Discoms delaying payment: Tata Power Renewable Energy CEO Rahul Shah

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The government may be pushing for aggressive expansion in renewable energy capacity, but companies face delays in payments, which are sometimes as much as a year, from state-run power distribution companies, said Rahul Shah, chief executive officer and executive director of Tata Power Renewable Energy.

The renewable energy arm of Tata group’s power utility Tata Power Company BSE -0.70 %, which runs over 2,000 mw of renewable energy capacity and has another 500 mw under construction, is bullish on the sector and aims to derive 30%-40% of its total generation from renewable sources by 2025. But the sector’s exponential growth in the past few years has thrown some challenges that need to be addressed soon, Shah said.

“Not just 2 -3 months, there are states which have nearly a year’s delay in payments. The financial health of the discoms is not good. The Uday scheme has started showing positive impact in terms of reducing their debt burden and losses. In some states, the regulators have not yet allowed tariff increases to happen, so improvement in their financial situation will take longer,” Shah said.

He said that given the financial constraints that state discoms face, they are “prioritising” payments to generators which offer firm supply of electricity, which means the thermal power generators, over renewable energy, which is an intermittent source of power.

While the government is pushing for more renewable energy, there are “subtle pulls” from state discoms discouraging these generators.

“Some of the states have tried to discourage addition of renewable energy capacity by either delaying payments or by backing down renewable energy. Therefore, telling the developer or the owner of the renewable energy plants that there could be some uncertainties pouring in,” Shah said.

Sector players list Tamil Nadu, Maharashtra, Madhya Pradesh, Andhra Pradesh and Rajasthan, among the ones delaying payments.

The renewable energy sector also faces huge challenges as transmission infrastructure is stretched and states are still not enthused about buying renewable energy.

“For India to achieve its goal of 175 gigawatts (by 2022), it is very important for the grid to be able to handle that. There is a limit to which scheduling, forecasting and improving the grid technology can help but government needs to work on the grid since it has a longer lead time. If the government does not act, then the rate at which new renewable power capacity will get bid-out will also have to slow down,” Shah said.

Tata Power is looking to expand its green energy portfolio through organic as well as inorganic routes. “We are completely agnostic as to whether it is solar or wind when we plan expansion. We are looking at acquisition opportunities as there are nearly 3 gigawatts of wind and solar assets in the secondary market,” Shah said.

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