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Up In The Air

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In the barren fields of Bogampatty village in Tamil Nadu’s Coimbatore district, Suzlon’s engineers, Parthasarthy and Arivu, sweat it out to get the windmills to rotate. It has been a long day, and they still have 733 windmills to attend to. The mills are spread over 2,800 sq. km, and supply 713 MW to the grid. Parthasarthy and Arivu are part of a team of more than 200 engineers stationed at the village to monitor the windmills, set up and managed by Suzlon on behalf of spinning mills in the state. 
 
Tamil Nadu has an installed capacity of 6,969 MW, or 40 per cent of our total wind energy capacity of 17,352 MW and 28 per cent of the total renewable energy capacity. Wind energy also accounts for 12.64 per cent of the electricity generated in the state (9,763 MU out of 77,218 MU). More than 95 per cent of the country’s wind energy potential is in the coastal states of Tamil Nadu, Andhra Pradesh, Karnataka, Maharashtra, and Gujarat. And while Karnataka has the largest potential, best wind sites are in Tamil Nadu. Four prominent passes in the state — Palghat, Shencottah, Aralvoimozhi and Kambam —  have average annual wind speeds ranging from 18 km/hr to 25 km/hr. In Karnataka, the average is about 10 km/hr.
 
Tamil Nadu, however, is power deficit — the average power availability in 2011-12 was around 8,000 MW with demand at 11,000 MW. In fact, the state recently moved the Supreme Court on grounds that the Centre was not providing enough power to it. The deficit results in power cuts for more than 10 hours in most districts and for a minimum of two hours in the cities. In June, though, wind power, which feeds 30 per cent of the state’s peak power demand, aided by strong monsoon winds, brought some relief. But not to the producers.
 
Sweating It Out
Spinning mills and Independent Power Producers (IPPs) have not been paid by the Tamil Nadu Electricity Board (TNEB) for the power that they sold. TNEB, which has more than Rs 50,000 crore in accumulated losses, owes Rs 3,500 crore to more than 400 members of the Indian Wind Power Association (IWPA). TNEB could not be reached for comment; an e-mail sent to the board’s CMD Sudeep Jain remained unanswered.
 
Payment delays and poor grid infrastructure are among the industry’s major woes
Payment is not the only problem plaguing Tamil Nadu’s wind energy industry. Lines for transmission and evacuation of electricity are few in number and the one’s that exist can hardly take any load. Captive wind power generators — 300-odd spinning mills with 3,000 MW captive windmill capacity — are peeved over the loss of tax incentives such as accelerated depreciation, which has been revoked for wind power producers. “With these problems, banks have been auctioning off the windmills of a few companies,” says K. Kasthurirangaian, chairman of the Indian Wind Power Association (IWPA). All 850 of IWPA’s 1,395 members in Tamil Nadu are struggling to meet their interest payments. 
 
Investors, too, seem to have lost interest. During 2010-12, countrywide capacity addition grew only 8.6 per cent compared to 65.6 per cent in 2009-11. “Most discoms (power distribution companies) in India, including in Tamil Nadu, are in the red,” says Shivanand Nimbargi, MD & CEO of IDFC-funded Green Infra. The company has close to 75 MW operational wind power projects in Tamil Nadu and projects worth another 50 MW are in the pipeline. He suggests that the Centre should expedite the restructuring package to discoms.
 
Credit rating agency ICRA in a recent report says that future installations hang in the balance unless the state’s discoms improve their books. IPPs will have to knock on lenders’ doors to restructure their loans and renegotiate power purchase agreements. “The problem with distribution utilities is that they have relied on subsidies from the state government. Their health is obviously deteriorating. They have to provide free power and cannot raise tariffs easily,” says Mahesh Makhija, director of business development (renewables) at CLP, which has 99 MW operational capacity in Tamil Nadu. The company has ruled out plans for more capacity.
 
 
 (BW Pics By Tribhuwan Sharma, Subhabrata Das andJagadeesh N.V.)

Bringing some relief to the industry, and in a bid to bail out loss-making transmission and generation company Tangedco, Tamil Nadu in March announced an average tariff hike of 37 per cent — after nine years. The move is expected to boost revenues by Rs 7,874 crore.
 
