India’s Andhra Problem Continues to Fester for the Renewable Energy Industry 

India’s renewable energy industry has been in turmoil ever since the new government under Jagan Reddy came to power in the southern state of Andhra Pradesh. He quickly put a spanner in the works by declaring hold on all new solar and wind projects and refusing to honor the power purchase agreements which were signed by the previous government. The power producer filed the cases against this unilateral change at various regulators and courts, but given the slow nature of these procedures, nothing has come out of it yet.

The renewable energy producers are facing huge challenges in their cash flows as money has stopped flowing from the AP government discoms to the producers of wind and solar power. With a massive 5000 MW of solar and wind projects in distress, the entire renewable energy developer community is facing a challenge slowing down the progress of the solar and wind industry in the entire country. Despite the central government trying to get the problem solved, no results have been seen. Now the countries and the international companies which had invested in the projects in Andhra Pradesh are threating to take these cases to an international tribunal to ensure their investments. Note major investors such as Goldman Sachs, Softbank and others have invested billions of dollars in the solar and wind projects.

Also, read Will Things “Brighten Up” for Andhra Pradesh

To add salt to the wounds, Andhra Pradesh is now changing its wind and solar policies which will hurt the RE producers even more. It plans to change the policies such that it will favor the discoms even more with the RE producers facing the music. Instead of arriving at a mutually agreeable solution with the RE producers, the AP government is making it more and more difficult for the entire RE industry. While the government distribution utilities may be facing a challenge in their finances, it was the fault of the government. Now putting the repercussions of the fault on the RE producers seems highly unfair as there does not seem to be any corruption issue here. Legally binding contracts not being honored in India is a massive issue and this action by the government just emphasizes the problem facing the entire country.