»Backlog of unsigned power sale agreements risks slowing India’s renewable energy growth«

Azure Power won 200 MW in SECI Auction in Rajasthan

Delays in signing power sale agreements (PSA) are a bottleneck in the growth of renewable energy capacity in India, jeopardizing the government’s renewable energy target of 175 GW by 2022, finds a new briefing note from the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research. It is dampening investor confidence and threatening the viability of projects.
PSAs for nearly 19 GW of renewable energy capacity tendered by Solar Energy Corporation of India (SECI) are yet to be signed by state-owned distribution companies (discoms). Manufacturing-linked solar projects account for 63 percent of this capacity. »This situation is having an adverse impact on the morale of project developers and investors and is slowing overall progress on renewable energy installation,« says co-author Vibhuti Garg, IEEFA Energy Economist, Lead India.
Developers with SECI-tendered projects in their pipelines awaiting PSAs include Adani, Azure Power, Renew Power and Greenko, which together form 78 percent of the total capacity in limbo, according to the note. On average, 37 percent of the entire (installed and pipeline) project portfolios of these developers is SECI-tendered projects with non-executed PSAs.
The note points to falling solar tariffs, driven by declining solar module prices, as a key reason for the discoms’ reluctance to sign PSAs – and in a few cases attempts to renegotiate or renege on wind and solar power purchase contracts.
In 2020, solar tariffs hit a record low of INR 1.99 ($0.023) per kWh. »Discoms are anticipating that solar module prices will decline further, leading to a reduction in future solar auction tariffs, so they are delaying signing PSAs at higher prices,« says co-author Jyoti Gulia, Founder JMK Research.

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