Risk for 3rd-party off-take based renewable IPPs to increase as COVID-19 clips cash flows: ICRA
July 4, 2020 11:45 am
July 4, 2020 11:45 am
Third-party sale based projects face challenges due to much lower tenure (5-10 years) of the PPAs against the 25 yeartenure for PPA in case of utility scale projects.
The renewable energy Independent Power Producers (IPPs) supplying through open access to commercial and industrial consumers face payment risks as cash flows of distribution utilities have been affected due to the COVID-19 lockdown. The power policies in many states have been amended over a period and the states have either completely withdrawn or reduced incentives given to open access customers (mainly commercial and industrial – C&I consumers) for power procurement from renewable energy projects, as tariff competitiveness of wind and solar power has shown a significant improvement.
Further, the open access charges applicable in case of third party sale of power have also shown an increasing trend across the key states, highlighting the rising regulatory risk for such IPPs. Earlier, the state power policies were attractive for open access based renewable power projects as concessions were available from levy of cross-subsidy surcharge (CSS), transmission and wheeling charges as well as favourable banking facilities to promote the renewable sector.
According to Vikram V, Associate Head & Assistant Vice-President, ICRA, third-party based projects face challenges arising out of relatively much lower tenure (5-10 years) of the power purchase agreements (PPAs) under the third-party sale route as against the 25 year-tenure for PPA in case of utility scale projects. Girishkumar Kadam, Sector Head & Vice President, ICRA Ltd says, “The renewable IPPs based on third party/ group captive off-take remain exposed to regulatory risk, which is set to augment even more, given the likelihood of an increase in open access charges due to an adverse impact of the lockdown/restrictions to control COVID-19 outbreak on the cash flows and revenue profile of the state owned distribution utilities. Further, with the improved tariff competitiveness for wind and solar energy against the conventional power sources, the open access charges for renewable energy projects are likely to remain aligned as that for conventional power sources, going ahead.”
We use cookies to personalize your experience. By continuing to visit this website you agree to our Terms & Conditions, Privacy Policy and Cookie Policy.