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Following intervention by the central government, several Indian states have agreed to move ahead with power purchase agreements (PPAs) with solar and wind energy project developers.

Clean Power

Indian States Agree To Sign Renewable Energy PPAs Following Government Intervention

Following intervention by the central government, several Indian states have agreed to move ahead with power purchase agreements (PPAs) with solar and wind energy project developers.

Following intervention by the central government, several Indian states have agreed to move ahead with power purchase agreements (PPAs) with solar and wind energy project developers.

The first breakthrough came with the signing of a power purchase agreement for one of the cheapest solar power projects in India. Power utilities in the state of Andhra Pradesh had refused to sign a power purchase agreement with the 250 megawatt solar power project secured by Solairedirect at a rate of Rs 3.15/kWh (¢4.8/kWh).

The utilities have now agreed to sign a power purchase agreement with the Solairedirect power plant, but with a condition. NTPC will ‘bundle’ 125 megawatts of coal-based electricity with the 250 megawatts of solar power. This would ensure that the overall cost of the electricity procurement is lower than Rs 3.15/kWh (4.8¢/kWh).

Wind Energy PPAs

Now, utilities in the state of Karnataka have decided to sign pending PPAs with wind energy developers. The utilities had earlier refused to sign these PPAs as they were under the feed-in tariff regime, and recently the introduced auction policy reduced the tariffs significantly.

The PPAs were supposed to be signed at a feed-in tariff rate of Rs 4.50/kWh (¢7.0/kWh), which is significantly higher than the current lowest wind energy tariff bid of Rs 2.64/kWh (¢4.1/kWh). The Karnataka Electricity Regulatory Commission has now approved at least one PPA at the higher feed-in tariff. The move is expected to affect developers that own more than 270 megawatts capacity PPAs for which were signed before 31 March 2017. The first wind energy auction was held in February 2017 which yielded a tariff of Rs 3.46/kWh (¢5.4/kWh).

The Ministry of New & Renewable Energy had asked states rich in wind energy to honor the PPAs for power projects which were commissioned when capital cost was higher.

Solar Power PPAs

The state of Uttar Pradesh has also approved PPAs with nine companies at a tariff of Rs 7.02/kWh (¢11.0/kWh). The tariff, which was discovered through a competitive auction process, is still higher than the current lowest tariff bid in India of Rs 2.44/kWh (¢3.8/kWh). The state utilities and the regulatory commission had objected to the high tariff bids compared to the bids seen in other states.

A total of 15 companies had secured rights to develop a total of 215 megawatts. Nine of these companies have agreed to reduce their tariffs to Rs 7.02/kWh while six others have refused to do so. The agreed tariff will be applicable for the first 12 years, while for the remaining 13 years of the PPA duration a much lower tariff will be applicable. Still, the new arrangement is beneficial to the developers as the tariff is significantly higher than the prevailing rate and several of these companies had already made huge investments and had the projects ready for commissioning.

 
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Written By

Smiti works as a senior solar engineer at a reputed engineering and management consultancy. She has conducted due diligence of several solar PV projects in India and Southeast Asia. She has keen interest in renewable energy, green buildings, environmental sustainability, and biofuels. She currently resides in New Delhi, India.

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