Tariff adoption is new hurdle for green energy cos in India

Indian green power firms can no longer take for granted that the tariffs at which they won projects in auctions will actually be adopted, Ranjit Gupta CEO of solar developer Azure Power told ET, citing it as a challenge for the sector.

The New York-listed firm was a pioneer in solar projects in India. It has about 7,100 MW of projects across 24 states in the country in different stages of commissioning and construction. Recently, Canadian Pension Fund CDPQ became Azure Power’s majority shareholder, raising its stake to 50.9%. 

Gupta said that earlier, state power regulators would routinely endorse whatever price state discoms signed their power purchase agreements (PPAs) at. But in the case of a 90 MW solar project Azure Power won in Assam at a tariff of Rs 3.37 per unit in June 2018 — much publicised as the biggest solar project in the northeast at that time — the Assam Electricity Regulatory Commission has yet to grant permission. Called ‘tariff adoption’, this should’ve been done shortly after inking the PPA with the state discom. With AERC withholding its decision, the Rural Electrification Corporation has also held back its promised financing of the project.

“Tariff adoption is becoming a challenge. The PPA is signed, construction has begun, but there is no assurance regarding the tariff. We’ve approached Assam chief minister’s office, but nothing has happened yet,” Gupta said. He added that it should be the discom’s responsibility to ensure tariff adoption, not the developer’s. “All approvals should be in place before the discom signs.” 

According to Gupta, financial institutions are reluctant to lend to renewable energy developers after the Andhra Pradesh government last year refused to honour PPAs the previous government had signed and wanted to renegotiate them. The matter is still being contested in court. In spite of these issues, Gupta is confident that the 2,000 MW project Azure Power bagged in a solar auction in December at a tariff of Rs 2.92 per unit will not face problems. The auction was conducted by Solar Energy Corporation of India, the renewable energy ministry’s nodal agency for auctions.

There has been industry speculation that most state discoms might find the tariff too steep. “It is the flagship tender of the government of India. If the Centre comes out tomorrow with basic customs duty on imported solar modules, tariff will be higher than Rs 2.92,” he said. 

Gupta said the firm will continue to pursue organic growth. “ We have always built our own projects; we don’t believe in acquisitions.” Azure will not be diversifying into wind power either. “ With land issues in Gujarat, it doesn’t make sense for us to enter wind,” Gupta said.

Source: Economic Times