Solar Projects Facing Land Challenges in Rajasthan’s Bhadla Park

The Central Electricity Regulatory Commission (CERC) has issued an order extending the scheduled commercial operating date for 72 MW of grid-connected solar photovoltaic projects. The commission was examining a petition filed by Welspun Energy Private Limited against the Solar Energy Corporation of India (SECI).

Welspun had requested that the CERC restrain SECI from terminating the power purchase agreement (PPA); direct SECI to permit the assignment of the PPA to Giriraj Renewable Private Limited, and extend the scheduled commercial operating date  and the time-period for conditions subsequent for the force majeure (unforeseen) conditions.

Case Background

In 2016, SECI issued a letter of intent to Welspun Renewable Energy  to develop 100 MW of grid-connected solar. The project was built on build own operate basis with viability gap funding (VGF) in Maharashtra under Phase-II Batch-III of the National Solar Mission.

Welspun Renewable Energy  had requested SECI to allow Welspun Energy Private Limited to execute the PPA with SECI. On April 7, 2016, Welspun Energy Private Limited submitted a performance bank guarantee (PBG) of ₹300 million (~$4.25 million) and soon applied for grid-connectivity with Maharashtra State Electricity Transmission Company Limited (MSETCL).

At that time, there was no provision in the request for selection (RfS) or the guidelines for PPA execution and implementation of the project by parent company of a bidder. After Welspun Energy Private Limited approached the commission, the Ministry of New and Renewable Energy (MNRE) referred the matter to the Empowered Committee.

The Empowered Committee recommended a change in the provisions of PPA signing by amending the guidelines. MNRE issued amendment to guidelines on July 19, 2016. The PPA was executed on July 26, 2016, between Welspun Energy Private Limited and SECI. The PPA was effective from April 10, 2016.

In September 2016, Welspun Energy communicated to SECI that it was not in a position to execute the project and requested for the release of its PBG. In November 2016, SECI asked the firm to comply with the terms of the PPA and to deposit extension charges for the delay period by November 14, 2016.

When the firm failed to respond, SECI wrote to the concerned bank for the encashment of PBG. The firm deposited ₹19 million (~0.27 million) with SECI and the encashment of PBG was kept on hold.

Another notice was issued by SECI in March, 2017. Instead of complying with the mandatory condition, the firm requested for the assignment of the PPA to Giriraj Renewable Private Limited  in terms of Article 15 of the PPA. The petitioner requested for extension of time and sent a cheque of ₹65 million (~$0.92 million) which was returned by SECI. Then, SECI also informed the company that the “PPA has automatically stood terminated with the efflux of time”.

After examining submissions made by both SECI and Welspun, CERC opined that the financial closure and grid connectivity stand fulfilled within the extended period, and that the delay in land possession was caused due to government delay which can be treated as force majeure.

CERC condoned the delay by the company from October 4, 2016 to June 9, 2017, due to force majeure conditions.

CERC also stated that 28 MW of projects had already been installed, synchronized and commissioned. For commissioning of the remaining capacity of 72 MW, the commission extended the date up to 90 days from date of issue of its order.

The order was issued on December 17, 2018, which makes the new deadline to be March 17, 2019.

Delays in project commissioning for various reasons have been a nagging problem for the solar sector with scores of such petitions filed under state commissions. For instance, recently,  Welspun Renewables Energy Private Limited had also filed a petition against Bangalore Electricity Supply Company Limited, Karnataka Renewable Energy Development Limited, and Karnataka Power Transmission Corporation Limited. The petitioner had asked the commission to declare that it is not liable to any liquidated damages to the BESCOM as the commercial operational date was within 18 months and had requested the commission to accept the delay in commercial operational date  as they were due to force majeure (unforeseeable) events.

Last month in a similar case, the Karnataka Electricity Regulatory Commission (KERCpenalized Marakka Solar Power Project LL.P for delay in commissioning a 1 MW project.

KERC also dismissed a petition by Emmvee Photovoltaic Power Private Limited, stating that the solar power developer is not entitled to the relief due to project commissioning delay which resulted in a 30 percent tariff reduction for the developer.