In a big relief to the renewable power developers whose investments of more than Rs 4,000 crore came under a cloud, the Rajasthan Electricity Regulatory Commission has reversed an order passed by the previous government last year and brought in fresh regulations last week to ensure continuity in power purchase agreements between discoms and the power suppliers .
In July last year, Rajasthan Vidyut Utpadan Nigam Ltd (RVUNL) had written to the power developers not to continue power purchase agreements as the cost of renewable energy has declined significantly over the past five years (the tenure of the PPAs) and wanted them to lower the prices as per the prices discovered in recent biddings. The PPAs were signed for five years even as the projects have a life of 25 years and they were expected to be renewed after five years as a practice in the industry.
In the order passed last week, RERC adopted a pooling price mechanism for the Renewable Energy Certificate projects worth 623 megawatt to arrive at Rs 3.14 per unit for the new PPAs to be signed from the start of next financial year.
“The pooled price has been fixed at Rs 3.14 per unit as per the order and the PPAs will be for the rest of the life of the projects. The solar power developers will also get renewable energy certificates,” said Anil Gupta, managing director of Rajasthan Renewable Energy Corporation.
While discoms had appealed to the regulator that they can get power at lower prices than the PPAs were signed five years ago, developers had argued that the investment has been made with definite rate of return for the investment with high borrowings from the various institutions.
Any change in income that too less than the feed-in-tariff prevailed at that point of time would not have made these investors to go ahead with generation from these investments itself and alternatively choose to have the feed-in-tariff itself, they had said in their appeal to the regulator.
Sunil Bansal, general secretary of Rajasthan Solar Association, said, “I think the decision addresses concerns of both discoms and the power developers and hope similar mechanism is adopted by other states so that the sanctity of government contracts are maintained which is crucial for the comfort and confidence of investors. This also shows the state government’s approach for the MSME sector as maximum number of REC projects belongs to small developers. The decision will improve the rating of the state to attract more investment.”
These projects set up under REC framework have also faced similar uncertainty in other states like Karnataka, Tamil Nadu, Telangana. The pooling price mechanism that Rajasthan government adopted to honour the projects could well be an example for other states to end the uncertainty.