Indian State Reconsidering Buying Power From New Green Projects

(Bloomberg) -- India's Andhra Pradesh state is considering scrapping its decision to enter into power purchase agreements for all upcoming clean energy projects.

The so-called “in-pipeline” projects under review include 21 wind power plants, a 600 megawatt hybrid project by Siemens Gamesa Renewable Energy SA and another one by Axis Energy Group, according to the minutes of a June 26 meeting by Chief Minister Y.S. Jaganmohan Reddy reviewed by Bloomberg.

The move is an effort by the newly elected provincial government to “unravel” the “ad-hoc processes” to award projects in the past and to ensure transparency in the power sector, according to P.V. Ramesh, special chief secretary to Reddy, who was part of the discussions and verified the authenticity of the document seen by Bloomberg.

“A committee of senior cabinet ministers has been set up to look into the issues raised,” Ramesh said by phone, adding that some of the in-pipeline projects were in the process of implementation.

Andhra Pradesh's decision could adversely impact the federal government's goal of installing 175 gigawatts of renewable capacity by 2022. The South Asian nation has awarded some of the world's lowest green energy tariffs and became the biggest auctioneer of solar and wind capacity last year, according to Bloomberg NEF. Prime Minister Narendra Modi's administration has managed to achieve less than half of the target currently.

The local government is also looking to cancel the short-term power purchase pacts with Lanco Infratech Ltd. and Spectrum Power Generation Ltd. for their natural gas-based plants and reallocate the fuel to the GMR Vemagiri plant. It's also looking to scrap a land allotment to Greenko Group for a solar-wind hybrid project.

Siemens Gamesa's spokesman and Greenko's spokeswoman didn't respond to emails seeking comment. Axis Energy officials weren't immediately reachable. Lanco and Spectrum officials didn't immediately respond to requests for comment.

The state has said separately it will renegotiate some power purchase agreements for renewable projects to improve the finances of its electricity retailers, which owe 200 billion rupees ($2.9 billion) to generators mainly because of “abnormally priced” wind and solar power purchase agreements.

Andhra Pradesh had 7.7 gigawatts of installed renewable and 14.6 gigawatts of fossil-fuel power capacity at the end of May, government data shows.

To contact the reporter on this story: Anindya Upadhyay in New Delhi at aupadhyay22@bloomberg.net

To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Alpana Sarma, Unni Krishnan

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