After shocking the world by quoting record low solar tariff of Rs 2.44 kWh in its bid for a SECI power project in Rajasthan, the winning bidder, ACME Solar, has now decided to cancel the project on account of disruptions caused by coronavirus pandemic and other operational issues.
ACME had won bid for 600 MW solar power project in Rajasthan in 2018, quoting a historically low tariff of Rs 2.44 kWh and setting the stage for a drop in electricity charges from renewable projects in India. The tariff quoted by ACME was considered too low by even experts who felt that project at this level of charges may be unviable.
But, now the company is pleading to get out from the project, citing delays in land acquisition, transmission line commissioning and various other issues. However, the coronavirus pandemic seems to put a final nail in the coffin for the project as the company is citing that this would disrupt the project cycle beyond repair in the near to medium term.
In a petition to the Central Electricity Regulatory Commission (CERC), ACME Solar has blamed the coronavirus pandemic, besides several other issues related to the project, as the reason for seeking cancellation. The firm has also pleaded to prevent the agency handling the bid, SECI, and Power Grid Corporation of India Ltd (PGCIL) from encashing its bank guarantee and letter of comfort submitted for the project.
In this solar power bidding, the project developer had to sign a power purchase agreement with SECI and another agreement with Power Grid Corporation for evacuation of power. This binds the developer to timelines that are sacrosanct as per the terms of the agreements. In fact, the developed has give bank guarantees and letter of comfort towards the project that becomes encashable if contract parameters are not adhered to.
ACME has taken recourse to the Force Majeure clause in the agreement.
The reasons cited by ACME in the petition include issues with its land allotment for the project, delays caused in supplies due to the Covid-19 pandemic, and finally, delays in building of the power evacuation infrastructure by PGCIL.
As per the terms of agreement, SCME had to complete the project in 24 months that is ending in November this year. A six month extension is allowed for delays where no one has any contrail. That will also expire in May 2021. As the project is already delayed by 15 months and Covid-19 has created further uncertainties, there is no way that the project is getting executed.
ACME may not be the last project to seek withdrawal from its commitment. There are about 35,000 ME of solar projects in pipeline that face similar issues of delays due to uncertainty on equipment supplies from China, which is crucial to keep the cost down and achieve the low quoted tariffs, land issues and financial viability in the post corona period. In the best case, these projects may get delayed well over 2022.
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