at the receiving end of much criticism for its pro-privatisation and pro-open access bias. Its decisions have also been opposed by the government. On July 31, this year, Ajoy Mehta, Maharashtra’s principal secretary for power, wrote to the MERC, voicing concern about “the methodology and operationalisation of open access regulations as they are likely to have a long-term impact on power tariff and the principle of equity”. The letter expressed fear that pro-private open access regulations will lead to windfall profits for the developers while causing MSEDCL to lose its high-end customers.
 

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