Covid-19 impact: Acme Solar wants to abandon record-low solar price tariff

The developer wants to cancel the power purchase agreement it signed in 2018 for a 600 MW project awarded at a tariff of Rs2.44/kWh, as it fears Covid-19-affected commissioning of the project will stretch beyond the six-month extension from the scheduled date enshrined in the agreement.

May 21, 2020 Uma Gupta

Acme wants to walk away from its record-setting solar PPA.

Image: geralt/18298 images/Pixabay

Clean energy developer Acme Solar, which secured a 600 MW project in Rajasthan at the lowest ever Indian tariff for solar electricity, wants to abandon the agreement. The project was bagged in 2018 when Acme offered to be paid Rs2.44/kWh generated after a reverse auction by tendering agency the Solar Energy Corporation of India (Seci).

Acme, however, has now approached regulator the Central Electricity Regulatory Commission (Cerc) seeking directions to prevent Seci and the Power Grid Corporation of India Ltd from encashing bank guarantees and letters of funding which it submitted to secure the contract.

In its petition, the developer submitted its decision to terminate the power purchase agreement (PPA) executed with the Seci, citing an inability to commission the project within the agreed timeline due to supply chain disruption caused by the Covid-19 outbreak and to delays in securing land for a necessary substation as well as the commissioning of associated transmission network infrastructure.

Force majeure

“The petitioners [Acme Solar] have terminated the PPAs dated 7.12.2018, executed with Seci, on account of … force majeure events, namely, status quo orders by Rajasthan High Court [related to] land on which [the] Fatehgarh substation was to be constructed; outbreak of Covid-19 and its adverse impact on manufacturing facilities of suppliers since December 2019, including [lockdowns] in China and India; and delay in [the] commissioning of associated transmission network elements by other transmission service providers,” wrote the developer in its petition.

Acme said the projects had already been delayed 15 months on account of the non-Covid factors cited, and further delay would be expected due to Covid-19-induced uncertainty.

“The PPAs entered with Seci provide for a maximum extension of six months from scheduled commissioning date, i.e., [a] total 30 months from the effective date of the PPAs for commissioning the entire capacity of the projects, due to any reason whatsoever,” continued the Acme petition. “Therefore, the entire capacity of the projects is required to be commissioned by 8.5.2021, considering an extension of six months from the scheduled commissioning date of 8.11.2020. The PPAs do not permit any extension beyond this point for any reason. Due to delay on account of force majeure events, the petitioner cannot execute the projects within the time. Accordingly, the performance of obligations under the PPAs has become impossible, and thus become void. Therefore, the parties are absolved from their obligations.”

Seci response

Seci, however, has not accepted unilateral termination of the contract by Acme on alleged force majeure grounds. The federal government’s solar energy body has disputed the force majeure claim and said even if such an event was recognized, its effect could not be expected to continue for more than three months.

Seci also told the regulator it is considering giving a project deadline extension to Acme and has no intent of encashing or appropriating the developer’s bank guarantee if the issues can be resolved by mutual discussion.

The ultra-cheap payments agreed by Acme for the energy generated by the Rajasthan project, and since equalled in Gujarat, prompted analysts to speculate about whether such solar farms could be financially viable.

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