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Renewable PPAs in Andhra, Punjab: Power cos write to Centre

The Andhra Pradesh government is currently in a legal battle with renewable energy producers with the aim of renegotiating contracted power tariffs and the Punjab Assembly has passed a Bill to renegotiate tariffs under existing PPAs

Written by Karunjit Singh | New Delhi |
Updated: December 22, 2021 5:20:59 am
Experts noted that besides moves by the two states to renegotiate contracts, renewable energy producers have faced of large dues from state discoms.

Renewable power producers have raised the issue of states like Andhra Pradesh and Punjab reneging on power purchase agreements (PPAs) and asked that the Punjab Governor veto a Bill that would allow renegotiation of existing PPAs in the state.

The Andhra Pradesh government is currently in a legal battle with renewable energy producers with the aim of renegotiating contracted power tariffs and the Punjab Assembly has passed a Bill to renegotiate tariffs under existing PPAs. Solar power tariffs have fallen drastically over the past 5 years leading to power purchased under earlier solar PPAs being significantly more expensive than prices under more recent PPAs.

In a letter to the Union Power Minister, the Association of Power Producers (APP) said the move by the Punjab government could put Rs 27,000 crore of investment in jeopardy and lead to a rise in non-performing assets in banks. “We have recommended that the Punjab Bill (Punjab Energy Security, Termination of PPAs and Redetermination of Power Tariff Bill), not be given approval by the Governor since it overrides the Electricity Act,” said Rajiv Ranjan Mishra, managing director, Apraava Energy.

Industry representatives noted that technological breakthroughs had led to a sharp decline in prices but investments made earlier were based on a price discovery mechanism and the technology at the time.

“Andhra Pradesh and Punjab have gone back on a majority of renewable PPAs. If you accept cancellation of PPAs because of a technological breakthrough bringing down tariffs, then you have to accept all cancellations as and when a breakthrough results in price reduction. For investments to continue and if we have to meet our target of 500 GW of renewable power capacity, we need to ensure that earlier contracts are honoured, “ said Ashok Khurana, DG, APP.

The Power Ministry did not respond to emailed requests for comment by The Indian Express.

The ministry had earlier written to the Andhra Pradesh government asking the state to respect PPAs. Credit ratings agency Crisil had estimated that the move the Andhra government could lead to financial distress for 5.2 GW of renewable energy projects with debt exposure of Rs 21,000 crore.

Experts noted that besides the moves by the two states to renegotiate contracts, renewable energy producers have faced of large dues from state discoms.

Mishra, quoted above, said, “Besides moves to renege on contracts, a number of states have large dues to renewable power producers. States like Madhya Pradesh,Maharashtra, Tamil Nadu and Telangana have large overdues of as much as 9-10 months.”

Power Minster RK Singh said last week that no investment for renewable energy would come if investors found out that power was not being paid for, adding that dues to the renewables sectors were worth about 11 months of power supply.

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