A senior official of a major renewable company said on the condition of anonymity that uncertainties stemming from Andhra Pradesh's decision have led to a situation where projects, despite being completely constructed, are not getting commissioned.
While most sectors saw an investment famine, the solar sector was looking up, but slowdown may be in the horizon for this sunrise sector as well. In a stark contrast to the situation in FY17 and FY18, many recent tenders floated by the Solar Energy Corporation of India (SECI) — the government’s nodal agency for renewable energy — have remained undersubscribed. (see chart).
The trend is attributed to delays in payments by state-run distribution companies (discoms), laxity in issuing tariff orders on the part of state electricity regulators and reopening of power purchase agreements (PPAs) by Andhra Pradesh and Uttar Pradesh. Industry sources also blame the rising complexities related to land acquisitions, abrupt curtailment of purchase by discoms and mandatory tariff ceilings under auctions for waning investor interest.
According to an industry representative, many solar developers are not evincing interest after they saw that projects of even Central government-run SECI and NTPC were not spared by the Andhra Pradesh government which recently cut renewable energy tariffs. The state government had written to these companies to reduce tariffs for some solar plants supplying power to the state.
A senior official of a major renewable company said on the condition of anonymity that uncertainties stemming from Andhra Pradesh’s decision have led to a situation where projects, despite being completely constructed, are not getting commissioned.
“Considering the fact that such steps can have adverse effect on investor confidence, the ministry of new and renewable energy (MNRE) has advised the state government of Andhra Pradesh that the contractual agreements are sacrosanct and should not be revisited unless there is specific provision to do so in the agreement or a case of malafide/corruption has been established,” Union power minister RK Singh recently informed Parliament. In the wake of tepid response received from the industry towards recent solar auctions, MNRE has recently amended the terms for bidders, allowing developers more time and flexibility to set up projects.
Under-subscribed tenders may pose a threat for the government to meet the December 31, 2022 deadline for installing 175 giga-watt (GW) of renewable energy. The installed renewable capacity now stands at 83.4 GW.
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 had slowed to 8.6 GW in FY 19 from 11.3 GW and 11.8 GW in FY17 and FY18 respectively.