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Andhra Pradesh has 3,230 MW of solar power projects awarded through competitive bidding. (AFP)
Andhra Pradesh has 3,230 MW of solar power projects awarded through competitive bidding. (AFP)

Andhra Pradesh to float India’ largest solar tender for 10 GW capacity

  • The Solar power capacity bid entailing a 35,000 crore investment comes even as earlier clean energy contracts hang fire due to the state government’s decision to renegotiate PPAs
  • India’ solar power tariffs have touched a record low of 2.36 per unit

NEW DELHI: In a surprise move, the Y.S. Jagan Mohan Reddy-led Andhra Pradesh government is expediting efforts to float India’s largest solar tender for setting up 10 gigawatt (GW) capacity, said three people aware of the development.

Interestingly, the mega tender accounting for 14% of India’s green energy capacity to supply electricity to the farmers is in the works, even as 5.2 GW of solar and wind energy projects are hanging fire, due to the state government’s decision to reopen renewable energy contracts inked under the previous N Chandrababu Naidu government.

State energy secretary N. Srikanth confirmed the mega solar tender development and said that Andhra Pradesh Green Energy Corporation Ltd (APGECL) is the nodal agency for the same.

Under flak from the Union government and global investors such as Goldman Sachs, Brookfield, SoftBank, Canada Pension Plan Investment Board, Caisse de dépôt et placement du Québec, JERA Co. Inc., GIC Holdings Pte Ltd, Global Infrastructure Partners, CDC Group Plc, EverSource Capital and World Bank’s International Finance Corp., the government has mandated state-owned APGECL to call for this mega solar bid that will entail a 35,000 crore investment.

These marquee firms had invested in Indian companies, including ReNew Power, Greenko, Adani Power, PTC India Ltd, SB Energy, Mytrah and Hero Future Energies that have set up projects in Andhra Pradesh. The state government's controversial decision not only drew criticism from the Centre, but also from the governments of France, Canada and Japan since the investments had invested in Indian companies made by their firms in the state’s clean energy space.

“We will call bids based on land getting ready," said a senior state government official cited above requesting anonymity.

This proposed mega contract also comes at a time, when India’ solar power tariffs have touched a record low of 2.36 per unit at an auction conducted by state-run Solar Energy Corporation of India Ltd. Falling clean power tariffs putting an already awarded 16.8 GW solar and wind energy capacity in limbo, as fund starved state electricity distribution companies (discoms) are unwilling to sign contracts for these previously awarded projects at a comparatively higher tariff, Mint reported earlier. Also, the Punjab government is seeking to renegotiate clean energy contracts for operational projects.

“The RFP (request for proposal) for 10,000 MW will be floated shortly," said a second person aware of the development cited above who also didn’t want to be named.

Andhra Pradesh has around 7.7 GW of solar and wind projects and is home to India’s second-largest installed capacity of clean energy, accounting for around 10% of the country’s green energy capacity, with investments of 60,000 crore. The state has 4,092 MW of installed wind power projects awarded through feed-in tariffs. Also, the resource-rich state has 3,230 MW of solar power projects awarded through competitive bidding.

“The state government is trying to resolve the problems associated with the earlier clean energy PPAs," said the second person.

The state discoms reduced the contractually approved tariff under the power purchase agreement (PPA) to 2.44 per unit for solar projects and 2.43 per unit for wind projects since July 2019; and informed the developers that in the event of them not agreeing to the revised tariffs, the PPAs would be terminated.

This tariff renegotiation by the AP government was challenged by the developers and the dispute is currently before the Andhra Pradesh high court. While setting aside the state government’s order, the high court directed the discom to make payment at the reduced interim tariff of 2.44 per unit for wind projects and Rs. 2.43 per unit for solar projects respectively, until the issue is resolved by the Andhra Pradesh State Electricity Regulatory Commission.

The state government’s move led to the Centre pitching to set up an Electricity Contract Enforcement Authority to ensure that conditions in PPAs are followed, through the draft amendments to the Electricity Act, 2003. The Centre has been trying to find a solution to the issue. These include state-run NTPC Ltd offering to buy 300 MW of green power from Andhra Pradesh to broker a truce, as reported by Mint on 2 January.

The mega tender also comes at a time when the Centre plans to take strict action against green energy firms and their promoters feigning the covid-19 as an excuse to exit projects that they were awarded. This comes in the backdrop of some wind-energy developers seeking ‘low-cost exit options’ i.e. termination of their PPAs without encashment of bank guarantees, for unviable projects. The government plans to not only blacklist such companies, but also censure their promoters, preventing them from taking part in future projects.

Clean energy projects comprise more than a fifth of India’s installed power generation capacity. India has 34.6 GW of solar power and seeks to produce 100 GW from solar projects by March 2022.

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