States must not leave investors in the lurch: Reneging on PPAs/reauctioning will hurt capital invested in renewables

With tariffs having come down sharply to levels of around Rs 2-2.25 per unit, and in some instances, below Rs 2 per unit, a clutch of states has either refused to buy solar power or has reneged on the power purchase agreements (PPA).

First, it was the Andhra Pradesh government that demanded tariffs in the PPAs for 5.2GW of wind- and solar-power capacity be revised downwards. Subsequently, the Uttar Pradesh government stopped procuring electricity from 650 MW of wind power plants, claiming the Rs 3.46-per-unit PPA-tariff had not been approved by CERC. Last August, Gujarat had auctioned 700MW of solar capacity to be built in Dholera for which a tariff of Rs 2.78 per unit had been discovered.

But with tariffs crashing below the Rs 2 per unit mark, the state decided it would hold the auction again. Although power producers have taken the matter to court, states remain undeterred. CRISIL estimates that power-supply agreements for about 7GW of capacity, bid out at auctions prior to February 2020, are yet to be closed out since tariffs have dropped thereafter.

Of this, about 3GW is vulnerable to reauctioning or even cancellation since the tariffs discovered were relatively high.

financial express
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