Solar/wind power deals and auctions: Investor sentiment won’t tolerate too many shocks

With Uttar Pradesh the latest in a list of states unwilling to honour winning solar power bids, calling them ‘infructuous’, India’s reputation for upholding the sanctity of contracts has taken another beating. Tariffs for renewable power capacity have come off sharply over the past two years, to levels of Rs 2-2.25 per unit or even lower. That has prompted a clutch of discoms to disregard contracts signed earlier at higher tariffs. It was the Jaganmohan Reddy-led government in Andhra Pradesh that first reneged on power purchase agreements (PPAs) for roughly 7,000 MW of wind and solar capacity—contracted at Rs 4.40 per unit. More recently, the Gujarat Urja Vikas Nigam Ltd (GUVNL) said it would re-tender the PPA for the 700 MW Dholera solar park. Although the winning tariffs were Rs 2.78-2.81 per kWh, GUVNL wants an even lower rate.