In a move that has been widely welcomed in the state, the Tamil Nadu state government announced its plans to set up a green energy transmission corridor at a cost of Rs. 1,593 Crores. Apart from this, Rs. 5,400 Crores will be provided for tariff subsidy. The state government will also take over liabilities of TANGEDCO(Tamil Nadu Generation and Transmission Company) to the tune of Rs. 2,000 Crores(Read more here).
The green energy corridor will be set up with the financial assistance of the KfW, a German government-owned development bank. The state has the highest share of wind energy in the country, but has lost its attractiveness for new wind projects mainly due to evacuation issues(Read our analysis of the magnitude of the problem here). As a result, less than 100 MW of wind installations were added in the current financial year till January 2014(More details here), and investors moving towards Gujarat and Maharashtra. The green energy corridor will help mitigate some of the problems faced by the wind developers and has been welcomed.
The allocation of funds for tariff subsidy and the takeover of TANGEDCO’s liabilities are in line with the financial restructuring plan for utilities administered by the Ministry of Power. This is also significant for the budding solar industry, since the confidence of investors to develop projects in the state will significantly improve as the risks of non-payment by TANGEDCO significantly recedes.
The bottomline is that the Tamil Nadu government is moving forward in the right direction in improving the power situation in the state and make the state an attractive destination for renewable energy projects.
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