Industry Groups Ask for Renewable Generators to be Fully Paid Amid COVID-19 Crisis

The Solar Power Developers Association (SPDA) and the Indian Renewable Energy Alliance (IREA) have written  letters to the Government of India requesting necessary relief for renewable energy generators in the wake of the Coronavirus pandemic to ensure that the industry continues to generate power during the period.

Renewable energy has developed at a rapid pace over the last decade in the country, and it has become one of the preferred power sources in the country and is at the heart of the energy transformation that is taking place across the globe.

Both the  associations appreciated the steps taken by the government to contain the impact of COVID-19. The Ministry of Power (MoP) and the Ministry of New and Renewable Energy (MNRE) have announced various relief measures, orders, and advisories to address the challenges across the power sector value chain-generation, transmission, and distribution.

The SPDA and IREA have requested the government to urge the DISCOMs to continue paying to the renewable energy generators, considering their ‘must-run’ status.

“Now, despite there being no mention of a moratorium on the payments to be made by the DISCOMs, in the final directions issued by the MoP to Central Electricity Regulatory Commission (CERC), some DISCOMs are purposely misconstruing the intent of the said directions to deny payments to renewable generators, under the garb of MoP’s direction and invocation of force majeure,” states the letter signed by Sunil Jain, the interim chairman of IREA.

In their letters, the associations stated that the stand that was taken by the MNRE to confirm that renewable energy generation is a part of the essential services was timely and much needed.

Citing the Ministry of Power’s recent notification that during the present emergency, there will be no curtailment of supply to the DISCOMs, the associations assured that all members and the entire solar industry are willing and committed to play its part.  The associations have highlighted the severe financial crunch across the renewable energy industry owing to the non-payment of monthly tariff payments by the distribution companies of the states. The letters also noted that unlike the central public sector undertakings (CPSU) and state government generators that have government backing for financial difficulties, the renewable energy capacity has mostly been developed by the private sector.

The SPDA and IREA argued that if the monthly payments are stopped abruptly by the DISCOMs, there will be a significant impact on the entire industry. It stated that various financial institutions had funded these projects, and repayment is entirely dependent on the receivables from the utilities. Non-payment would result in the companies being declared as non-performing assets (NPAs).

The letters by SPDA and IREA further added that the loan moratorium announced by the RBI is a positive step, but it may not be enough to sustain the renewable energy generators. The renewable energy sector requires continuous cash flow and considering the gravity of the situation, and the requirement that renewable energy power projects continue operating, the liquidity in the sector must be maintained.

The letters requested that as a part of the economic stimulus package being planned, direct relief to DISCOMs must be provided, perhaps through short-term bonds subscribed by RBI or a government grant while ensuring the generators get paid for the power they supply.

Further, the letters added that the state government could raise money by issuing commercial paper that can be used to pay renewable energy generators. In its letter, the associations pointed out that the Reserve Bank of India (RBI) had announced targeted Long-Term Repo Operations (LTRO) aggregating ₹1,000,000 million (~$13.35 billion), wherein banks can raise funds at 4.40% and invest in commercial papers and non-convertible debentures. It further noted that the government intermediaries like SECI and NTPC are best positioned to tap into this money and relieve the entire sector from working capital challenges.

Lastly, the letters also suggested that the Ministry of Finance may like to release the funds to the generators through the MNRE against the outstanding tariff or to the DISCOMs with a condition to make the outstanding payments to renewable energy generators.

Meanwhile, a few days back, Anand Kumar, Secretary of the MNRE, stated that all renewable energy projects currently under implementation would be given an extension of time in light of the ongoing lockdown due to the COVID-19 pandemic.

Earlier, MNRE had issued an official memorandum, which stated that the time extension in scheduled commissioning of renewable projects due to the disruption of supply chains would be treated as a ‘force majeure’ event.

Track the latest developments and initiatives taken by the government to fight the economic repercussions of the pandemic in the renewable industry here.