APTEL Accepts Solar Thermal Generators Plea, Allows PPA Cancellations

Direct Natural Irradiance (DNI) proved to be a bugbear for three solar thermal generators who set out to build projects based on figures provided by MNRE in 2010. The three generators, namely M/s. Aurum Renewable Energy Private Limited (in short “AREPL”), M/s. Diwakar Solar Projects Limited (in short “DSPL”) and M/s. KVK Energy Venture Private Limited (in short KEVPL”) bid for rights to set up solar thermal plants of size  20 MW, 100 MW, and 100 MW respectively.

However, what these firms discovered was that actual DNI at the site was far lower than those presented by MNRE using US satellite data among other things, leading to a situation where they found the projects unviable at the prices they had bid for. The bid price being Rs 12.19 at the time. With actual DNI almost 25% lower than projected, the developers found that both the power generation, and linked to that, the CUF they had committed to, would not happen as per plans or projections. That started a long struggle for first, increasing the PPA price from NCCN, and later, cancelling the PPA altogether and returning the Bank Guarantees of the three.

Th struggle, spread over well over a decade had the MNRE as a key respondent for delaying on its promise to study and reply to the developer’s pleas between 2014 and 2017. Moreover, while MNRE was considering the representation, changes in market dynamics occurred. Specifically, the tariff for solar PV projects dropped significantly from INR 17.91 per unit to INR 2.44 per unit, while solar thermal tariffs fell from INR 15.31 to INR 12.08 per unit. Discoms refused point blank to consider purchasing power at such high cost. Falling tariffs meant that NVVN would face an additional annual cost of INR 39.29 crores, totaling INR 982.22 crores over 25 years, if the project was commissioned at the original tariff and CUF; These changes impacted the viability of the Appellant’s project further.

The APTEL bench, after considering all the issues at hand,  adjudged that ” In the light of above, it cannot be denied that the refusal to amend the petition will result in a multiplicity of proceedings contrary to the Hon’ble Supreme Court’s view in Civil Appeal No. 5909 of 2022 in the case of Life Insurance Corporation of India versus Sanjeev Builders Private Limited and Anr., considering the same cause of action as the reduction in the DNI and the occurrence of subsequent events (MNRE reply dated 14.06.2017), the nature of proceedings will remain the same i.e. whether the reduction in DNI levels is affecting the project’s tariff and no prejudice to the respondents as the tariff of the
project is already multi-fold high as compare to the prevailing tariff, which certainly has to be borne by the consumers.
Undisputedly, the PPA tariff which is above Rs. 10 per kWh will cause prejudice to the consumers, we find such an argument to continue with the project at such a high-cost tariff contrary to section 61 of the Act, even when the Appellants want to terminate such PPA.”

In doing so, accepting the pleas of the generators in total, which should allow them to proceed with the return of their bank guarantees and cancellation of the PPAs.