Economy

Wind power industry hit by discom turbulence

V Rishi Kumar Hyderabad | Updated on October 07, 2018 Published on October 07, 2018

Losing speed The trade feels that unless the sector is handled with care, it will lead to NPAs   -  THE HINDU

Power producers allege pressure from State utilities to re-negotiate PPAs, delayed payments, lack of open access

The country’s wind power sector is facing with turbulence, with alleged arm twisting by several State discoms over renegotiation of PPAs, lack of open access for inter-State transmission, and delayed payments by discoms, all leading to financial concerns raising bankability issues.

This, in turn, has resulted in lenders turning cautious over funding new projects, as the outcome may not be as projected, according to several players in the sector.

Relief in Maharashtra

A recent Bombay High Court decision provides some relief for projects in Maharashtra but there are a number of systemic issues that need to be addressed if the sector has to grow unhindered, say industry observers. In its order, the Court provided much-needed comfort to wind generating companies operating in Maharashtra, whose tariffs were under the cloud of re-negotiation pursuant to an order passed by the power regulator.

These related to power purchase agreements during 2012-15 where the tariffs allowed were based on wind zone location, Sakya Singh Chaudhuri, a legal expert representing wind power companies explained.

Significantly, the issue faced by the wind power producers in Maharashtra may appear an isolated case, but in reality, they are faced with a number of problems in other States such as Tamil Nadu, Andhra Pradesh, Karnataka and Rajasthan.

For the IPPs, apart from facing the threat of renegotiation of PPAs to bring down tariffs, delayed payment is an issue as the financial health of discoms has not been rosy; open access becoming difficult is the other issue.

Discoms woes

These problems have been thrust on IPPs inspite of clear guidelines and government directives, according to a senior representative of the Association of Power Producers.

The older projects and captive ones are at the receiving end. DV Giri, Secretary-General, Indian Wind Turbine Manufacturers Association, said: “Though there had been threat of re-negotiation/re-opening of PPAs from some States, it was not taken forward as it would challenge sovereign contracts and could open up litigation.”

But the bigger issues are delayed payments, and curtailment and back down, which have had adverse impact on developers. The delay ranges from a couple of months to over one year. Unless the sector is handled with care, it will lead to NPAs, Giri said.

The case of conglomerate ITC is illustrative. It had set up wind farms at Anantapur in the undivided Andhra Pradesh, to use the power generated for its paper mill at Bhadrachalam, now part of Telangana.

After commissioning, it found it hard to wheel the power to the mill in the new State as it did not have access. Both AP and Telangana have turned power surplus adding to its woes. “So, we are now wheeling the power generated at Anantapur for use in our ITC plants located in the UP,” a senior official of ITC said.

While rating agency ICRA has hinted at the potential to add about 3 GW in FY 2019, some developers said that given the issues faced by existing projects, lenders are treading cautiously, leading to delays in financial closure.

While efforts are on to create Green Corridors, which are expected to ease transmission issues for renewable energy, the impact is likely to be felt only with a lag. However, PTC India recently announced inter-State wind power transfer arrangement between UP, Bihar and Jharkhand, this needs to be expanded.

IPPs take more than a year to secure approvals for inter-State open access resulting in huge losses to generators. This is against regulations. When power is wheeled from one State to another, a producer has to pay transmission charges of two States and transmission losses.

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Published on October 07, 2018
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