Three actions for Tamil Nadu to consider in its energy transition

Tamil Nadu contributes to 16% of India’s total installed capacity of grid-connected renewables, second only to Karnataka. Its renewable power (RE) installed capacity is 42% of its total energy mix. Already a leader in RE, the state must ensure that its energy transition is sustainable, prescient, and inclusive.

Source: Central Electricity Authority, October 2019; Ministry of New and Renewable Energy (MNRE)

On 19th November 2019, WRI India organised a workshop in Chennai to explore the challenges and opportunities with Tamil Nadu’s energy transition journey. This blog synthesises the discussions at the workshop and identifies three actions for the state, as it transitions to a cleaner energy system:

1. Understanding demand is essential to plan for clean energy for all

TANGEDCO, Tamil Nadu’s electricity utility, serves a range of consumers—residential, commercial, industrial, agricultural, public buildings and institutions like hospitals and colleges — across high- and low-tension tariffs. These consumers have varied and changing electricity demand patterns. For example, Tamil Nadu’s demand for electricity peaks in the evening, after sunset. With the demand for air-conditioning and cooling increasing today, there is an increasing second peak – at mid-day. For TANGEDCO to effectively service its consumers, it must be able to accurately forecast demand and plan its operations and capacity additions. This requires robust and timely data, which is currently absent.

There is also a need to understand demand data for consumer segments that are not metered. For instance, Tamil Nadu’s agricultural consumers are largely unmetered. Although there are efforts to address this through metering at feeder levels, there is limited data on agricultural electricity demand in the state, which significantly affects planning. On the flipside, metering may be perceived by consumers as an attempt to waive subsidies that they are currently eligible for.

The workshop highlighted the challenges due to the uncertainty around the growth of electricity. Electricity demand has peaked at approximately 15 GW, though it was anticipated to exceed 20 GW by 2020. This is probably due to the state’s industrial slowdown but also to industrial customers’ migration from the grid to captive power generation; and our inability to forecast demand in the right manner. These developments present a mix of challenges to electricity planners including: (1) whether to invest in RE and emerging technologies such as storage rather than relatively expensive thermal power; (2) decisions to revise feed-in tariffs for agricultural solar pumps to minimise the burden on cross-subsidies, and (3) to disincentivise consumers from migrating out owing to costly tariffs. An improved understanding of demand will lead to better decisions in the state’s energy transition.

2. Flexibility of existing conventional power plants is crucial to integrate more renewables into the grid

Solar and wind are intermittent generators of electricity and can impact a grid’s stability. The workshop discussed how growth in RE must be supported by deploying corresponding storage solutions, or until they become cheaper, by enhancing the flexibility of existing power plants. This flexibility should not be limited to power plants operations but should include enhanced coordination among the institutions involved in system operations.

Despite having over 43% of installed capacity from RE sources and witnessing about 17% RE generation, Tamil Nadu has not been able to utilize all its RE whenever it is available. There have been frequent instances of RE generation curtailment over the past few years. The primary rationale provided is the limited ability of thermal power plants to ramp up and down as RE is supplied into the grid. Addressing challenges in enhancing the technical minimum of power system flexibility and minimising curtailment require a deeper understanding of power system operations. Such studies may also inform the flexibility options relevant to Tamil Nadu and their prioritisation. Complementing this with research on load flow analysis and its impact on the distribution network will inform effective means to better integrate RE into the grid.

3. Consumer-driven, decentralised RE like rooftop solar, are crucial to fuel the transition

User-driven RE generation is the hallmark of energy sovereignty. Its geographically decentralised nature provides benefits such as reduced line losses, greater voltage stability, lesser network capacity issues, etc. Some larger consumers (especially commercial and industrial consumers) are moving towards this option, through captive power generation or open access, for a range of reasons, including lower costs. Despite policy impetuses at the national as well as state levels, rooftop solar PV has not picked up at the expected pace. In Tamil Nadu, solar PV accounts for only 21% of renewable energy installations and SARAL (a ranking of Indian states on their relative Rooftop Solar Attractiveness) ranks the state tenth out of 31 states. Rapidly falling solar tariffs are also disincentivising solar developers and vendors from investing further in this sector. WRI research demonstrated the importance of consumer-centric approaches and identified the lack of clear information, an absence of customised financing, and poor institutional coordination as bottlenecks to overcome, especially among residential consumers. However, utilities are concerned over the loss of revenue from their consumers, further impacting their financial situation. During the workshop, some experts pointed to rooftop solar helping improve TANGEDCO’s finances.

This will require a comprehensive understanding of:

• True costs of rooftop solar installation and its reflection on solar tariffs. This must take the concerns of the consumer, vendor and utility into consideration.

• Tariff rationalisation across consumer categories. The utility and consumer rights groups must undertake measures to disseminate the benefits that may accompany a rise in tariffs.

• Evaluating existing government instruments (like financing mechanisms and subsidies) to achieve policy targets.

Responsive state-driven governance mechanisms should complement market-based reforms

Tamil Nadu’s energy transition is not merely about energy. It has implications for the state’s political economy, which requires greater coordination among key stakeholders through an integrated resource planning approach. This will assist in aligning various incentives and motives towards achieving a sustainable energy transition that leaves no one behind. Mechanisms that support the transition must also ensure that all consumers’ needs are equitably met, the service provider’s (e.g. the utility and private developers) financial sustainability is considered, and overall environmental considerations (i.e. its impact on land, water and other resources in maintaining the infrastructure) are accounted for, as Tamil Nadu supports India in achieving its climate commitments.

Naren Pasupalati works as a Senior Research Analyst in WRI India’s Energy Program.