Poor Capacity Handling
Transmission and evacuation are tripping investors. Says Kameswara Rao who heads energy, infrastructure and mining practice at PwC: “It’s not easy to manage the system when there is a lot of wind.” Unlike conventional sources, renewable energy is variable — the speed of wind can drop or pick up any time. The state is inept at grid management and balancing power. The Tamil Nadu Electricity Regulatory Commission (TNERC) in its latest tariff order echoes the sentiment: “As Tangedco has no balancing capacity to take care of this infirm power during unexpected meteorological changes (wind speed), the deficit rises to 3,000-3,500 MW.” 
 
break-page-break
 
Perhaps having a national grid would help, along with better forecasting and generation planning. Denmark, a leader in developing wind energy — it supplies more than 25 per cent of the country’s electricity — boasts of excellent grid balancing for integrating wind energy. And the key is its linkage to larger grid systems of Norway, Sweden and Germany which can absorb the variations of wind. 
 
“There are no major 400 or 765 kilo-volt (KV) lines to evacuate large capacities of power,” rues Nimbargi. This begs the question: with such poor infrastructure, why did the state go ahead with capacity additions? Between 1999 and 2012, 6,241 MW of capacity was added. “In many areas, a no-objection certificate (for new windmills) was given and transmission lines were not strengthened to effectively evacuate power,” points K. Venkatachalam, chief advisor at Tamil Nadu Spinning Mills Association (Tasma). Sixty per cent of Tasma’s members have invested in windmills, which account for more than 50 per cent of the state’s total installed capacity. Out of the total installed capacity of windmills in Tamil Nadu, 6,000 million units are consumed by industries; 80 per cent of this by spinning mills.
 
The Tamil Nadu Transmission Corporation (Tantransco) is attempting to improve the infrastructure. It has started work on three 400-KV sub-stations for wind power evacuation; these will be linked to a 765-KV sub-station to be set up by the Power Grid Corporation at Salem. This is part of their plan to increase capacity by 5,000 MW over five years. But Tantransco’s expansion plans need funds, and there is certainly no queue: “If you were a banker, you would throw the proposal on their face. How will they repay?” asks a senior member of the wind energy fraternity. It had to approach the Ministry of New and Renewable Energy for assistance under the National Clean Energy Fund. 
 
Click To View Enlarged Image
(BW Pic By Jagadeesh N.V.)
Testy Tariffs
Wind energy tariffs, after a two-year delay, have been marginally hiked. Windmills installed between 1 August 2012 and 31 July 2014 can now sell power at Rs 3.51 per kWh against Rs 3.39 per kWh for units commissioned between 19 September 2008 and 31 July 2012. Then there is the debate that rages over “banking” — a system where power can be banked. Wind energy generators (WEGs) can supply electricity to the state grid and can also draw it back within a year. This was introduced in the 1980s to attract investments. But Tangedco’s contention is that WEGs push excess power into the grid when demand is low; when the demand is high, they draw back the power for captive use. 
 
To meet its contractual obligations, Tangedco is forced to purchase power at much higher rates from the open market leading to losses of Rs 200 crore. Tasma refutes these claims saying it actually gives Tangedco Rs 77 crore in profit. Others like GIL’s Nimbargi point out that high charges for banking facilities in wind has adversely impacted investment plans of wind IPPs as the nature of wind power makes banking a much-needed support from the state grid. For captive users, open access and banking charges went up to Rs 1.50 a unit in August from less than Rs 0.50. Tasma has filed an appeal in the Appellate Tribunal for Electricity (New Delhi). 
 
These developments have helped little to serve the industry’s cause. “It has resulted in a situation where the promoters are less interested to invest in wind energy owing to the frustration of not being able to use the energy with all the restrictions,” says Venkatachalam.
 
A Tasma report says that when the Centre announced the Technology Upgradation Fund Scheme in 1999, it included windmills for interest subsidy; almost everybody invested in windmills. It got a boost from Section 80-IA which exempts income from windmill from tax for a decade after being set up. “The market now permits only those with deep pockets to invest in wind energy. This is not competitive,” laments Kasthurirangaian.
 
Despite the roadblocks, Tamil Nadu is crucial. As Nimbargi from Green Infra puts it, “You have to be there if you want to be a big, long-term wind player.” If Tamil Nadu can play it right, the success story can be saved from going sour. But if delay in payments, poor grid infrastructure and expensive captive power is not dealt with, its clean energy potential could be all but lost.
 
bweditor(at)abp(dot)in
 
(This story was published in Businessworld Issue Dated 12-11-2012)


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