India extends commissioning deadline for RE project, considering covid situation
Premium- The extension has been granted for projects that have a scheduled commissioning date on or after 1 April 2021
NEW DELHI : In a huge relief to green energy developers across the country, the Union government has decided to extend the deadline for completion of their projects, considering the difficulties arising from the second wave of coronavirus pandemic raging across India, said two government officials aware of the development.
This assumes significance, given that the contracts, or power purchase agreements (PPAs), signed by developers specify strict commissioning deadlines and a failure to meet them can result in fines and encashment of their bank guarantees.
MORE FROM THIS SECTIONSee All
Premium Premium Covid update: India reports 3.62 lakh cases in a day, 4,120 deaths
1 min read . 10:05 AM IST
Premium Premium Covid-19: Uttarakhand to distribute Ivermectin tablets to all residents
1 min read . 08:58 AM ISTThis decision by the ministry of new and renewable energy (MNRE) to grant extension to those projects having a scheduled commissioning date (SCD) on or after 1 April 2021, comes against the backdrop of large parts of the country shutting down to contain the spread of the second wave.
Given the restrictions imposed by states, affecting the movement of personnel, labour, material, and the delay in multiple approvals and a depleted workforce at project sites, this extension is in addition to the one granted by MNRE up to a maximum of six months on account of the first wave.
An MNRE spokesperson did not immediately respond to queries emailed by Mint late on Wednesday.
To prevent developers from using covid-19 as an excuse for "low-cost exit options" from unviable projects, the MNRE has in its Wednesday order reviewed by Mint said, “While applying for such time-extension, RE (renewable energy) developers shall undertake that the time-extension shall not be used as grounds for claiming termination of power purchase agreement (PPA) or for claiming any increase in project cost, including Interest During Construction (IDC) or upward revision of tariff."
India is running the world’s largest clean energy programme to achieve 175 gigawatts (GW) of renewable capacity, including 100GW of solar power and 60 GW of wind power by 2022. A lot is riding on these projects to help India meet its climate change commitments.
Mint had earlier reported about the government’s plans to take strict action against green energy firms and their promoters leveraging the pandemic as an excuse to exit projects. The government plans to not only blacklist such companies, but also censure their promoters, preventing them from taking part in future projects. With some project developers exploring termination of their PPAs without encashment of bank guarantees, the MNRE has taken a dim view of such practices as it can impact India’s green energy plans.
“The actual quantum of time-extension shall be decided in due course depending on the covid-19 related developments that take place in the coming weeks," the 12 May order said.
“Requests for time-extension on account of resurgence of covid-19 and subsequent issuance of instructions by States/UTs restricting mobility of people have been carefully examined in the ministry. It is noted that while there are no central government instructions for a countrywide lockdown, since beginning of April 2021 several States/UTs have taken various measures such as night curfew, imposition of section 144, and weekend lockdown, which may have affected RE projects," the order added.
With solar module prices rising by over a fifth since December impacting the internal rate of return (IRR) from projects which have already signed PPAs, some developers are averse to putting resources into such contracts that are delayed and onerous to fulfil.
“Developers shall pass on the benefit of time-extension to other stakeholders down the value chain, including EPC (engineering, procurement, and construction) contractors, material/ equipment suppliers, and OEMs," the MNRE order said.
India has set a target of 450GW renewable energy capacity by 2030. It currently has an installed renewable energy capacity of 89.63GW, with 49.59GW under execution. Also, ₹4.7 trillion has been invested in the country’s renewable energy space in the past six years, with an expected ₹1 trillion investment opportunity annually till 2030.
Never miss a story! Stay connected and informed with Mint. Download our App Now!!