Protect PPAs to recharge investment in renewables

Despite the Centre’s Rs 1.25-lakh-crore liquidity infusion scheme to enable state distribution companies (discoms) to clear the dues of generators, a large number of renewable energy producers in many states remain to be paid. The situation in Andhra Pradesh is alarming due to the state government’s insistence that old PPAs for solar and wind energy be renegotiated, against the recently discovered price through competitive bidding.

In this context, it is important to discuss the implications of the recent judgement of the Andhra Pradesh High Court which has a direct bearing on the survival of renewable energy investors. The issue of electricity falling in the concurrent list of the Constitution also needs to be factored in.

To address the problem of mounting dues of independent power producers (both conventional thermal plants and solar & wind generators) from the state discoms, the ministry of power had ordered that power shall be despatched by the National Load Despatch Centre and Regional Load Despatch Centre/s (NLDC / RLDC) only on production of a letter of credit (LC) for the desired quantum of electricity by the state discom.

Defaulters shall not be granted short-term open access to buy power from any other source, including the power exchanges. In short, the said order made the discom liable to pay compensation to the generator if the contracted power as per the PPA is neither scheduled nor despatched due to the non-opening of the LC by the discom.

The Andhra Pradesh High Court ruled that the Centre has no authority to enforce contracts between the state discoms and renewable energy generators, and it set aside the above orders of the Union ministry.