The renegotiation of contracts with renewable energy players is impacting the viability of investments in the sector according to a report by WWF-India.

The report titled, “The Rise of Renewables: Are You REDE?” said, “The fall in Renewable Energy (RE) prices, as a result of economies of scale and reverse bidding led to a series of events where many Discoms across the country have started reneging tariffs as against the spirit of PPAs (Power Purchase Agreements) signed with RE generators and sanctioned by the regulators.”

“This directly affects the financial viability of projects set-up by generators/investors. For example, Discoms in Andhra Pradesh, Karnataka and Uttar Pradesh went on reneging contacts with investors. Such issues not only discourage corporates to invest in this sector, but also spread negative news about the certainty and sanctity of the contacts,” the report said.

Policy uncertainty

Calling policy and regulatory uncertainty as the single largest issue that buyers and investors face in the RE sector, the WWF-India report said. “Policy uncertainty is a significant challenge for businesses, and while some degree of uncertainty is always factored into energy cum financial models, the business case of investing in RE can easily fail, if deviations exceed beyond a critical point. Policy makers and regulators need to therefore provide an environment of long-term policy certainty and implementation to enable investments in the long term,” the report said.

“As India has put in place a uniform tax structure across different States through GST, similar options could be considered towards uniform open access regulations, charges and mechanisms for RE procurement. Policy makers and regulators should devise framework in which corporates having operations in multiple States should be governed through a unilateral RE policies and regulations handled by a central agency,” the report added.

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