Mint earlier reported about falling clean-power tariffs putting already awarded solar and wind energy capacity in limbo. Fund-starved state electricity distribution companies (Discoms) are unwilling to sign power supply agreements (PSAs) with intermediary procurers such as state-run Solar Energy Corporation of India (Seci) for these previously-awarded projects at a comparatively higher tariff.

“Discoms’ lag in signing PSAs stems from slow demand growth and falling solar tariffs, implying that the last to sign PSAs gets the cheapest power. However, we estimate 32GW of fresh PSA potential if all states meet their RPO (renewable purchase obligation) targets,” the report said.

This comes at a time when Chinese solar equipment suppliers are increasing solar module prices to 25 cents per kWh from 19 cents per kWh. The suppliers are reneging on their contracts to supply equipment that had already been contracted for, even at the risk of their bank guarantees getting encashed.

The report said, “We find only 50% actually under construction as 35% lack PSAs, while another 14% has been canceled. Of the remaining 27GW, about 44% includes PSAs with Discoms while 56% includes state tenders that have an implicit PSA with respective Discoms.”

Also, clean energy developers are looking at riskier states’ contracts.

The report said, “With Seci tenders facing difficulty in getting PSA, the trend is again moving towards individual state tenders, which offer ready PSAs, though they come at great receivables risk of each state Discom’s credit rating.”

This comes at a time when the country’s peak electricity demand is growing and breached the 200 GW mark. India currently has an installed renewable energy capacity of 89.63GW, with 49.59GW under execution.

Source: Live Mint