Unsigned power purchase agreements (PPAs) and power supply agreements (PSAs) are on the rise in the country because of a steep surge in renewable projects in the past couple of years, according to the Union government.
"Renewable energy projects are not failing to secure Power Purchase Agreements or Power Sale Agreements (PSAs). The quantum of unsigned PSAs/PPAs is primarily on account of significant rise in the quantity of renewable power that has been bid out in recent past," the Ministry of New and Renewable Energy (MNRE) said in resposne to a question on unsold energy raised by Congress MP Manish Tewari in the Parliament.
The issue of unsold energy erupted after the indictment of Gautam Adani and others by the US Department of Justice (DoJ) and the Securities and Exchange Commission (SEC). Industry estimates show that nearly 30 GW of green projects have no takers. The energy available at these projects has no contract from distribution companies or discoms. SECI, one of the largest renewable energy implementation agencies in India, alone has at least 9 GW of unsold renewable power.
In April 2023, the Centre-mandated CPSUs, comprising SECI, NTPC, NHPC and SJVN, to cumulatively bid for 50 GW of renewable projects every year until FY28 - a step towards India’s goal to have 500 GW of non-fossil fuel based power generation capacity by 2030. As a result, there is a large pipeline of renewable projects, but not all of them have confirmed power purchase contracts.
With the increased deployment of RE, its cost of power has decreased over the years. Solar power tariffs in India saw a significant reduction from the peak of over Rs 17 per unit in 2010 to about Rs 2.5 per unit.
As a result, while more and more renewable projects are being tendered, selling power from old renewable projects is becoming increasingly difficult as tariffs from newer or subsequent projects keep coming down. Due to better prices available, discoms that are financially strained are either unwilling to sign supply pacts with procurers such as SECI or negotiate heavily. Consequently, SECI fails to sign power deals with the RE developers.
To ensure adequate offtake of renewable power, the Ministry of Power on September 26 conveyed to all state governments that the renewable consumption obligation notified under Energy Conservation Act, 2001, needs to be followed by the obligated entities. It also requested the state governments to take appropriate measures to meet the obligations for consumption of renewable energy as per the specified targets.
For 2024-25, the discoms had to purchase 29.92 percent renewable power from its total power purchased to supply to end-consumers. For 2025-26, this target is set at 33.01 percent.
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