Andhra Pradesh signs wind power PPAs, does U-turn, wants 25 pct price cut now

Andhra Pradesh’s electricity distribution companies (discoms) signed power purchase agreements (PPAs) with various wind power generators at between Rs 4.76 and Rs 4.84 per unit in 2015, at tariffs that looked competitive then. But now that, two years later, Solar Energy Corporation of India (SECI) managed to get bids as low as Rs 3.46 per unit — SECI invited bids for 1,000 MW — the Andhra Pradesh discoms want their PPAs to be revised down to these levels. In addition, the discoms also want various central-government incentives for wind energy firms to be passed on to them.

The discoms have approached the state’s power regulator unilaterally seeking a lowering of the tariffs under a host of existing PPAs with wind power generators. The discoms’ bid to virtually dishonour the PPA terms would put wind power projects of around 1,000 MW in a bind and could set a bad precedent, analysts said.

The discoms’ petitions could adversely affect returns on investments of up to `6,000 crore. Wind power projects take between 18 and 24 months to start operations and the investments take several more years to be recouped.

The Andhra Pradesh electricity regulator, APERC, had in July 2015 released a tariff mechanism for wind power projects commissioned between FY16 and FY20 in the state. Since then, a clutch of PPAs were signed with developers such as Ostro, Renew, Tata Power and Mytrah. These firms invested, given the government’s assurance of a predictable and credible regulatory regime.

According to sources, the discoms have now requested the regulator to curtail the “control period” of the tariff mechanism to FY17; if the regulator allows this, the developers henceforth won’t be able to claim tariffs built into the PPAs.

Under the mechanism, wind power tariffs for FY16, FY17 and FY18 were set at Rs 4.83, Rs 4.84 and Rs 4.76 per unit, respectively.

Discoms have also appealed to the APERC to come up with new tariff for FY18, taking into account the outcome of recent wind power auctions. In their pleas, the discoms pointed out that wind tariffs plunged to a historic low of Rs 3.46 per unit in the maiden tariff-based auction for long-term wind power contracts on February 24.

Though many discoms from other states have reportedly been reluctant to buy renewable power at earlier rates after low prices discovered in tariff-based reverse auctions, sources say that this would the first instance in the country where existing PPAs are being sought to be amended in the wake of tariffs discovered via auctions subsequently.

Additionally, Andhra Pradesh discoms have also sought to receive the benefits of incentive schemes which were originally meant for power generators. Under the central government’s generation-based incentive (GBI) scheme, power generating companies of wind energy projects commissioned before March 31, 2017, can receive Rs 0.50 per unit for four to 10 years. The discoms also requested the regulator to pass on these generation-based incentives to them.

  1. According to sources, Andhra Pradesh discoms have also separately sent various letters to existing wind power project developers in the state demanding reduction in existing tariff. In some cases, they have allegedly started deducting Rs 0.50 per unit against GBI benefit, cutting down per-unit revenue of the generators to Rs 4.34.
  2. Timely approval and signing of PPAs and conducive wind speed made it an attractive destination for the wind energy industry. The 2,190 MW wind power plants added in Andhra Pradesh in FY17 accounted for 41% of the national capacity addition.

Source: Financial Express

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