State utilities tearing up the terms of power agreements

INDIA: Andhra Pradesh, which installed a record 2.1GW of wind projects in 2016-17, is upping the ante in the long running dispute with wind-power producers

Switching from feed-in tariffs to auctions has pushed prices down in India (pic: Suzlon)
Switching from feed-in tariffs to auctions has pushed prices down in India (pic: Suzlon)

The state’s electricity distribution companies, which signed power purchase agreements (PPAs) with wind-power generators at rates of INR 4.76-4.84/kWh ($0.074-0.076/kWh) in 2015, consider the contracted tariffs too high after the state’s first wind power auction brought down the price to INR 3.46/kWh.

Subsequent auctions that pushed prices down to INR 2.44/kWh only added to the discontent.

As far back as June last year, the utilities had demanded the renegotiation of PPAs and the retention of various central-government incentives available directly to the generators.

Recent reports from wind-power producers suggest the utilities have gone ahead and acted on their demands.

"They are compulsorily deducting 2% of the tariff, which is INR 0.10/kWh, instead of paying the penalty for payment delay of more than six months," said Sunil Jain, president of the Wind Independent Power Producers Association, in an interview with India’s Economic Times on 31 January.

"In fact, payments are being made six months late, but for the past two to three months they have begun deducting the discount anyway. The PPAs say the [utilities] should pay a penalty of 2% if payment is delayed beyond two months. Far from paying the penalty, they are enforcing the discount."

Andhra Pradesh’s utilities have also been deducting INR 0.5/kWh, an amount equivalent to the federal generation-based incentive, for the past few months and are now asking wind-power generators to renegotiate their PPAs at a lower tariff.

There is also the vexing issue of excess power generation.

The utilities are threatening not to pay for excess generation corresponding to a plant load factor (PLF) of more than 23%, which is the normative PLF that was assumed in calculations to arrive at the feed-in-tariff.

"Ours are not thermal plants. Some days, depending on the wind speed, we may even get a PLF of 30%. We are basically being told to under-utilise our turbines," Jain said in the interview.

The state government is aware of the problem and is trying to broker an agreement between the producers and the utilities. The state regulator is also considering the issue.

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