The future of solar photovoltaic (PV) project development in Andhra Pradesh appears gloomy amid an apparent disconnect between the developers and the state. After the state distribution company (DISCOM) issued letters to entities to revise tariffs for projects whose power purchase agreements (PPAs) and power sale agreements (PSAs) have already been executed, the entities have refused to comply.

When contacted, a government official said, “As of now, the finer details of our communication cannot be shared, but it should be known that SECI and NTPC will not be revising the tariff as requested. The tariff was found to be correct, then according to the system costs, land costs, and other variables. Yes, the market saw a huge decline after two years or so, that doesn’t mean a contract bound by law can be breached.”

According to another government official, “Neither SECI nor NTPC will be attending the committee meeting. The letter by the Andhra DISCOM doesn’t make sense because the PPAs have been in operation for these projects for a long time. Any change in tariff will set a bad precedent that will do irreparable damage to the flow of investment in the Indian renewable energy sector, especially solar.”

The current situation, if not handled correctly, could lead to massive disruption in Andhra Pradesh’s solar and renewable energy sector.

Mercom has reported that the Andhra Pradesh government recently issued a communique stating that during 2014-2019, several PPAs were signed for more than the mandated 5% Renewable Power Purchase Obligation (RPPO), for up to 23% and the tariffs for these projects were high. The current state government has argued that the purchase beyond RPPO led to a loss of ₹10 billion ($146 million) to ₹15 billion ($219 million), due to the ensuing backdown costs of thermal power.

Later, Mercom reported, APSPDCL also wrote to the Solar Energy Corporation of India (SECI) and the National Thermal Power Corporation (NTPC) asking for a revision of tariff in the PPA and PSA to ₹2.44 (~$0.036)/kWh. Even then, an NTPC official had commented saying that the decision by the state government was baffling and that the NTPC was not going to revise the bills as requested.

At the same time, APSPDCL had written to a few private solar PV project developers too. One of them, (Greenko) SEI Green Flash Private Limited, petitioned the Appellate Tribunal for Electricity (APTEL) requesting it to intervene and put a stay on the operation of letter dated July 12, 2019, issued to it by the APSPDCL regarding the revision of the tariff for its grid-connected solar PV project to ₹2.44 (~$0.036)/kWh. The stay order was put in place by APTEL soon after. It remains to be seen how the tussle among the NTPC, SECI, and Andhra DISCOM plays out.

In a comprehensive report, Mercom recently analyzed how the state of affairs in Andhra Pradesh could set a bad precedent for the domestic renewable industry at large.

Image credit: Azure Power