The government in the Indian state of Andhra Pradesh has finally come around to provide some relief to scores of solar and wind energy developers which it had recently threatened with tariff renegotiations.
Talking to a leading business daily, an unnamed government official in the state of Andhra Pradesh clarified that the government would investigate only those projects that were allocated without any competitive auction. Allocation of land to some of the wind projects may have been suspicious and now only such projects would be investigated, the official added. The statements made by this official seem to indicate that some of the developers may have submitted inaccurate information regarding land and other costs to the regulators during the tariff determination process.
This development comes within days of the Japanese Ambassador to India writing a letter to the Andhra Pradesh Chief Minister cautioning him against reviewing finalized power purchase agreements as this could alarm foreign investors. This letter seems to have been the final, and probably the most crucial, trigger for the Andhra Pradesh government to soften its stand.
The Andhra Pradesh government set up a committee a few weeks back to investigate all power plants operational or under construction in the state. The government was looking to renegotiate power purchase agreements and tariffs on the premise that some projects had been assigned tariffs greater than those in other states.
We covered a story examining the range of tariffs currently applicable in Andhra Pradesh against those in some other states.
Soon after the Andhra Pradesh government announced that the committee would look into the power purchase agreements, the central government issued an advisory against it claiming that such steps could shake investor confidence and adversely impact future investments in the renewable energy sector. In June, the state government had cancelled infrastructure projects worth Rs 50,000 crore (US$7 billion).
Consequently, the Andhra Pradesh government clarified that not only the power projects under its own jurisdiction but even those allocated by the central government agencies, like the Solar Energy Corporation of India and NTPC Limited, shall be open for tariff renegotiations. The state government asked SECI and NTPC to revise the tariffs of all their solar power projects operational or under-development in the state to Rs 2.44/kWh — lowest solar power tariff in India.
SECI and NTPC Limited threatened legal action against these measures. While the Ministry of New and Renewable Energy and Ministry of Power approached the Minister of Home Affairs to intervene in the matter, some projects developers approached the courts and secured a stay over the activities of the committee constituted by the Andhra Pradesh government. The Appellate Tribunal of Electricity also ruled in favor of the project developers and advised the state government not to cancel or terminate any power purchase agreements.
The state government also decided to curtail generation from a number of wind energy projects and increased generation from thermal power plants to meet the demand.
The steps taken by the Andhra Pradesh government may have served a huge blow to the confidence of several project developers over the last few weeks. We have covered extensively how project developers shied away from some large solar and wind energy tenders in the recent past.