Even as India slowly starts opening its market post an extended pandemic related lockdown, there seems to be trouble brewing in the solar industry. ACME Solar says it cannot go ahead with 600 MW PV capacity development due to force majeure events, but SECI and PGCIL don’t agree. It remains to be seen if other developers will also come up with such requests. (Photo Credit: TaiyangNews)
- ACME Solar has unilaterally terminated the PPAs for 2x300 MW capacity it won under a SECI auction in July 2018
- It has invoked force majeure reasons for this termination including pandemic related adverse impact on its suppliers among other reasons
- ACME Solar wants CERC to direct SECI and PGCIL to restrain them from invoking bank guarantees and letters of comfort and to return the same
- SECI and PGCIL haven’t agreed to the termination and CERC will be reviewing the matter in the next hearing
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Indian solar power developer ACME Solar will not go ahead with the development and construction of 600 MW solar PV capacity in Rajasthan that it won for one of the lowest winning PV tariffs in the country at INR 2.44 per kWh back in July 2018. The company has cited force majeure events as the reason for pulling back from the project, including COVID-19 outbreak.
The 3 GW auction was partially cancelled by the Solar Energy Corporation of India (SECI) in August 2018 due to high tariffs. Except for ACME Solar, all other winners returned empty handed.
ACME Solar was to develop this capacity in the form of 2 projects of 300 MW each and entered into power purchase agreement (PPA) with SECI on December 7, 2018 through its group companies. On May 4, 2020, the PPAs were terminated by the company.
The force majeure events blamed for this decision by ACME Solar are as follows:
- status quo orders by Rajasthan High Court for 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 lockdown in China and India, and
- delay in commissioning of associated transmission network elements by other Transmission Service Providers.
The petitioners have now approached the Central Electricity Regulatory Commission (CERC) to restrain SECI and Power Grid Corporation of India Limited (PGCIL) from invoking bank guarantees and letters of comfort and to return the same.
A petition filed with CERC explains that the projects were had been delayed by 15 months and the petitioners expect further delay on account of uncertainty due to COVID-19.
As per the PPAs signed and factoring in a maximum extension of 6 months allowed under the agreement, the 600 MW capacity should have been online on May 8, 2021. However, because of the reasons stated above, ACME Solar claims, ‘Performance of obligations under the PPAs has become impossible and thus become void. Therefore, the parties are absolved from their obligations’.
SECI doesn’t agree…
SECI has refused to agree to the termination request disputing the force majeure event ‘or that even if there is such an event, its effect is continuing for a period of more than three (3) months. Further the Petitioners did not claim sustained force majeure for termination of PGCIL connectivity and the delay in construction of sub-station until after the event was already over. The stay order by Hon’ble High Court of Delhi has been vacated and therefore, the same can no longer be relied to claim termination’. It has instead offered to grant extension to the petitioners to implement the projects.
…nor does PGCIL
PGCIL believes the petitioners cannot be allowed to escape the liabilities of the contracts under the guise of force majeure, especially when on March 5, 2020 they ‘willfully represented’ to the commission that commissioning of the projects was under progress with an extended timeline.
CERC has currently directed SECI and PGCIL not to take any coercive measure against the petitioners till the next date of hearing, which was not disclosed, and the latter were directed to keep the letter of comfort and bank guarantee valid.
In March 2020, the Ministry of New and Renewable Energy (MNRE) had allowed renewable energy developers to invoke force a majeure clause for project commissioning delay due to the pandemic impacting their supply chain (see India Allows Force Majeure For COVID-19 Delaying RE Projects).
Mercom India Research cited a legal expert who said the fate of this litigation will give a ray of hope to other developers who are facing challenges in relation to project execution due to deadlines and winning bids.