Generation from wind has long been part of Tamil Nadu’s power generation mix, and even the provision of banking has been afforded to wind energy generators (WEGs) in the state as early as 1986. This provision addresses the mismatch between intermittent wind generation and the demand pattern of open access or captive consumer, by allowing the consumer to bank excess generation with the distribution company (DISCOM), over a stipulated time period.

The present framework in Tamil Nadu allows WEGs to bank excess energy with the utility over a year, and the service is paid for at 14% of the energy in kind³. This banking charge started at 2% in 1986, escalated to 5% in 2001, and remained at 5% till 2009. The charge has been progressively escalated at an ad-hoc rate over the years in successive wind tariff orders, to be 14%, as on date. The banking period, presently at 1 year, has also been revised several times over the past years, and it has varied in duration from two years to three months.

This provision and its varying parameters have played a key role in facilitating generation and investments in wind energy. In the recent past, however, it has been met with mixed responses from stakeholders. Some actors, like the Power Engineers Society of Tamil Nadu (PESOT) and the state utility, Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO), have consistently requested that the banking facility for wind power be withdrawn, citing they have to bear losses because of banking provision. The WEGs, conversely, contend that modifications to the banking facility would affect the regulatory certainty and economic viability of the investments. TANGEDCO and the WEGs have clashed on the matter in consultations for almost every wind energy tariff order issued by the Tamil Nadu Electricity Regulatory Commission (TNERC). This was also the case with the wind tariff order, dated 13th April 2018, where both the parties were dissatisfied with the regulatory dispensation of the banking facility.

TANGEDCO appealed the 2018 wind tariff order as it did not completely withdraw the banking provision, as TANGEDCO had required. The WEGs, through three other appeals⁴, opposed the modifications to the banking facility approved in the 2018 order. Some of the suggested modifications in the impugned 2018 order and the respective conditions of the banking provision are listed in table 1.

Table 1. Modifications to the banking facility approved in TNERC Order No. 6 of 2018

Source: Prayas (Energy Group) compilation based on APTEL judgement no. 191 of 2018

On 28th January 2021, the Appellate Tribunal for Electricity (APTEL) passed a judgement which dealt with the impugned TNERC order. It assessed the competing interests of the stakeholders and the missteps in regulatory action with regard to the banking facility in the state. 

The APTEL judgement

It is interesting to note that the wind tariff order passed on 31st July 2012, which included amendments to the then extant banking charges, was also challenged by stakeholders before the APTEL, as was the following wind tariff order issued on 31st March 2016. TANGEDCO requested for the roll back of the banking facility in consultations for these orders, as it did again in the 2018 wind tariff order.  It claimed that the banking provision worsens its precarious finances, and owing to pass throughs, impacts its consumers.

However, the WEGs, countered these claims and argued against the withdrawal of the facility or stark modification of the conditions assured at the time of investment, during the life of the project. They claimed that such action shakes regulatory and policy certainty. They also argued that the impugned order is not in line with the objectives of the Electricity Act, 2003, which requires state Commissions to promote generation from renewable sources.

To inform the impugned order, the TNERC had floated a consultative paper. It discussed options⁵ to address the continued concerns of the primary stakeholders. While this provided some insights, the TNERC found that TANGEDCO and the WEGs not only had different positions on the matter, but also furnished different data, as cited in the impugned order⁶. Since the 2018 wind tariff order was based on this consultation, the decision taken by the Commission addressed issues pertaining to wind energy banking without robust data (Para 10.1.14, 2018 Tariff Order). Owing to this and, by extension, the lack of a comprehensive approach in addressing the long standing matter, the TNERC order has invited ire from the APTEL. The APTEL in its judgement called the Commission’s approach “half baked and wholly devoid of any logic” (Para 62, Page 52/80, Appeal Nos. 191, 195 & 265 of 2018 and Appeal No. 406 of 2019).

With respect to the conflicting interests of stake holders, the APTEL judgement conceded that the provision of the banking facility was indeed a vexed issue, with both DISCOM finances and promotion of wind generation requiring serious consideration. However, it found the provisions to address the matter as per the impugned order lacking, and set the order aside. The directions issued were found to be arbitrary, and did not seem to be drawn from analysis based decision-making on part of the ERC. Instead, the APTEL found, they seemed to be in response to pressures from the parties involved, making it “akin to stretching the sheet to cover one extremity only to render the other unjustly uncovered”.  

Suggestions for the way forward

Despite the DISCOM’s ask, the provision of banking cannot be fully rolled back for WEGs, given the seasonal and diurnal variations in generation and consumer load pattern. However, according to the DISCOM, the banking service is loss making. The issue here is that banking rate charged for this service, currently 12%, does not proportionately reflect the costs likely incurred by the distribution company while providing this service to open access and captive consumers. Instead, a per unit charge that is proportional to the service provided and is revenue neutral to both the DISCOM and the consumer, could be considered. This can be done by linking energy banking with the actual Merit Order Dispatch of the distribution utility. Such an alternative framework has been detailed in section 4 of an earlier Power Perspectives article titled ‘Renewables, moving beyond concessions and waivers’.

In addition to the increase in banking charges, the modifications outlined in the impugned order suggests different treatment for new WEGs, captive WEGs, and third party open access WEGs. The issued consultative paper notwithstanding, these decisions have been made in the absence of robust data and detailed analysis, as acknowledged in the TNERC order and called out in the APTEL judgement. Further, solar is more nascent a technology in Tamil Nadu than wind, but the banking provision does not extend to solar generators. Such differentiated treatment, that is not evidence based and not based on uniform principles, is likely to bring in more litigatory and operational complications. For any restructuring or modification of the banking provision to be effective it must be based on data driven analysis, that accounts for impact on all stakeholders, comprehensive operational realities, long-term effects, and context of larger sector dynamics.

However, such debates around the changing provision of banking is not unique to Tamil Nadu, and has been seen in several states like Karnataka and Maharashtra. This strengthens the case for uniform national principles for renewable energy banking. The Forum of Regulators (FoR) could be tasked with developing an equitable and effective framework for renewable energy banking. Such action would fall into the ambit of the FoR, given that this framework is needed to develop a common, synchronised approach toward the banking facility.    

To ensure a robust framework, reliable data is essential. Toward this end, the state utility should aggregate and provide data pertaining to renewable energy banking, so as to substantiate the claims of losses incurred on account of the banking provision, and also to quantify the impact of banking on the state’s power sector. Data reporting should include 15 minute-wise generation and drawal of OA and captive consumers.

The banking framework aside, it is important to note that the provision of the service itself has been a matter of contention in Tamil Nadu for over a decade, as evidenced by the multiple cases on the matter at the APTEL. Nonetheless, regulatory action to resolve the issue has been limited and delayed. Given the swift pace of changes in the power sector, timely action based on detailed study is crucial toward effective governance, and is well within the scope of the TNERC.

Tamil Nadu has substantial wind generation potential, and with the growing importance of renewable generation, wind could play a pivotal role in the generation mix of the state. To ensure that this opportunity does not blow past the sector, timely, equitable, and planned policy action is the need of the hour. 

Endnotes