As the government moves to cancel non-viable contracts for renewable energy projects, the Ministry of New and Renewable Energy (MNRE) on Tuesday clarified that any such cancellations will be phased and only done after all viable options for entering into Power Sale and Purchase Agreements (PSAs and PPAs) are fully explored.
The Mint announced Tuesday that the Department of Energy has asked Solar Energy Corp. of India (SECI), NTPC Ltd, NHPC Ltd and SJVN Ltd to terminate all awarded contracts for which PPAs could not be signed by the end of November.
These state-run firms, referred to as Renewable Energy Implementation Agencies (REIAs), are middlemen in the renewable energy chain, signing contracts for the sale and purchase of energy.
Read also | Sterlite is making a contrarian bet on renewable energy sources. Is it worth it?
In a statement, MNRE said it was “closely monitoring” these cases and noted that PSAs for nearly 43.94 GW of allocated capacity remain unsigned with state-run power distribution companies (discoms). The issue is significant because a longer delay threatens to slow India’s plan to add 50 GW of renewable capacity each year to reach 500 GW by 2030 and move toward its goal of zero by 2070.
The development assumes significance as the PSAs for 43.94 GW remain unsigned with the end-users – discoms – for which the REIAs have issued approval letters. Many discoms chose to wait for tariffs to go lower before signing the PSA straight away, delaying the process.
The vexed issue has plagued the industry for years and is gaining importance given the impact of delays on India’s ambitious green energy goals. Given the country’s green energy transition trajectory and net zero, the plan is to add 1,800 GW of renewable energy capacity by 2047 and 5,000 GW by 2070.
“The government is actively exploring mechanisms with stakeholders to optimize transmission capacity and improve the contractual framework. These efforts include examining the feasibility of signing PPAs and PSAs for certain awarded capacities and reviewing provisions such as the green shoe option. A blanket cancellation of bids is not anticipated,” the ministry said.
According to experts, falling prices for renewable energy and excess solar power production are the key reasons for reduced demand for new power purchase contracts.
“Many discoms are facing the problem of excess solar generation and loss of unused power during solar hours. This has reduced demand for new contracts and increased demand for storage capacity. They are looking for more continuous (RTC) power and new storage offerings can ease the situation and get more demand,” said Mohammad Saif, partner, strategy and transactions at EY.
Read also | Sub-goal of the government for renewable energy under priority sector loans
Mint said REIAs have also been given the option to sign PPAs without PSAs. It also said the government had decided that the green shoe option, which allowed for the acquisition of additional capacity beyond the offered capacity at the same bid price, would be dropped.
MNRE said some discoms have expressed concerns about signing PSAs for bids where the connection start date for successful bidders is likely in the distant future.
“REIAs have been advised to conduct due diligence by reviewing and categorizing such cases based on the likelihood of securing PSAs with end-users. This assessment would consider multiple factors, including the configuration of renewable energy to be supplied under the bid, the identified renewable energy supply tariff and the expected timeline for connectivity. After this review, only those LoA outlooks with minimal or no PSA cancellation basis may be considered,” the ministry added.
Cash-strapped utilities were unwilling to purchase electricity from projects awarded earlier at a relatively higher tariff, instead purchasing lower tariffs. The losses of discotheques are currently estimated at approx ₹7 trillion.
Read also | Government announces ₹5,400 incentive for battery energy storage
The ministry said the standard bidding guidelines for solar, wind, hybrid and fixed and dispatchable renewable energy (FDRE) have been amended to allow for the cancellation of awards that “remain outstanding for more than 12 months from the date of issue”, it said in a statement.
Of India’s installed renewable energy capacity of around 197 GW, solar and wind account for the largest share with 123 GW and 53 GW respectively.
