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MISSION


  • Tariff and counterparty risks directly impact the viability of renewable energy projects. These risks have amplified post the recent solar and wind project auctions, in which significantly lower tariffs were discovered as compared to the feed-in tariffs (FiTs) in various states. The new low for solar power is Rs 2.44 per kWh while that for wind power is Rs 2.64 per kWh.

  • The biggest concern is the discomsí approach towards renewable energy offtake. Until recently, it was limited to their payment behaviour, grid curtailment and merit order despatch. But now, with the discovery of low prices in each subsequent auction, and often under the pretext of public interest, the discoms have started renegotiating the terms of the power purchase agreements (PPAs) including tariffs. Take for instance, the case of the two power utilities of Andhra Pradesh, which refused to sign PPAs for the 250 MW project tendered by NTPC at a tariff of Rs 3.15 per kWh, claiming that they have contracted enough solar power to meet their requirement.

  • Some states like Jharkhand and Uttar Pradesh have been able to secure lower tariffs by renegotiating the PPA terms. Jharkhand had refused to sign PPAs for 1.2 GW of capacity for two years because the tariffs discovered at its auction were higher compared to those in other states. Uttar Pradesh told over a dozen project developers to reduce tariffs by as much as 18 per cent just before they were ready to commission the projects. Discoms in Karnataka and Tamil Nadu have also made similar attempts.

  • These developments have created a certain degree of uncertainty, which should be avoided at this juncture as project installations have just started gathering pace and a tall target of achieving 175 GW by 2022 is to be met.

  • Over the years, the PPAs signed for renewable energy projects have failed to address the issue pertaining to grid curtailment and they also lack a mechanism to compensate for the energy loss. Further, the poor financial performance of discoms has led to frequent delays in payment, impacting the interest-servicing capability of renewable projects.

  • The government, on its part, is working towards addressing these concerns. The Ujwal Discom Assurance Yojana (UDAY) has helped in restoring the financial health of discoms to a certain extent. The Solar Energy Corporation of India has announced a payment security fund to ensure that developers receive timely payments even if utilities default on their payments, while the Ministry of Power has proposed a compensation mechanism for renewable energy projects against grid curtailments. More recently, the Ministry of New and Renewable Energy has issued a notification to impose stringent penalties on states and project developers if they unilaterally renegotiate or cancel PPAs.

  • Meanwhile, open access has been conceived as an important tool to give developers the option to sell power to offtakers of their choice and not just be restricted to PPAs with discoms. Industrial and commercial consumers often procure power through open access by signing third-party PPAs. However, multiple regulatory risks have burdened this model of power procurement as well. Additional surcharges levied on open access customers, even as renewable tariffs have fallen considerably, have only worked against the expansion of this market.

  • The mission of this conference is to examine the financial health of discoms, discuss the risks and challenges pertaining to power offtake by discoms, study the alternatives and propose solutions. The conference will also highlight the key features and the various legal nuances of solar and wind PPAs, execution challenges and the way forward for the enforcement of PPAs..
 
     
 
       
 
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