Published on June 14th, 2019 | by Saurabh0
$300 Million Pending Payment To Solar Developers Highlights India Challenges
June 14th, 2019 by Saurabh
The Indian solar power market continues to experience perennial challenges with no possible solution in sight.
Indian media outlets have reported that solar power developers in the southern state of Telangana are awaiting payments worth $300 million for generation since July 2018. As many as 200 project developers are affected, representing a cumulative capacity of 3.6 gigawatts.
The payments are to be made by the Telangana State Transmission Corporation which had entered into power purchase agreements with the developers. The agreements were signed at tariffs that now seem every high. Tariffs for these projects are reportedly between Rs 5.17/kWh (7.43¢/kWh) and Rs 6.90/kWh (9.91¢/kWh). Tariff bids in the last few auctions have been around Rs 2.60-2.80/kWh (3.73-4.02¢/kWh).
According to the report, the transmission company has failed to made payments to the solar power developers due to pressure from conventional power generators and little financial support from the state government.
The delay in payments pose serious financial risk not only to the solar power developers but have indirect ramifications that extend well beyond the solar market. According to the Telangana Solar Developers Association, several project developers had taken loans to set up projects and are now struggling to service their debt on time. As per regulations of the Reserve Bank of India, delay in payment of EMIs for three consecutive months could result in the asset being classified as a ‘non-performing asset’. Credit rating of such defaulters are also downgraded resulting in direct financial impact across markets.
Solar power has a huge contribution in the Telangana power mix. It is the second-largest technology by installed capacity within the state-owned power plants. Solar power represents almost a third of Telangana’s own power generation capacity. In terms of energy solar power has contributed more than 12% of the state’s consumption over the last few days compared to just 3.5-3.7% on the national level.
The Telangana government clearly needs to take an aggressive approach to clear all pending dues of the solar power developers as the consequences of mass defaults by these developers has the potential to push the entire solar power sector in a death spiral.
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