India’s renewable energy push is now an accepted narrative in any energy transition discussion. But there are also issues of delay in project implementation and Centre versus State challenges because of the powers that State governments have in the electricity sector.
Recently in the news was the indictment by a US district court of a 2019 tender floated by Solar Energy Corporation of India (SECI), alleging that Adani Group Chairman Gautam S Adani, his nephew Sagar Adani, and six others had offered ₹2,029 crore ($265 million) in bribes to Indian government officials.
Allegations were also made against certain State governments — the previous regime in Andhra Pradesh led by YS Jagan Mohan Reddy being one. This exposes the loopholes in implementation that cause inordinate delays in signing power purchase agreements (PPAs) and power sale agreements (PSAs).
Andhra Pradesh is critical in this story because its agreement to purchase 7,000 MW of solar power in 2019, when Chandrababu Naidu was in power, is the largest among the States involved here. On paper, both SECI and the Andhra Pradesh government are on the right. Thereafter, the Jagan government held up these projects. As a result, a PPA was finalised between SECI and the developer, but the PSA between the SECI and the State was held up.
Before moving further, let us understand the role of SECI. Technically, SECI is supposed to be an intermediary. It’s a Navratna central public sector undertaking dedicated to the development and expansion of renewable energy (RE) capacity in India.
SECI is one of the Renewable Energy Implementing Agencies (REIAs) of India and it has been facilitating market development and creating an ecosystem for RE by conceiving, prototyping, modelling as well as policy advocacy with innovative project configurations, such as solar-wind hybrid with or without energy storage, round-the-clock power supply, RE with assured peak power supply, and firm and dispatchable renewable energy (FDRE) to name a few.
These initiatives have been undertaken as part of various government schemes and SECI’s own initiatives, to provide RE towards meeting the ever-growing energy requirements of the nation. Since it came into existence in 2011 it has established a pan-India presence in almost all States and Union Territories.
What went wrong this time? The developers were arguably in a hurry to implement the project, said an observer.
When the whole controversy came to light, the current government in Andhra Pradesh led by Chandrababu Naidu decided to tread cautiously. If the local government decides to cancel the agreement, it will end up paying a substantial amount. If it decides to go ahead with the project, the cost of the power to the end-consumer will be higher than the existing rates on account of the delay.
A way to deal with this is to narrow down the time lag between award and signing of PPAs and PSAs. Another way could be to strictly implement the uniform renewable energy tariff so that there are no disputes on price.
Assess demand
It may be argued that SECI and others should first assess the demand and then go for such contracts. Demand, however, cannot be artificially created. Any government push is short-term, unless driven by market forces. The government’s initiative of 24/7 power for all will reveal the actual power demand numbers hidden behind unscheduled and unregulated power cuts by States which claim to have surplus power. Once the demand is known, commissioning of any project will be easier to handle.
Another option is to have uniform tariff so that there are no challenges of price escalation if the projects get delayed. Earlier, SECI tried pooling of tariff once in six months but that didn’t work out since tariffs kept falling.
The only solution is the Government should enforce renewable purchase obligations (RPOs) strictly so that distribution companies (Discoms) procure renewables on time and do not give financial ill-health as an excuse.
A clear target has been set by the Central Government for green energy. In fact, the Minister of New and Renewable Energy, Prahlad Joshi, after receiving record high capacity addition commitment from States and the private sector alike, has been quoted as saying that the ministry is gearing up for the next task of ironing out the challenges in the sector.
Recently, he announced that a dedicated task force comprising all stakeholders will be set up under his ministry in collaboration with the Ministry of Power to achieve the goal of 500 GW by 2030.
He emphasised the need to install 288 GW of renewable energy capacity over the next six years, requiring a substantial investment of ₹42 lakh crore, including transmission infrastructure. The minister called for the early finalisation of PPAs and strict enforcement of RPOs.
In the given situation, the way out is strict implementation of RPOs, which mandate that all electricity distribution licensees should purchase or produce a minimum specified quantity of their requirements from renewable energy sources. This will ensure a much fairer system.
