Uttar Pradesh Proving To Be Tough Place To Do ‘Solar’ Business
As Uttar Pradesh gears up with the mission of ‘Power To All By 2019’, renewable is bound to play a major role. The present government has made efforts to finally catch the investors’ interests and set the policy right. As a matter of fact, the state is blessed with a good solar radiation to the tune of 1,800 kilowatt-hour per sqm on an annual average basis. Many experts have hailed how UP could be the dark horse for solar power demand in the country.
However, the recent tariff scuffle between the authorities and the solar developers is laying strong argumentative grounds on ease of doing ‘clean’ business in the state.
The state renewable nodal agency, UP New & Renewable Energy Development Agency (UPNEDA), recently asked the developers to reduce the solar power tariffs, against the earlier agreed, as the projects reached completion stage.
In 2015, a 215 MW state solar tender was closed with 15 winning developers, with tariffs ranging between Rs 7.02 per kwH and Rs 8.60 per kwH. Amongst the winners were Adani Green Energy and Essel Infra projects, bagging 50 MW each. Post the singing of the contacts; the developers were put in a tough situation with NEDA’s demand for voluntarily agreeing to lower solar tariffs to Rs 7.02 per kwH, the price proposed by the lowest bidder during the auction in 2015.
Bridge to India (BTI), a solar consultancy’s analysis state that only 130 MW of projects have been completed under this UP tender so far and several other projects have been granted an ad-hoc extension.
“UPNEDA may feel that it is justified in seeking lower tariffs when capex costs/ tariffs have been falling across the sector. But such a move is short-sighted as the harm to the state’s credibility and the negative impact of this step on future tenders will far outweigh the benefit of any tariff reduction”.
Many project developers are already wary of entering UP and the state’s move to renegotiate tariffs after signing PPA’s will further damage its credibility;
“It makes no sense for UP to renegotiate tariffs for a mere 165 MW of capacity when it wants to add more than 10 GW of solar capacity in the next 5 years”, adds the report, mentioning that such unilateral, post-facto moves to renegotiate tariffs could detract from the Indian government’s ambitious plans and the need to attract more private capital in the sector.
The state ranks 14th in the ‘Ease of doing business’ survey in the country and according to the report by BTI’s report ‘Assessment of utility-scale tender results in India’, UP tariffs in comparison to the other states, have been higher by up to 50 percent post adjustments.
“The new BJP government has a huge economic opportunity to turn around the state’s economy by exploiting the cheap renewable power and reforming the local power transmission and distribution system. It has indeed made the reliable power supply as one of its core policies. UP has already cancelled over 7 GW of planned thermal projects and is believed to be planning to procure another 1,500 MW of solar power in the near future. In such a scenario, it makes no sense for the state to renegotiate tariffs for a mere 165 MW of capacity”, adds the report.
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