AWARDED WIND AND SOLAR PROJECTS BEING REFUSED TO SIGN POWER SUPPLY PACTS BY STATES.

The State electricity distribution companies (discoms) are reluctant to execute contracts after large clean energy power projects have been awarded the job of putting up major solar and wind power projects to achieve the countries target of 100 GW power from solar projects and 60GW power from wind projects by 2022, as cheaper tariff is available at the spot market.
Solar and wind energy projects totaling 16.8 GW worth a potential investment of Rs 60,000 crore remains in limbo as the cash strapped discoms have spot availability of cheaper tariff. This will hinder India’s image of rules-based regime and its future of green economy.
Discoms usually sign power supply agreements (PSAs) with state-run Solar Energy Corpn of India (SECI) who in turn sign power purchase agreements with solar and wind project developers. State’s reluctance to sign PSAs which is further delaying signing of power purchase agreements (PPAs). India’s solar tariffs have hit a record low of Rs 2.36 per unit at a SECI auction in June this year.
Earnings of power distribution companies have nosedived as people are unable to pay for the electricity consumed while power supplies being essential services have been maintained. The liquidity of power distribution companies is not expected to improve in the short term, as economic activity and power demand will take some time to pick up.
Debt financing for green energy projects have also been drying up, with large banks declining to fund projects that have committed to sell power at less than Rs 3 per unit. Banks are wary of lending to developers as they suspect viability of projects promising power at rock bottom rates.
The Ministry of New and Renewable Energy (MNRE) is aware of this issue. Bundling of the comparatively high tariffs of previously bid-out manufacturing-linked projects with that of the recently bid ones having low tariffs is something the MNRE is planning to clear the PPA backlog. This will result in a weighted average tariff at which the PSAs will be signed with the discoms. The Union Power Ministry has also proposed setting up an Electricity Contract Enforcement Authority to enforce PPAs in the draft amendments of the Electricity Act 2003.
Renegotiating auctioned tariffs could hurt India’s ability to attract global investors and damage India’s tendering process, at the time the country is running the world’s largest green energy programme.