The power purchase agreement (PPA) for a 250 MW grid-connected solar project at Kadapa Solar Park has not yet been signed, adding to the increasing uncertainty in India’s solar sector.

Back in April 2017, Solairedirect won the 250 MW project at a reverse auction by quoting a tariff of ₹3.15 (~$0.0487)/kWh under NSM Phase-II, Batch 2, which was the lowest quoted tariff at that time. However, before the PPA can be signed, NTPC needs to first enter into a power supply agreement (PSA) with the distribution company (DISCOM) in Andhra Pradesh.

The signing of that agreement is being hindered by the DISCOM’s reluctance. Andhra Pradesh State Power Distribution Company (APSPDCL) is citing a surplus power situation in the state as its reason for not finalizing the PSA with NTPC at the quoted ₹3.15 (~$0.0487)/kWh tariff, putting development of the 250 MW solar power project in jeopardy.

“It is extremely concerning that even a project that won the auction with the lowest tariff ever seen at the time in India is still struggling to get a PPA signed. There seems to be no consequence for such delays. Government agencies send a very negative sign to investors when they fail to sign a PPA after an auction is won fair and square,” said Raj Prabhu, CEO of Mercom Capital Group.

When contacted, a Solairedirect executive said, “We are positive that NTPC will find a buyer, the rates are very competitive. The state DISCOM needs to be sensitive regarding such matters and not chase after the latest low tariffs.”

An NTPC official told Mercom, “There are no developments as of now, but if it has to be cancelled then it will be done by NTPC.”

“Having said that, I would like to add that we (NTPC) have requested that the developer extend the validity of the offer. Hopefully they will agree, we then would have to get the PSA signed and then follow up by signing a PPA with the developer. And there is no renegotiation on the tariff, it will be the same ₹3.15/kWh as per the reverse auction. In case the tender is scrapped, then it will be re‑tendered and will be open to all for reverse auction,” added the NTPC official.

Another NTPC official cited “the greed of the state DISCOM” as the reason for the delay, adding that “According to them, this tariff is in excess of what they can spend, but we are sure that the tender won’t be scrapped.”

An official at Andhra Pradesh Solar Power Corporation Private Limited (APSPCPL) said, “Talks are ongoing. NTPC and the Andhra Pradesh State Power Distribution Company (APSPDCL) are talking about bundling and the like, as far as I know, the tender won’t be scrapped.”

The APSPCPL official added, “For the grid connectivity of this particular project, we (APSPCPL) will be developing stations for evacuation which will be connected to the substation situated 5 km away. All other works are on time, it’s just that the sooner NTPC and APSPDCL come to an agreement, the faster the work can begin.”

When contacted, another APSPDCL official did not offer assurances that the PSA would be signed, saying “We will take into consideration the greater good of the largest number of citizens while arriving at a decision. Other than that, at this point there’s little else to say.”

“Developments like these are creating widespread uncertainty across the solar sector,” said Prabhu, adding “Tender and auction activity has slowed due to cases like this where DISCOMs are pushing developers to match the lowest bids seen to date (immaterial of the situation) or face potential PPA renegotiations. All of this is coming at a time when the price of Chinese modules rose by 14 percent in the latest quarter (Q3). These events point to a weaker outlook for the Indian solar sector in Q4 of this year and going into 2018,” added Prabhu.

According to Mercom India Research, NTPC has auctioned a total of 3,000 MW of solar under NSM Phase-II, Batch 2. PPA’s have been signed for 2,750 MW except for the 250 MW Kadapa Solar Park project in Telangana.

According to Mercom’s India Solar Project Tracker, Solairedirect has an installed capacity of 369 MW located across states of Rajasthan, Punjab, Telangana, and Uttar Pradesh.

Image credit: Mercom India