The Ministry of New and Renewable Energy (MNRE) has written a letter to the chief secretary of the government of Andhra Pradesh LV Subramanyam, expressing its serious concerns over the state’s impending decision to revisit the power purchase agreements (PPAs) it has signed with solar and wind developers.

Showing apprehension on the state’s decision to revisit PPAs, the MNRE has stated that without a bonafide reason, no contractual agreements can be revisited and such an act would disturb the national goal of renewables and would harm the investor confidence in the sector.

According to reports, the state’s new chief minister Jagan Mohan Reddy has said that his government will review all the PPAs, especially wind and, solar, signed by the previous government led by N Chandrababu Naidu, alleging corruption.

In the letter, the MNRE has mentioned that the PPAs have been signed either under Section 62 or Section 63 of the Electricity Act 2003. As per Section 62, the tariff is determined by the state regulatory commission in line with the Central Electricity Regulatory Commission(CERC) and based on Section 63; the tariff is arrived at after competitive bidding.

The MNRE letter further explains that for both the sections, the tariff is adopted only after a public hearing, which is then followed by the actual signing of PPAs.

The MNRE letter has further requested the chief secretary of Andhra Pradesh to keep the chief minister appraised on the ramifications of revisiting of PPAs and observations of the MNRE.

“We feel the MNRE letter to the Andhra Pradesh government is a positive move in the interest of bid out projects. In solar and wind, many projects are already on course, and many have also achieved financial closure. Revisiting PPAs is going to be detrimental to investor and developer confidence. The MNRE letter is reiterating this fact,” said Sandeep Kashyap, President, business development, at ACME Solar commenting on this development.

Revisiting PPAs is not new in Andhra Pradesh. Earlier, the Andhra Pradesh Southern Power Distribution Company (APSPDCL), a state distribution company, had decided to renegotiate power purchase agreements it had signed with wind project developers. The PPAs were signed before India’s first wind power auction was conducted by Solar Energy Corporation of India (SECI).

In another instance, the Andhra Pradesh Electricity Regulatory Commission (APERC) was mulling whether to reduce the duration of the power purchase agreement from 25 years to 5 years due to the fall in prices of wind and solar energy. The commission had written to the Advocate General of Andhra Pradesh for advice on the legal feasibility and possibility of reviewing the PPA in force and changing their duration.

Recently, Andhra Pradesh DISCOMs filed a petition with the APERC seeking relief in the terms and conditions for tariff determination for wind power projects in the state between FY 2015-16 and FY 2019-20. The petition also sought revision in the PPA for wind power projects and the tariff fixed by APERC in its orders dated December 13, 2019.

According to Mercom’s India Solar Project Tracker, Andhra Pradesh has installed solar PV capacity of ~2.75 GW and a project pipeline of 1.9 GW.

Early this year, the state came up with a new solar policy to promote widespread usage of solar power and targets a minimum total solar power capacity addition of 5,000 MW in the next five years in the state.