Renew-SECI Tussle At CERC Indicates Further Trouble For Wind Energy

India’s wind energy sector has been stuttering, even as solar has managed to escape the worst of the slowdown blues. So much so that multiple developers that were invested in growing both Wind and Solar energy projects, have quietly moved away almost exclusively to solar now, other than the odd Hybrid project that comes up.

An indicator of this trend is a recent case that came up at CERC (Central Electricity Regulatory Commission), where ReNew Wind Energy (TN) Private Limited (Renew) has pitched to prevent the encashment of its bank guarantees by SECI (Solar Energy Corporation of India), for a wind power project that is still stuck in Tamil Nadu. The project, probably part of the Tranche III auctions held in 2018, has been stuck due to multiple force majeure events, according to Renew Power’s contention. According to the petition, these have ranged from (i) delay in allocation of revenue land for the Project, (ii) delay in commissioning of transmission system, (iii) delay in adoption of tariff on the part of SECI, and (iv) outbreak of Covid-19, have delayed the Petitioner’s Project for more than 20 months and the said delays are continuing till date. Accordingly, on 26.7.2020, Renew has terminated the PPA on account of these ‘force majeure’ events.

SECI has predictably denied the invocation of force majeure, and stuck to its line that the bank guarantee should be encashed as the project has missed the SCOD) Scheduled Comissioning Date)  as per the PPA. In fact, it has relied on an SC judgement to claim that “With regard to invocation of Bank Guarantee, it is a well settled position of law that courts should not interfere with enforcement of bank guarantee except in cases where fraud or special equity is prima facie made out to prevent irretrievable injustice to the parties”. Renew has disputed the application of the SC judgement in this case.

While this  case is yet to reach a conclusion, it is no secret that the dice is loaded against the project itself progressing, not just because of the Corona pandemic right now, but also due to the changed situation on the ground. Not only is Tamil Nadu against further wind capacity addition, Renew itself is probably having strong second thoughts on the low tariffs that were a key reason for the project win, back in 2018.

SECI itself, facing a massive delay on over 40 percent of the projects bid out since 2018, faces a tough choice. Even though it has offered som sort of mediation if Renew does not act unilaterally, chances are that the discussions will be too complicated to ensure a fruitful result, in the form of a viable project at the end of it all. Expect many such cases to make it to the CERC in the coming months, especially for the bids in the range of Rs 2.44 to Rs 2.55 per unit.