SECI Is Struggling With Huge Backlog Of Unsigned Power Sale Agreements

In Clean Truth, Clean Facts, News, Products, Renewable Energy, Solar
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Many renewable energy projects are staring at an uncertain future as the Solar Energy Corporation of India (SECI) has not been able to find buyers for the electricity generated by solar and wind projects.

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The Indian solar industry added just 3.2 GW of solar in 2020 as the market slumped by 56% due to COVID-related disruptions and now the reluctance of the distribution companies (DISCOMs) to sign power sale agreements (PSAs) with the nodal agency is threatening to slow down growth.

In the bidding process that SECI conducts, the tariffs discovered are much lower than if the state DISCOMs called for those auctions.

With the nodal agency, the counter-party risk is considered lower, and the robust payment security mechanisms tend to attract competitive tariffs. Even with all these positives they are struggling to sign PSAs.

The huge backlog of unsigned PSAs makes it difficult for developers to secure debt funding from lenders who rightly insist on signed PSAs.

PSAs for about 19 GW of solar power projects are yet to be signed. Given this context and the dropping solar tariffs, it is a bit disconcerting that SECI has a huge backlog of PSAs.

The obvious narrative for this is that DISCOMs don’t want to get locked into high-priced PSAs in a scenario of falling prices, due to this lack of interest from the DISCOMs many projects are now in limbo and this has also slowed down the pace of implementation.

There are no clear solutions in sight for SECI’s problem in finding buyers for power generated by renewable energy projects. SECI has toyed with the idea of blending costlier tariffs with cheaper ones and offering them to DISCOMs. However, these tariffs have not been received well either.

Reference- Mercom India, SECI, Economic Times, MNRE, JMK Research

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