Andhra Pradesh to Issue Recovery Notices to Solar, Wind Projects for Loss Caused to DISCOM

State to cancel 21 wind PPAs, a 600 MW Siemens Gamesa hybrid project, Axis Energy hybrid project, energy storage projects and 600 MW of schedulable power


Andhra Pradesh Chief Minister Jaganmohan Reddy held a review meeting with the state’s energy department to deliberate on the recent decision to revisit the Power Purchase Agreements (PPAs) of the solar and wind power projects that were allotted during the previous government led by Chandrababu Naidu.

This decision by the state government comes despite the Ministry of New and Renewable Energy (MNRE) expressing its serious concerns over the state’s impending decision to revisit the power purchase agreements it had signed with solar and wind developers during the tenure of the previous government. However, the Jaganmohan Reddy-led Andhra government did not pay heed to the MNRE’s letter of caution and the chief minister recently announced forming a High-Level Negotiation Committee (HLNC)  to deliberate and bring down the costs in all the high-priced PPAs for wind and solar power projects signed during the term of the previous Chandrababu Naidu-led government.

In the latest meeting, Reddy has now ordered a slew of measures to be taken up immediately, starting with the issuance of recovery notices to all solar and wind power developers of the state that had entered the PPAs. The notices were served for the alleged losses caused to the state DISCOMs and the government due to the higher tariffs quoted in these PPAs.

Moreover, the chief minister has decided to challenge the “Must-Run” clause in solar and wind regulations of the Andhra Pradesh Electricity Regulatory Commission (APERC). He has also ordered the filing of a petition with the regulatory commission to rework and reduce the Feed-in-Tariff (FiT) for wind projects.

In what may be termed a severe blow to the already waning investor confidence in the sector, the new Andhra chief minister has ordered to cancel the previous state government’s decision to enter PPAs for all the projects in the pipeline.

A government notification has elaborated that this cancellation would include PPAs of 21 wind power projects, a 600 MW Siemens Gamesa hybrid project, Axis Energy hybrid project, energy storage projects and about 600 MW of schedulable power.

Reddy has further ordered the cancellation of all the wind, hybrid, and experimental PPAs which are either not concluded yet or are pending approval by the Andhra Pradesh Electricity Regulatory Commission. Moreover, a cancellation order has been issued for the land allotment made to Greenko’s solar-wind hybrid project at Anantapura, through New & Renewable Energy Development Corporation of Andhra Pradesh (NREDCAP).

Apart from the wind and solar sector PPAs, the chief minister has also ordered the cancellation of the existing tender for the 12×80 MW Polavaram hydropower project, and conduct reverse tender process by October 2019.

As a backup plan, he has ordered that the thermal power projects of the state should be kept ready in standby mode, in case solar or wind projects are stopped during or after the renegotiations.

The chief minister has also ordered the officials to try and explore the possibilities of offloading the high-cost solar and wind projects to other buyers in India.

To control the losses to the government, as Reddy claims, he has also ordered the formation of a committee to examine the subsidies that are in place for projects and reduce the burden on the state government.