Neither the Centre's admonitions, nor adverse court rulings seem to be dissuading some state governments from dishonouring the power purchase agreements (PPAs) with renewable power units - a trend that is threatening to put the sunrise sector in jeopardy. Close on the heels of the Andhra Pradesh government, which virtually called for a downward revision of the tariffs mentioned in the PPAs for 5.2 giga watt of wind and solar power capacity, the Uttar Pradesh government stopped procuring electricity from 650 mega watt of wind power plants effective Tuesday evening.
The UP government's excuse for the sudden move is the Rs 3.46-per-unit PPA tariff has not been approved by the Central Electricity Regulatory Commission (CERC). But the tariff under PPA for wind units supplying to UP is 7% lower than the average power purchase rate of the state and also much lower than the Rs 4.16-6.02-a-unit rate states paid to wind power plants under the erstwhile feed-in-tariff regime.
Of the 650 MW, about 440 MW are supplied by companies, which quoted the lowest tariff in the maiden reverse auction for wind power held in 2017. The PPAs for these units owned by Renew Power, Mytrah Energy, Sembcorp and Inox Wind were signed with Central government-owned PTC India and Solar Energy Corporation of India (SECI). These firms were supposed to supply to states which wanted renewable energy at low rates.
According to industry sources, to keep these wind plants running, PTC India is now exploring the option of supplying power from these units to other states. "The development is really shocking to us. We will be talking to our industry counterparts on Thursday to decide the next course of action," Siva Girish Arepalli, chief commercial officer, Mytrah, told FE.
Recently, the Andhra Pradesh High Court has struck down the controversial July 1 order by the state government asking a high-level committee to renegotiate the state’s PPAs with renewable power producers, terming it illegal. The court has, however, asked the state electricity regulator APERC to decide on the matter within six weeks. In the meantime, the discoms will however need to pay the reduced price of Rs 2.43-2.44 per unit to the renewable units.
The renewable energy sector is one of the major FDI earners and experts cautioned that apart from hindering FDI inflows, such developments can throw a spanner on the 450 GW renewable energy capacity target, which was recently announced by the Prime Minister Narendra Modi in the United Nations General Assembly. Thanks to the devaluation of the rupee, rising finance costs, government-mandated tariff caps in reverse auctions and cancellation of renewable project tenders, the pace of adding renewable generation capacities already slowed down in FY19
(see chart). The installed renewable capacity now stands at 81.3 GW.