India’s biggest solar power project has stalled as the state which sought bids from generators says it can’t buy the energy at prices it had agreed upon.
Winning developers in India’s Jharkhand state are still waiting to sign power purchase agreements almost a year after the tender. In March, Jharkhand awarded contracts to build 1.2 GW of solar. The state’s power retailer, Jharkhand Bijli Vitran Nigam Ltd., was supposed to sign the power purchase agreements in May 2016.
“We have asked for financial assistance of a few hundred crore (a few billion) rupees from the state’s finance department and are awaiting their response,” said R.K. Srivastava, chief secretary of the energy department in the state of Jharkhand.
The delay underscores the threat from financially strapped state power retailers to Prime Minister Narendra Modi’s ambitious renewable energy goals. State-owned power retailers in India had combined losses of 3.84 trillion rupees ($57 billion) as of March 2015, according to a report by KPMG.
Jharkhand Bijli’s managing director, Rahul Kumar Purwar, couldn’t be reached for comment.
ReNew Power Ventures Pvt., which is majority owned by Goldman Sachs Group Inc., scooped up 522 MW in the March auction. ReNew’s other investors include the Abu Dhabi Investment Authority and the Global Environment Fund.
Other winners included Suzlon Energy Ltd., OPG Power Ventures Plc, Acme Group, Adani Enterprises Ltd. and SunEdison Inc.
A Suzlon spokesperson was unavailable for comment. An e-mail sent to the Adani Group wasn’t returned. OPG Power executives couldn’t be reached. In an e-mail, ReNew Power executives declined to comment.
How much of the solar capacity awarded in March’s tender eventually gets built depends on whether the government provides the backing, Srivastava said.
Tariffs awarded in the auction ranged from 5.08 rupees ($0.08) to 7.90 rupees per kilowatt-hour depending on the size of the project, all of which were supposed to become operational between May and November this year.
“There is a huge difference between the average tariff of nearly 4.3 rupees a unit, at which the discom buys power, and the rates quoted for solar energy in the auction last year,” Srivastava said in a phone interview, referring to the term used to identify electricity distribution companies in India.
The poor financial health of the country’s power retailers has been identified as one of the biggest hurdles to Modi’s climate pledge to install 175 GW of renewable capacity by 2022.
Those losses mean discoms can’t buy more electricity to satisfy expected demand whether clean or conventional, nor can they add more customers. That ultimately leaves latent power demand unmet.
Several domestic and overseas clean-energy companies have said they haven’t received payments for the electricity they generate for more than 10 months, racking up deficits of several hundred million dollars that may put the country’s green power ambitions at risk.
Jharkhand’s state discom has liabilities of 64 billion rupees, according to government data.
As marquee investors find themselves at risk, the central government has asked for a quick resolution of the matter.
The government faces embarrassment should the situation in Jharkhand not be resolved, according to a senior official at the ministry of new and renewable energy who requested anonymity because he isn’t authorized to speak to the media. The ministry has asked the state to resolve the matter, the official added.
©2017 Bloomberg News
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