Karnataka Electricity Regulatory Commission Issues Advisory Asking DISCOMs Not to Sign New PPAs with Wind Project Developers in Karnataka

May 4, 2017

The Karnataka Electricity Regulatory Commission (KERC) has issued an advisory to the state government of Karnataka, asking it to direct all distribution companies (DISCOMs) in the state not to enter into any new power purchase agreements (PPAs) with wind power projects until further review by the KERC.

The KERC stated that increasing procurement from wind power projects in the state is not good for financial health of state DISCOMs and wind PPAs already signed will be sufficient to meet the state renewable purchase obligation (RPO) for the current financial year as well as another couple of years. The KERC further stated, wind power tariffs have seen periodic upward revisions unlike solar.

The KERC also noted that recently DISCOMs in the state signed PPAs with wind power projects tendered by the government. Power from these projects can be sold only to DISCOMs in Karnataka per government regulations. Procurement of power from such sources will lead to violation of long-term PPAs with thermal power projects, resulting in payments of fixed charges to thermal power projects and increased costs of power for consumers.

The commission found that currently DISCOMs in the state are defaulting on payments to renewable energy generating units due to cash flow constraints.

The new PPAs if signed will aggravate the problem as DISCOMs will have to pay two parties and they are already struggling with debt, stated a KERC official. This is just an advisory; if the government thinks it is feasible and developers want to, they can go ahead and sign PPAs, but later there might be tariff issues, and that’s why the KERC has come out with this advisory, added the KERC official.

The KERC has mentioned wind, not solar, as solar is much cheaper than wind and it won’t affect consumers, added the KERC official.

According to Karnataka Renewable Energy Development Ltd. (KREDL), Karnataka has ~ 7.2 GW of total installed capacity from renewable energy sources, with 3.8 GW of Wind, as of March 2017.