Toeing the line of electricity distribution companies in Uttar Pradesh and Andhra Pradesh, Karnataka-based discom Bescom has cancelled the power purchase agreements (PPAs) of 75.6 MW wind power projects commissioned before March 31.
In a notice, seen by FE, Bescom invoked a letter from the state’s energy department in April which directed the state’s discoms to not sign any new PPAs with wind power projects.Sources aware of the development said more such PPA cancellation notices from the other four discoms in Karnataka are expected soon. The 75.6 MW are part of the 490 MW of wind projects, whose PPAs were not approved by the Karnataka
Electricity Regulatory Commission (KERC). The companies affected from the cancellations include big industry names like Gamesa, Suzlon, Inox Wind, Sembcorp Green Infra and Mytrah. Power minister Piyush Goyal has been apprised of the situation, sources added.
A senior KERC official told FE that the power-surplus state requires no new wind power till 2021 as it has sufficient wind energy to fulfil its renewable energy obligations (RPOs). However, no directives were issued regarding the existing PPAs.
Emails and text messages to Bescom officials did not get a response.
The wind power industry believes that such moves send a negative signal to the investor community as financial closure depends on the stability of tariffs as per the PPAs. The wind plants have been generating power since April 1, and they have not received any payment due to the PPA uncertainties. Romesh Mattoo, the Karnataka secretary for the Indian Wind Power Association, told FE that wind energy producers are contemplating moving court against such decisions.
In the wake of falling tariffs for renewable energy, KERC had issued an advisory to the state’s energy department stating that new wind PPAs are not currently required. It also advised to follow only the competitive mechanism route to award wind energy projects in the state, instead of feed-in tariffs (FiT) — a cost-based compensation system. Currently, states buy wind power from the developers at various FiTs, which are in the range of Rs 4.16 to Rs 5.76 a unit.
Solar Energy Corporation of India managed to get bids as low as Rs 3.46 a unit in the maiden competitive bidding for wind energy of 1,000 MW held in February.
The discussion paper on the subject also suggested that if energy tariffs for wind energy projects not completed within the stipulated time would be cut to Rs 3.6 a unit, instead of the approved tariff of Rs 4.5 per unit. A public hearing on the suggestions of the discussion paper would be held on July 20.
Many discoms from other states have reportedly been reluctant to buy renewable power at earlier rates after low prices discovered in tariff-based reverse auctions.
Andhra Pradesh’s discoms approached the state regulator last month asking it to change the terms of PPAs, signed in 2015, where per unit wind tariffs were set between Rs 4.76 and Rs 4.84. UP discoms had cancelled the PPAs with thermal power plants with high tariffs.