APERC Clears Wind PPA Between APSPDCL and NALCO

The Andhra Pradesh Electricity Regulatory Commission (APERC) has approved the revised Power Purchase Agreement (PPA) between Southern Power Distribution Company of Andhra Pradesh Ltd. (APSPDCL) and National Aluminium Company Ltd. (NALCO) for the latter’s 50.4 MW wind power project in YSR Kadapa district.

However, the Commission has slashed the tariff from the proposed Rs. 2.55 per unit to Rs. 2.49 per unit and directed that Renewable Energy Certificates (RECs) will now accrue to APSPDCL instead of NALCO.

The original PPA between APSPDCL and NALCO, signed in December 2012, expired in December 2022 after a 10-year term. While the wind project had been supplying power under Average Pooled Power Purchase Cost (APPC) linked tariffs, negotiations for an extension of the agreement dragged on for over a year. APSPDCL initially offered a tariff of INR  1.50 per unit, which NALCO, a central government-owned Navaratna company, rejected as financially unviable.

Amid policy pressure and government-level discussions, both parties eventually reached a consensus in November 2023 to extend the agreement for another 15 years at a negotiated tariff of INR 2.55 per unit, with a 3 percent annual escalation, and REC benefits continuing with NALCO.

However, this arrangement drew criticism from public stakeholders, who questioned the need for the power purchase, the financial burden on consumers, and the appropriateness of continuing REC benefits to a generator that had likely recovered its capital cost.

After public notice, hearings, and multiple rounds of clarifications, the Commission evaluated the need for the procurement in light of new Renewable Purchase Obligation (RPO) trajectories set by the Ministry of Power,now raised to 29.91 percent  for FY25 and climbing to 43.33 percent by FY30. APERC found that DISCOMs will face shortfalls in renewable energy from FY28 onward, despite large-scale solar tie-ups with SECI and hybrid capacity additions.

Rejecting the original INR 2.55 per unit proposal, the Commission recalculated a levelized tariff of INR 2.49 per unit for the next 15 years using CERC’s 2024 tariff determination norms. It also ruled that NALCO would no longer be entitled to RECs, stating that the original rationale, offsetting high capital costs via RECs, is no longer applicable in a falling-cost renewable energy market.

“Granting REC benefits to NALCO at this stage would harm consumers and defeat the DISCOMs’ core reason for procuring this power, to meet renewable purchase obligations,” the order stated.

APSPDCL has been directed to incorporate the tariff changes and REC benefit clause into the PPA and submit the amended agreement for final approval within 30 days. The new tariff and terms will be effective from August 1, 2025.

The Commission has also reserved APSPDCL’s first right of refusal post the 15-year term and mandated that Clean Development Mechanism (CDM) benefits be shared 90:10 between the developer and the DISCOM.

With this order, APERC has signaled a sharper scrutiny of post-PPA power extensions, especially in legacy renewable projects, aiming to align financial prudence with evolving policy mandates.