Mumbai: India’s renewable energy sector is grappling with sizable delays in signing of power purchase agreements (PPAs) with 80-90 GW projects under pipeline and about 40-45 GW facing delays, according to industry experts.
According to Kannan Krishnan, Joint Managing Director of Jakson Green, this is across all RE projects including FDRE and RTC tenders. He said that the discoms are now inclined to engage with projects with higher capacity utilization factors.
“There is a huge lag in signing of PPAs. Today, over 40 GW to 45 GW of renewable energy projects are impacted which includes REIPs as well as the discoms,” said Krishnan.
Vikram V, vice-president, co-group head – corporate ratings, ICRA, said that there is a lag of eight to nine months between the award of projects and signing of the PPAs or PSAs by the bidding agencies, which leads to deferment of project execution as the execution timeline starts from the PPA signing date.
“The current renewable project pipeline remains large at 80-90 GW, out of that there is a sizable quantum which is awaiting signing of PPAs or PSAs,” he added.
He said that the overall bidding activity remains healthy, and it is building up the project pipeline for future capacity addition. However, as the execution will only start once the PPAs are signed, it is imperative to get the PPAs or PSAs signed in a timely manner.
These delays stem from regulatory uncertainties, financial challenges faced by discoms, and occasional mismatches between state and central policies. Additionally, grid infrastructure constraints and disputes over tariff rates contribute to the lag.
Ravi Shekhar, Managing Director, Eninrac Consulting, said that these delays arising from various structural and operational challenges, have implications for project timelines, cost overruns, investor confidence, and increased risk perception.
In 2022, planned RE capacity stood at 15 GW but PPAs were signed for 9.5 GW with the year registering a delay of 6-12 months in PPA signing. In 2023, planned capacity was 18 GW and PPAs for 12 GW capacity were signed, the delay recorded was 8-10 months. Whereas in 2024, PPA signing is expected to see a delay of 4-8 months.
Regarding the top states with the highest delay for key projects, Renew’s 500 MW solar project in Gujarat got delayed by 12 months, followed by Adani Green’s 400 MW wind-solar hybrid project in Andhra Pradesh which was delayed by 10 months. Whereas Tata Power’s 350 MW hybrid project in Karnataka was delayed by 9 months, according to data upto November 2024, shared by the research consultancy.
According to Jakson Green’s Krishnan, the government has a defined bidding trajectory for public sector undertakings like NHPC, NTPC, SECI, and SJVN, hence to meet the bidding calendar the tenders are being auctioned without offtake agreements in sight.
“Earlier, the tenders were auctioned only when the PSA visibility was certain thus assuring an offtake agreement in a short duration. Now, the government has to also define a similar offtake calendar for discoms so that PPA-PSA can be aligned,” he added.
According to Shekhar, the key reasons behind this delay are discoms financial challenges, tariff disputes, policy misalignment, and grid infrastructure constraints.
He said that many state-owned discoms face significant debt, impacting their ability to commit to long-term PPAs. Payments for existing renewable projects are often delayed, adding to the hesitation in signing new agreements.
“Regulatory differences between state and central governments over tariffs often lead to prolonged negotiations. Developers argue for higher tariffs to account for inflation and costs, while discoms push for lower rates,” he added.
He said that the integration of large-scale renewable energy projects into the grid is limited by existing infrastructure. Concerns over grid reliability and stability make discoms cautious in committing to new capacity.
However, according to ICRA’s Vikram, the enforcement of RPO norms would be important to get the discoms to sign the PPAs and PSAs.
Another industry expert said that there needs to be more stringent penalties on discoms for not meeting the RPO obligations in a quarterly manner.
