Economy

Renewable PPAs in Andhra Pradesh benefited 3 players: Jagan

Venkatesh Ganesh Mumbai | Updated on August 23, 2019 Published on August 23, 2019

YS Jagan Mohan Reddy, Chief Minister of Andhra Pradesh

The previous government’s agreements can cause a loss of ₹4,000 crore every year for the next 22 years, the AP CM said in a letter to PM Modi

The Power Purchase Agreements (PPA) entered into by the previous Andhra Pradesh (AP) government had benefited only three players and has imposed a heavy burden on the state, according to Chief Minister Jagan Mohan Reddy.

In a letter to PM Narendra Modi, which is with BusinessLine, Jagan, who has been under fire from the industry for wanting to cancel all power projects, has shot back at the industry. “With respect to the renewable PPAs executed in the state, the sad part is that all of them were executed for a long term of 25 years. This was purchased at very high tariffs and majorly to benefit 3 players,” he wrote. He had sought renegotiation of existing PPAs, and wants to do away with its decision to enter into PPAs for all upcoming clean energy projects. He has also launched a probe into 30 pacts signed under TDP government.

The 3 companies are Greenko, ReNew Power and Mytrah Global Services.

Also read: Centre writes to Andhra Pradesh government; requests not to re-open PPAs of renewables

Greenko has a net installed capacity of 4.7 GWdc across 15 states, ReNew is the largest renewable independent power producer, which claims to have 7 GW of capacity and Mytrah manages 1000 MW of wind and solar assets. Out of the 3,494 MW of wind energy generation, about 63 per cent of the wind power capacity is tied up with three developers alone.

Jagan also emphasised that the state is under great stress due to the crippled financial position and because of the misrule of the previous government, the energy sector has undergone many hardships.

Also read: Renegotiation of PPAs in Andhra may exert cash-flow pressure, impair investor confidence: Ind-Ra

Distribution companies or discoms, have accumulated losses of about ₹15,000 crore, exhausted their borrowing limit (due to high purchase cost) and power generators owe the discoms ₹20,000 crore.

Discoms in India owe over ₹3,000 crore to renewable energy companies, according to data compiled by the Central Electricity Authority.

Massive losses

“Under the garb of compliance with the Renewable Power Purchase Obligations (RPPO), mandating renewable energy consumption of 5-11 per cent, AP procured about 23 per cent of high cost renewable power, which put a heavy burden on the state’s finances,” he noted.

Jagan argued that it is common knowledge that with technological advances, the energy efficiency would increase significantly leading to tariff reductions. Therefore, it was a crime to execute high tariff PPAs for energy purchase beyond what was mandated by RPPO, or what was necessitated by the energy demand-supply situation, he noted.

Also read: AP Transco backs down on 50 million units of renewable power amid escalating row over tariff

Following this, the state’s discoms terminated 21 PPAs, citing unenforceable contracts. Then the renewable energy companies approached the Appellate Tribunal for Electricity (APTEL), which stayed the government’s decision to withdraw the 21 PPAs.

State government officials pointed out that solar energy prices was in excess of RPPO at costs up to ₹6.99/kWh. Further, power available through thermal power stations at ₹4.2/ kWh was procured up to ₹8.09/kWh to facilitate solar power producers by paying ₹3.89/kWh extra. In Rajasthan, the average rate of solar energy is available between ₹2 -3/kWh, as was seen in Solar Energy Corporation of India's bid. “This can cause a loss of ₹4,000 crore every year for the next 22 years,” he noted.

Published on August 23, 2019
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