Solar Power Developer Penalized for Delay in Project Commissioning

The commission ruled that the project will have a tariff of ₹4.36/kWh for the term of the PPA


The Karnataka Electricity Regulatory Commission (KERC) has issued an order dismissing the petition filed by Marakka Solar Power Project LL.P stating that it is not entitled to any of the reliefs under force majeure (unforeseeable) events.

The Mangalore Electricity Supply Company Limited (MESCOM) was the respondent in this case.

Marakka Solar Power Project LL.P, had entered into a PPA with MESCOM on August 29, 2015 to develop the project for a farmer who was selected for developing a 1 MW  solar  power  project  on  the farm land  at Suranahalli village, Challakere Taluk, Chitradurga  district  under  the State  Solar  Policy  2014-2021. According to the PPA, the project was to be commissioned on or before February 28, 2017 or 18 months from the date of the PPA and entitled to receive a tariff of ₹8.40 (~0.1254)/kWh.

In 2015, the Karnataka government launched a program under which 300 MW (with projects ranging from 1 to 3 MW) of solar was to be developed by farmers on land held by them at a tariff of ₹8.40 (~$0.1254)/kWh. Under this program, farmers were provided with a central subsidy of ₹50,00,000 (~$79,365)/MW.

According to Mercom’s India Solar Project Tracker, 154 projects totaling 306 MW was awarded under this program.

The petitioner argued that there was a provision in the Power Purchase Agreement (PPA) for an extension in commissioning the project if it was delayed due to factors beyond its control and therefore could be treated as a force majeure event.

The commission noted that the petitioner applied for conversion of the land after a lapse of more than 5 months from the effective date of the PPA. To this, the petitioner argued that the delay was on part of government authority in obtaining certain documents, but the petitioner failed to produce the copies of the applications proving their filling date to the concerned authorities.

The commission rejected the claim of petitioner that the delay was caused by the authorities in providing the documents. It found that the land conversion order was passed by the Deputy Commissioner within a few days after payment of the charges.

The petitioner also asked the commission to adjudicate on the project’s tariff for the term of the PPA.

According to the PPA, there is a provision to reduce the tariff due to any delay in the project’s commissioning beyond its scheduled commission date.

As the petitioners could not commission the project due to reasons outside the force majeure clause in the PPA, the commission has now ordered the project’s tariff of ₹4.36 (~$ 0.059)/kWh for the term of the PPA, as per the Generic Tariff Order dated April 12, 2018.

The commission also instructed the petitioner to pay the damages as per the PPA.

Recently, Mercom reported that KERC has proposed a tariff of ₹2.79 (~$0.043)/kWh for new, MW-scale, grid-connected solar projects developed in Karnataka. The proposed utility-scale solar benchmark tariff is ₹1.57 ($0.024)/kWh or 36 percent less than KERC’s previous benchmark tariff of ₹4.36 ($0.07)/kWh. The reduction comes amid a trend of declining tariffs in state tenders.