Wind power companies in shock over Andhra Pradesh discom’s move to renegotiate PPAs
Wind project developers are alarmed over a move by Andhra Pradesh Southern Power Distribution Co Ltd (APSPDCL), the southern state’s main distribution company, to renegotiate power purchase agreements (PPAs) it had signed with them.
The agreements were entered into before India conducted its first ever auction of wind power projects, which saw tariffs dropping sharply to Rs 3.46 per kwH – projects are awarded to those who quote the lowest tariff to supply power. APSPDCL now wants to use this auction ‘discovered’ rate as the benchmark to sign new PPAs.
Prior to the auction, the Andhra Pradesh Electricity Regulatory Commission (APERC) had set the feed-in tariff for wind power for 2016-17 at Rs 4.8 per kwH. Accordingly, the discom signed PPAs with a host of wind developers, most of which have since begun work on their projects.
Once the PPAs are signed, the agreements need to go through the formality of getting approval from the state’s power regulator as well. In an internal memorandum on April 26, the chief general manager of APSPDCL said he had requested APERC not to consider the PPAs still pending with it and return those to the discom without approval, which the regulator had duly done.
These PPAs signed with 41 developers cover 832.4 MW of capacity. Most of the agreements were signed between February 13 and 23, at a tariff of Rs 4.8 per kwH, while the auction concluded on February 25. Among the developers with PPAs pending approval, the ones building the big projects are Orange Uravakonda Wind Power (100.8 MW, PPA signed on May 31, 2016), Ais Wind Energy (105 MW, PPA signed on November 30, 2016) and Axis Wind Farm (105 MW, PPA signed on February 23, 2017).
Andhra Pradesh power officials were reluctant to discuss the matter. “We understand that developers have made their investments based on certain calculations and don’t want to create problems for them,” said a senior government official. “But we are also accountable to power consumers. The discovered tariff is Rs 3.46 per kwH. We are trying to see what can be done.” Developers are already considering going to court if the APSPDCL formally cancels the earlier PPAs.
“This discovered tariff has opened up many problems,” said an industry insider. “Most likely, this will result in litigation. The PPAs have already been signed and they are trying to renegotiate.”