Solar energy policy in Tamil Nadu

This page outlines all the available funding and incentive schemes for solar energy in the state of Tamil Nadu in India, both at the Federal and State level. If you notice anything that is incorrect or out of date, please let us know via our contact page.

Tamil Nadu is now the leading Indian state in terms of installed solar power capacity, with 1,368 MW as of August 22, 2016, according to market analyst Bridge To India. Although this falls far short of its 2012 goal of reaching 3 GW of cumulative capacity by 2015, it’s still nothing to be trifled, and a testament to how seriously the state has taken its goal of transitioning to cleaner forms of energy production.

Federal incentives for solar energy in India

Jawaharlal Nehru National Solar Mission (JNNSM)
The Jawaharlal Nehru National Solar Mission by the Ministry of New and Renewable Energy (MNRE) has the ambitious goal of reaching 100 GW of grid-connected solar power by 2022, and making India a global leader in the development of solar energy. Currently India is on track to reach this goal, and a recent poll we conducted via Twitter showed that half of the respondents felt India would surpass this and install “much more than 100 GW” by 2022, proving that optimism abounds on this question.

The JNNSM is geared towards large-scale solar installations and not small-scale residential plants. It is rolled out in phases and batches, each of which consists of a reverse bidding auction. This means that bidders bid the price per kilowatt hour at which they would be willing to sell the electricity. The most recent auction, Phase II Batch I of the JNNSM, witnessed 505 MW of solar projects receive approval.

State incentives for solar energy in Tamil Nadu

The state of Tamil Nadu has taken decisive action in stimulating solar energy in the region. What follows are the various incentives and financial rules they have adopted in order to stimulate solar energy in the state.

PPA and Levelised tariff in Tamil Nadu

Tamil Nadu has set its feed-in tariff (FIT) at ₹5.10 per kilowatt hour from April 1, 2016 – April 1, 2017. This was based on the following assumed tariff components:

Capital cost ₹5.05 crore per MW
CUF 19%
Operation and maintenance expenses 1.4% of capital cost with escalation at 5.72% p.a. from second year
Insurance cost 0.35% of net asset value
Debt-equity ratio 70:30
Term of loan 10 years + 1 year moratorium
Interest on loan 13%
Life of plant and machinery 25 years
Working capital components One month O&M cost and two months receivables
Interest on working capital 13.5%
Return on equity 20% pre-tax
Depreciation 3.6% on 95% of capital cost
Auxiliary consumption Nil
Discount factor 10.21%
Levelised tariff without AD 5.10
Levelised tariff with AD 4.56

Currently there is no feed in tariff in Tamil Nadu. Reverse bidding through TANGEDCO tender is the only way to procure power generated by solar panels for levelised tariff for 25 years.

(See p. 18 under section 9.13 of the Comprehensive Tariff Order on Solar Power from the Tamil Nadu Electricity Regulatory Commission).

Incentives for domestic solar rooftops

The Chief Minister of Tamil Nadu offers an incentive for domestic solar rooftops for both individuals and groups. In each case, the following rules apply:

1. Applicants will be considered for a subsidy of ₹20 per watt peak for installations up to 1 kilowatt peak per house or flat (amounting to a maximum subsidy of ₹20,000 per house or flat).
2. The domestic consumer must have a TANGEDCO service connection under tariff LA-1A.
3. The subsidy scheme applies only to grid-connected rooftop solar photovoltaic systems, and covers solar PV modules, a rooftop support structure (i.e. mounting system), a solar grid inverter, any cabling, and any protective devices. Off-grid systems are ineligible.
4. Surplus electricity can be exported to the grid via a net metering agreement. Exported electricity will be credited to the consumer up to a limit of 90% of any imported electricity over a 12 months settlement period.

Further rules and online or offline applications can be found on the solar rooftop incentive pages for individuals and groups. Although, energy transition in Tamil Nadu has a lot of support and focus, it still lacks net metering for industries & commercial establishments.

Tax rebates

There is a VAT refund of 50% on all capital goods for power production that are manufactured in Tamil Nadu (see p. 12 under section of Tamil Nadu Industrial Policy 2014 from the Industries Department of the Government of Tamil Nadu). However, these tax benefits are only applicable for captive projects.

Fees and charges

Solar energy generators only have to pay 30% of the transmission, wheeling, scheduling and system operation charges that are applicable to conventional power generators (see pp. 23-24 under section 12.1 of the Comprehensive Tariff Order on Solar Power).
Solar energy generators in Tamil Nadu will be levied 50% of the cross-subsidy surcharge for third-party open access consumers (see p. 24 under section 12.2 of the Comprehensive Tariff Order on Solar Power.)

Other monetary incentives

Because solar installations are low-carbon, they are eligible for receiving Certified Emission Reduction (CER) credits from the Clean Development Mechanism (CDM) board. These credits can then be traded in various emissions trading markets.

Any CDM benefits acquired from the solar installation shall be distributed as follows:

  Developer Consumer (usually TANGEDCO)
Year 1 100% 0%
Year 2 90% 10%
Year 3 80% 20%
Year 4 70% 30%
Year 5 60% 40%
All following years 50% 50%

(See p. 20 under section 11.3 of the Comprehensive Tariff Order on Solar Power.)

Solar installations on Tamil Nadu government buildings
Furthermore, in 2014 the Tamil Nadu Energy Development Agency released its Guidelines for Grid-connected Small Scale (Rooftop) Solar PV Systems for Tamil Nadu. These are applicable only to installations on government buildings that are grid-connected, which means they can export surplus electricity to the Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) electricity grid.

Are you interested in installing solar in Tamil Nadu?
If so, get in touch via our contact page and learn how we can help you join us in the solar energy revolution.