India’s biggest solar power risk becomes a reality as bankrupt distribution utilities delay/refuse to buy

The biggest risk cited by developers and investors in India’s renewable energy industry is the ability of the distribution utilities to pay them for the power generated from the solar and wind power plants. While transmission capacity is another big risk, it is still manageable and a one time risk. On the other hand the 15-25 year PPA signed with discoms which have billions of dollars in accumulated losses is a giant risk.

Read about PRAYAS.

With many Indian states turning power surplus, there is little incentive to buy solar and wind power which is still expensive compared to the dirt cheap power available on the Indian power exchanges. Recently, India’s state of Punjab said it could not sell power form its thermal power plant despite selling it at just 3-4 cents a unit. Large Indian states such as Maharashtra have reportedly not paid developers for 12 months, causing the working capacity for developers to increase. Developers are also reluctant to build new RE capacity given the state of their existing RE capacity which is not getting payment on time. Lenders who generally provide 80% of the funding for these plants in the form of debt have also become reluctant to lend to this sector given the woes.

The Indian central government and its renewable energy ministry have little power to change things. The energy minister Piyush Goel had said that he would punish those states which are curtailing solar and wind power, but as we have said earlier he can’t do much. He can’t even act against states that are ruled by his party the BJP forget states which are ruled by the opposition parties. The biggest guilty parties are Rajasthan, MP and Maharashtra utilities. All the 3 states are directly ruled by the BJP but the Minister is mostly all sound and no action.

Accionia which is one of the biggest power developers in the world has reportedly said that it would need invest any more money into new wind power plants as almost 150 MW of its plants are either not getting any money from the utilities or do not have any PPAs signed with the state government.

“These discoms are paying conventional generators, but they haven’t paid wind from July 2015 onwards and are actively discriminating against wind generators,” said Sumant Sinha, founder of ReNew Power Ventures Pvt.

ReNew Power said 360 megawatts of wind power in Maharashtra, 150 megawatts in Rajasthan and 100 megawatts in Madhya Pradesh are affected by payment delays, impacting 35 percent of the company’s revenue.

The company with 86 megawatts of wind power in India and another 78 megawatts under development is the latest investor to complain that some Indian power distributors, known as discoms, are stifling investment and undermining Prime Minister Narendra Modi’s green-power ambitions.

Acciona had considered work in Maharashtra and Madhya Pradesh then decided to shelve its plans because discoms weren’t signing power purchase agreements for completed projects. Reccani said Tamil Nadu state has strong enough wind to support wind farms but also the same risk that payments would be curtailed at peak times.

Source