Your browser is not supported. Please update it.

14 January 2021

Tata Power battles Andhra Pradesh in court over electricity prices

Tata Power has managed to secure a pause on the 6,400 MW Ultra Mega Solar Project in the Indian State of Andhra Pradesh. This is in reaction to the Andhra Pradesh state government’s attempts to seize jurisdiction over these projects from the state regulator, Andhra Electricity. In reaction, the state’s High Court has not forbade the state from making agreements concerning the park until the next hearing, to be held on February 15th.

The state-level government has been touting the project as demonstrating recovery from past disputes with developers, and that renewables were back on track. The overall target in the state is 10 GW solar, so most of that would be met just from this one complex.

Andhra Pradesh ran into issues with developers in 2018, when it decided to renegotiate PPAs signed by the previous administration, and also delayed payments. It’s not uncommon to have such renegotiations cause disruption to the solar industry, with Ukraine being a recent example, and even France proposed retroactive FiT cuts on 2006 to 2010 projects last November. But what is unusual is to see a state-level authority messing things up against the wishes of a pro-renewables federal government which has embarked on all kinds of initiatives to accelerate wind and solar, including many multi-GW solar complexes.

Along with the other big issue of ailing distribution companies being late on payments, it paints a picture of an India that’s too decentralized. This kind of interruption of income also forces the country’s solar to be developed very much on the cheap otherwise the investment isn’t worth it; and that’s sort of working for now, but could lead to problems later if shoddy construction results in faster degradation and damage to installations.

A third of Andhra Pradesh’s capacity is now solar or wind, making it one of the four ‘hotspot’ states for renewable development, along with Rajasthan, Maharashtra and Modi’s home state of Gujarat. So if there’s an issue in any one of these states it jeopardises the whole national renewable energy agenda. Andhra Pradesh is not the only offender, but likely the most prominent, with the Ministry of Energy having proposed improvements to regulations with the explicit aim of preventing its type of backsliding.

And if Andhra Pradesh’s politicians were allowed to take jurisdiction over energy projects from the electricity regulator, this would set a precedent for other states to do the same. The motivation on the part of the state government wasn’t to simply sabotage renewable energy development, but rather to secure lower prices. But this has limits, with India being one of the world’s consistent record-setters for low solar prices along with Portugal and the UAE, which both have superb natural conditions. Indian auctions already have issues with a lack of interest – tender uptake has often been as low as two-thirds in recent years.