Renewable energy sector faces hurdles as PPA and PSA delays persist

19 Sep 2024 CW Team

This push led to a significant surge in solar tenders and auctions in early 2024, with tenders increasing by 122% year-over-year to over 30.7 GW and auctions witnessing a 2,957% year-over-year growth. Despite this growth, over 43 GW of projects are now stalled, waiting for PPA signings due to a lack of prequalified offtakers.

An official from a Renewable Energy Implementing Agency (REIA) explained that the new bidding trajectory requires the release of tenders even without secured offtakers, disrupting the previous process, where tenders were issued only upon securing a procurer. This has resulted in delays in PSA signings and created challenges in the industry.

Developers had anticipated some of these issues, expecting that stricter penalties for failing to meet Renewable Purchase Obligations (RPOs) would prompt faster PSA signings. The Electricity (Amendment) Bill 2022 introduced penalties for RPO non-compliance, ranging from Rs 0.25 /kWh to Rs 0.50/kWh, incentivizing power distribution companies (DISCOMs) to expedite PPA signings to avoid financial penalties.

However, the large volume of tenders without secured offtakers has frustrated developers. Many tenders face legal disputes or opposition from DISCOMs, particularly when bundled with thermal power. For example, DISCOMs like TANGEDCO in Tamil Nadu and West Bengal have objected to certain tenders, even after the Central Electricity Regulatory Commission (CERC) adopted the tariffs. These disputes have slowed PPA signings, particularly for projects viewed as unfavorable by DISCOMs.

Concerns also arise with hybrid power tenders involving solar, wind, and storage, where tariffs are slightly higher due to the added reliability of supply. Despite this, DISCOMs have hesitated to sign such PPAs, particularly due to concerns over transmission charges, with the inter-state transmission charge waiver applying only to projects commissioned by June 30, 2025.

While higher capacity utilization factors make wind-solar hybrid power and firm renewable energy projects attractive, uncertainties about transmission charges and the structure of tenders continue to pose challenges. Despite government mandates promoting renewable energy adoption, securing offtakers remains a significant issue for developers.

Raj Prabhu, CEO, Mercom Capital Group, emphasized that while setting an annual bidding trajectory was a step toward meeting India’s 2030 renewable energy goals, the entire process from bidding to procurement needs streamlining. He suggested that policy adjustments should ensure that bidding capacities count only if the auction is successful and power is procured, rather than merely announcing tenders.

(Mercom)

India’s renewable energy sector is experiencing delays in finalising Power Purchase Agreements (PPA) and Power Sale Agreements (PSA), hampering progress for developers amid rising demand for clean energy. The Ministry of New & Renewable Energy introduced an agency-wise bidding calendar in April 2023, targeting 50 GW of renewable energy projects annually through FY 2027-28. This initiative, involving agencies like the Solar Energy Corporation of India (SECI), NTPC, NHPC, and SJVN, aimed to accelerate India's clean energy transition. This push led to a significant surge in solar tenders and auctions in early 2024, with tenders increasing by 122% year-over-year to over 30.7 GW and auctions witnessing a 2,957% year-over-year growth. Despite this growth, over 43 GW of projects are now stalled, waiting for PPA signings due to a lack of prequalified offtakers. An official from a Renewable Energy Implementing Agency (REIA) explained that the new bidding trajectory requires the release of tenders even without secured offtakers, disrupting the previous process, where tenders were issued only upon securing a procurer. This has resulted in delays in PSA signings and created challenges in the industry. Developers had anticipated some of these issues, expecting that stricter penalties for failing to meet Renewable Purchase Obligations (RPOs) would prompt faster PSA signings. The Electricity (Amendment) Bill 2022 introduced penalties for RPO non-compliance, ranging from Rs 0.25 /kWh to Rs 0.50/kWh, incentivizing power distribution companies (DISCOMs) to expedite PPA signings to avoid financial penalties. However, the large volume of tenders without secured offtakers has frustrated developers. Many tenders face legal disputes or opposition from DISCOMs, particularly when bundled with thermal power. For example, DISCOMs like TANGEDCO in Tamil Nadu and West Bengal have objected to certain tenders, even after the Central Electricity Regulatory Commission (CERC) adopted the tariffs. These disputes have slowed PPA signings, particularly for projects viewed as unfavorable by DISCOMs. Concerns also arise with hybrid power tenders involving solar, wind, and storage, where tariffs are slightly higher due to the added reliability of supply. Despite this, DISCOMs have hesitated to sign such PPAs, particularly due to concerns over transmission charges, with the inter-state transmission charge waiver applying only to projects commissioned by June 30, 2025. While higher capacity utilization factors make wind-solar hybrid power and firm renewable energy projects attractive, uncertainties about transmission charges and the structure of tenders continue to pose challenges. Despite government mandates promoting renewable energy adoption, securing offtakers remains a significant issue for developers. Raj Prabhu, CEO, Mercom Capital Group, emphasized that while setting an annual bidding trajectory was a step toward meeting India’s 2030 renewable energy goals, the entire process from bidding to procurement needs streamlining. He suggested that policy adjustments should ensure that bidding capacities count only if the auction is successful and power is procured, rather than merely announcing tenders. (Mercom)

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