NEW DELHI: The Centre plans to come down hard on those green energy firms and their promoters feigning the coronavirus pandemic as an excuse to exit already awarded contracts, said two people aware of the development.
This assumes significance given that India is running what will become the world’s largest clean energy programme, and comes in the backdrop of some wind energy developers seeking "low-cost exit options" for unviable projects.
The government plans to not only blacklist such companies but also censure their promoters, thereby preventing them from participating in future projects. With some project developers trying to terminate their power purchase agreements (PPAs) without encashment of their bank guarantees, the ministry of new and renewable energy (MNRE) has taken a dim view of such practices, as it can impact India’s green energy trajectory.
Power purchase agreements (PPAs) signed by developers have strict commissioning deadlines and a failure to meet them can result in fines and encashment of bank guarantees.
A MNRE spokesperson declined comment.
India plans to have 175 gigawatts (GW) of clean energy capacity by 2022. Of this, it seeks to produce 100 GW from solar projects and 60GW from wind power plants by March 2022. India now has 34.6GW of solar power and 38GW of wind power
“The projects were awarded through an open auction in which these developers willingly participated. The government has been trying to help the sector with measures such as awarding relief to those invoking force majeure. Also, the interest rates have come down. While we are open to helping the industry, it should not be misused," said a senior government official cited above requesting anonymity.
“Where is the question of a low-cost exit option? As far as Covid is concerned, the government has already given time extension," the official added.
The Department of Expenditure has issued instructions that due to COVID-19 pandemic on the invocation of Force Majeure Clause, contract period may be extended for a period not less than three months and not more than six months without imposition of any cost or penalty on the contractor/concessionaire.
“Instructions were also issued to return the value of performance security to the contractor/ suppliers proportional to the supplies made/ contract work completed to the total contract value. The same is being implemented by various Departments/Ministries," the government said in an earlier statement.
“While the issue (of low-cost exit options) has been discussed among developers, exiting doesn’t seem like a likely solution as no government will allow it," said the chief executive of a New Delhi based clean energy firm requesting anonymity.
The government’s stand comes at a time when the project developers are averse of putting resources into contracts that are already delayed and onerous to perform. To be sure, some of the issues that the wind energy sector has been facing even before the coronavirus pandemic hit the Indian economy hard include; change in state’ land allocation policies, delay in electricity tariff and PPA adoption by state electricity regulators, payment delays, and financing and transmission connectivity related challenges.
“There are terms and conditions that need to be followed as per the terms of the PPA. It's not so easy to exit. The government will follow all due process as laid out in the contract conditions," said a second government official cited above, who also did not want to be named.
This comes at a time of falling clean-power tariffs putting an already awarded 16.8 GW solar and wind energy capacity in limbo, as the fund-starved discoms are tariff-shopping and are reluctant to ink power supply agreements (PSAs) for these projects, Mint reported earlier. This also comes in the backdrop of the Andhra Pradesh and Punjab governments seeking to renegotiate clean energy contracts for operational projects.
According to government data, discoms owe around Rs10,000 crore in overdue payments to the green energy generation firms. This accounts for around 9% of the total Rs1.14 trillion in overdue payments to the generation firms for the electricity bought.
Clean energy projects now account for more than a fifth of India’s installed power generation capacity. The country is seeking additional clean energy investment of around $80 billion till 2022, growing more than threefold to $250 billion during 2023-30.
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