A Southern State’s Crazy Policy Revision Threatens India’s Entire Renewable Energy Sector

Despite having achieved economic grid parity with fossil fuels, renewable energy is still subject to the whims and fancies of government policies around the world. Power is generally a heavily regulated sector and is greatly influenced by the policies and regulations emanating from the state decision makers. The political ideology of parties can make or break the renewable energy industry. For example, the Democrat Party in the USA is very pro-renewables but the Republican party which does not believe in climate change is anti-renewables. Same is the case with other countries in the world where the election of an anti-renewable government can derail the progress made by renewable energy. Both developing and developed countries face this problem where policy stability and consistency goes for a toss.

The recent win of regional party YSR Congress in the southern Indian state of Andhra Pradesh has not only thrown the renewable energy in that state into a tailspin but the entire country’s industry into a state of chaos. The Jagan Reddy government has said that all the solar and wind energy contracts signed in the last five years should be renegotiated as they were signed at high prices leading to losses for the state-owned power distribution companies.

This is a specious argument given that solar and wind equipment prices fall sharply almost every year leading to lower costs. Taking a solar price signed 2-3 years ago and comparing it with a price now is stupidity. However, the AP government wants to do exactly that and has said that it would investigate all PPAs that were signed during the last government’s tenure. Note, Andhra Pradesh is one of the top Indian states by “installed solar energy” capacity. Given that AP has more than 7 GW of solar and wind energy capacity, this means a problem for the entire country. If the RE developers do not receive the payments on time, they would default on their loans and make foreign investors wary of putting money into India’s booming green energy sector. The courts have already ruled against the government while the regulator has stayed neutral in the assault launch on the RE industry. Billions of dollars of investment have suddenly become highly risky and credit rating firms have already downgraded major RE developers such as Greenko because of these concerns.

Also, read Andhra Pradesh becomes the hub of Renewable Energy in India

The AP government did sign a lot of RE contracts in the last few years but it is to be remembered that AP suffered from huge power deficits and quick set up of renewable energy came as a boon to the state which has now become power surplus. The Indian federal government is trying to get the AP government to stop this jihad against RE but has not been successful till now. The Chief Minister of AP has even written letters to government-owned companies such as IOC, NTPC, and SECI to change their contracted prices of renewable energy. He is also trying to strong-arm the developers by curtailing the purchase of wind and solar power by falsely implying danger to grid stability.

The solution to the problem seems simple. The federal government and their agencies should stop supplying power to the AP government and stop giving the share of taxes. This will bring the state government to heel very quickly.