The industry body drafted the state’s new bill to redefine solar rates, which will make already operational projects unviable and power producers will struggle to repay their loans. He sought the intervention of the Minister of Justice to convey his concerns to the President with whom the bill is currently awaiting approval.
The industry body National Solar Energy Federation of India has approached Law and Justice Minister Kiren Rijiju to seek his intervention to reconsider the Punjab government’s proposed bill that allows termination and renegotiation of tariffs for solar projects ongoing operations.
The Punjab Renewable Energy Security, Reform, Termination and Re-Determination of Power Tariff Bill, 2021 aims to redetermine tariffs under Power Purchase Agreements (PPAs) entered into for a total of 983.5 MW of power capacity. renewable energy (886 MW solar and 97.5 MW biomass) . The bill was introduced and passed in the Punjab State Assembly on November 11. After sending it to the governor, the bill was then sent back to the President of India for his final assent.
Punjab has about 900 MW of solar power projects in operation at an investment of nearly INR 7,000 crore. The return of this investment comes in the form of long-term power purchase agreements with a fixed tariff approved by the Punjab State Electricity Regulatory Commission.
In accordance with the provisions of the bill, “…all clauses having a price impact directly or indirectly in the agreements will be terminated. In addition, agreements between power generators and Punjab Corporation, including implementation agreements with the Punjab Power Development Authority, must be submitted to the Electricity Regulatory Commission of Punjab. State of Punjab for redetermination of tariff and all A decision to renegotiate tariffs for projects already in operation will affect the viability of projects and power generators will find it difficult to repay their loans, suppliers and staff, which will result in a default in their business which directly or indirectly impacts the tariff in the agreements, after taking into account all relevant cost parameters involved in the generation of renewable energy.
To ensure continuity of electricity supply and energy security of the state, the Punjab State Electricity Regulatory Commission will also determine a temporary tariff rate which will be applicable until the tariff is finally redetermined by the regulatory commission.
According to NSEFI, the enactment of the bill will be decisive for the interests of all solar energy developers operating in the state of Punjab. This will render already operational projects unviable and power generators will find it difficult to repay their loans, suppliers and staff, leading to a default in their contractual obligations. This is clouding the sector with a negative investment outlook while impacting the livelihoods of hundreds of people associated with these projects.
In his letter to the Minister, NSEFI Chairman Pranav R. Mehta wrote that the bill contravenes the Electricity Act 2003, the National Electricity Policy 2005 and the National Tariff Policy of 2016. In addition, it only covers some specific projects among renewable energy exploitation projects; the bill provides no basis or justification for such a classification.
Since renewable energy represents a relatively small share of Punjab’s energy mix, the impact of purchasing renewable energy on the overall cost of electricity to the state is negligible.
“The landed purchase cost of solar energy is INR 6.5/kWh against a total electricity purchase cost of INR 4.3/kWh. Considering the contribution of solar power capacity in the state, the overall solar power generation is only more than 4% of the total power consumption, the cost impact of purchase being approx. INR 0.06 per kWh, which is miniscule compared to the negative impact breaching the sanctity of contracts would have on overall investor sentiment across the state,” Mehta wrote.
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