Andhra Pradesh HC Stays APERC Order Which Cut Down Incentive for Wind Energy Companies
Wind Energy players in Andhra breathed a sigh of relief, albeit temporarily when the Andhra Pradesh High Court stayed the orders of the Andhra Pradesh Electricity Regulatory Commission (APERC) that sought to reduce tariffs of electricity supplied by wind projects that received a generation-based incentive (GBI) from the Centre.
The central government had devised the GBI scheme to encourage investments in wind power generation by providing an additional incentive of Rs 0.50 for every unit of energy of electricity fed into the grid for a minimum of 4 years and a maximum of 10 years with a cap of Rs 10 million. The APERC had passed the order modifying its earlier tariff orders claiming it had earlier failed to give effect to its regulations that require incentives to be deducted from the tariff. In other words, through the order, APERC had removed this GBI.
With wind tariffs plummeting in the recent tenders floated by NTPC to Rs 2.77. The incentive is a means to encourage Wind power generation. In the sector that has seen prices fall almost 50% in the past 3 years or less, the steep drop has created a piquant situation for developers operating older projects, as state discoms are seemingly looking for every opportunity to cut back, or even go back on committed purchases at the fixed prices they signed up. Keep in mind that just two years back, wind tariffs were easily passing muster at Rs 5.00 and above. And now, reserve prices are being set under Rs 3 by most of the coastal state regulators.
The order is also significant because the GBI issue was seen as a roadblock in Greenko’s planned acquisition of Orange’s renewable energy portfolio. The order of the Andhra Pradesh Electricity Regulatory Commission (APERC) was challenged by leading clean energy companies such as Orange Renewables and Hero Group, which sought an interim suspension of the APERC order.
The order had been challenged primarily on the ground that APERC does not have the jurisdiction to alter its own orders subsequently. The court in its order said that : The 1st respondent- Commission has no jurisdiction to exercise the power of review in the manner it did.
With around 2,000 MW wind project capacity in the state, the APERC order had an impact on projects with a net worth of more than Rs 2,000 crore for the wind power generation companies working in Andhra Pradesh who had factored in the GBI while working out financials for setting up future projects.
Thus the high court order issued on the late evening on 23 August, comes as a big relief to such companies in the state.
Currently, other states like Gujarat, Rajasthan, Maharashtra and Karnataka which have a high concentration of wind power generation, allow the benefit of GBI to the wind power companies. The APERC order if effected successfully would almost certainly have led to copycat amendments by other states regulators to remove GBI as well.
The policy tweaks or flip-flops if you take the extreme view, is precisely the sort of industry situation that increases the risk premium in any sector, and the renewables sector, thanks to the many parameters that affect it, be it weather, equipment, the state of the discoms and more, could at least do with some stability here, to be honest.
