Lawmakers of Indian state of Tamil Nadu recently revealed that they are negotiating with at least one solar project developer to reduce tariff. This could trigger a bad precedent across India as bids for new solar projects continue to decline rapidly.

The project in question in Tamil Nadu is no ordinary solar project. The government of Tamil Nadu is looking to get Adani Green Energy reduce tariff of its 648 megawatt project – the largest in India.

The Adani project, commissioned last year, gets paid Rs 7.01 (11¢) for every unit of electricity it feeds into the grid. That’s a massive premium to the current lowest tariff bid in the country, nearly three times as much.

Tamil Nadu recently issued a tender for 1.5 gigawatts solar power capacity and set a maximum tariff at Rs 4.00/kWh (6.2¢/kWh). It is clear that the government wants to check any ‘unjust’ profits that the developers may be getting due to advancements in technology and the share decline in module prices over the last several months.

A similar attempt was made in 2015 in the state of Gujarat. The projects in question at that time were among the first utility-scale solar power projects in India which predate even the National Solar Mission. The very first projects commissioned in Gujarat are still getting tariffs as high as Rs 12/kWh (19¢).

Power utilities in Gujarat approached the regulators to reduce tariffs of these operational projects but did not find any success. The matter was dragged into a court which ruled in favour of the developers.

Any retrospective reduction in tariffs will also send the wrong message to project developers which could put brakes on India’s march to become one of the largest solar power markets in the world. Any doubt in the developers’ mind could make them ask for new PPA templates which could elongate the regulatory procedures and delay project execution.

Screengrab from NatGeo documentary on Adani Energy solar power plant

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