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Andhra Pradesh renewable energy PPA dispute: Solar power body asks Centre to intervene

Venkatesh Ganesh Mumbai | Updated on August 19, 2020

Solar installations in the first half of 2020 totalled 1.3 GW, a 59 per cent decrease from the 3.2 GW of capacity added in the first half of 2019   -  AFP

Solar and wind power purchase agreements entered into by the N Chandrababu Naidu government were terminated by the YS Jagan Mohan Reddy government

The National Solar Energy Federation of India (NSEFI) has written to Power Minister RK Singh seeking the Centre’s intervention in securing an early decision on its Power Purchase Agreement (PPA) dispute with Andhra Pradesh.

NSEFI is an umbrella organisation of all solar energy stakeholders in India, which includes solar developers, manufacturers and EPC (engineering, procurement and construction) contractors.

The issue on hand is with regard to the termination of solar and wind power PPAs entered into by the N Chandrababu Naidu government by the YS Jagan Mohan Reddy government. As a result of the AP government’s decision to revoke the PPAs, the matter got dragged into the AP High Court (APHC).

Impact on investment

Subsequently, Singh wrote to Reddy saying that the move could set a precedent, question the sanctity of PPAs and impact foreign investment. Reddy retorted that the PPAs entered into by the previous government had majorly benefited only three players and the cost of power was procured at higher-than-normal rates, imposing a heavy burden on the State finances.

“Our member companies are still awaiting the decision on the court cases on the issue. The delays in the proceedings and the decision from APHC on this matter is having an adverse impact on investor sentiments and future development of the RE (renewable energy) sector in the State,” wrote NSEFI.

The urgency is also due to the curtailment of power by State Load Dispatch Centres (SLDC) and the outstanding payments owed to the power generators.

The last date set for the hearing by the AP High Court was March 11. However, due to Covid-19 and the resultant nationwide lockdown, the matter has been delayed. So, despite the dispute having started a year ago, a final decision in the matter is still awaited.

“Although the HC has started functioning, this matter has not been taken up despite most developers filing urgency applications... Multiple interlocutory applications have been filed requesting urgent hearing, with no favourable response from the APHC,” wrote NSEFI.

While the Reddy government’s intent was to reduce the ‘high’ PPA tariffs, the move has put 5.2GW of installed wind and solar power capacity, with a combined debt of ₹21,000 crore, at the risk of a default, it added.

Solar installations in the first half of 2020 totalled 1.3 GW, a 59 per cent decrease from the 3.2 GW of capacity added in the first half of 2019, according to a Mercom report.

Further, large-scale installations totalled 120 MW compared with 896 MW in the previous quarter. Large-scale project installation figures in Q2 were the lowest in the past seven years. “Therefore, given the current uncertainty in the economic climate and the fact that the RE sector has the capacity to bring in investments, create jobs and contribute to the PM’s dream of ‘Atmanirbhar Bharat’, an early decision on this matter is needed,” NSEFI said.

Published on August 19, 2020

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