Supreme Court Clarifies Timelines for Wind Power Project Delays

Posted On - 6 April, 2024 • By - King Stubb & Kasiva

In a landmark judgment that breathes new life into wind power projects, the Supreme Court of India has inter alia clarified the rules surrounding time extensions for delays caused by unforeseen circumstances. The case of Solar Energy Corporation of India Ltd. (“SECI”) vs. Wind Four Renergy Pvt. Ltd. (“WFRPL”), offered a much-needed gust of clarity for the renewable energy sector.

The dispute in the captioned matter arose from delays in a wind power project commissioned by WFRPL under 5 Power Purchase Agreements (“PPAs”) (dated July 21, 2017) signed with Power Trading Company India Limited. Under these PPAs, WFRPL agreed to establish 50 MW wind power unit and generate to supply renewable wind power to PTCIL. SECI/the Appellant is the implementing agency for the project (a nodal agency of the Central Government to promote renewable energy).

The agreed-upon commissioning date was October 4, 2018, with a potential 9-month extension for liquidated damages and tariff reduction. However, the project faced setbacks due to the inter-state transmission system for Long Term Access (“LTA”) not being operationalized on time by Power Grid Corporation of India. The LTA was only operationalized on April 14, 2019.

In pursuance thereof, the Ministry of New and Renewable Energy issued a letter on October 22, 2019 inter alia granting concessions and extensions of milestones in wind power projects. It provided guidelines for granting extensions in the scheduled commissioning of wind power projects following the operationalization of LTA by transmission licensees. One of the key provisions of this letter was Clause 2(c), which stipulated that wind power projects would be granted an extension in the scheduled commissioning date for a period equal to 60 days after the operationalization of LTA.

Thus, SECI accepted that WFRPL would be entitled to an extension of the commissioning date until June 13, 2019, per the 60-day extension provided in the letter. Consequently, the additional time allowed, along with provisions for payment of liquidated damages and reduction of the tariff, as well as the maximum period allowed for commissioning, were to be computed based on this extension. These computations were to be made considering the 9-month and 27-month periods from the date of issue of the Letter of Award (“LoA”).

WFRPL requested an extension to complete their project, citing that they were not informed about the commissioning of the LTA by SECI until November 22, 2019. On March 8, 2021, the Central Electricity Regulatory Commission (“CERC”) granted WFRPL a 132-day extension in response to their request.

This was accepted by SECI, however, WFRPL preferred an appeal before the Appellate Tribunal for Electricity (“APTEL”). The APTEL intervened and inter alia stated that “the period of 132 days, for which delay has been condoned, would commence from the date of judgment in the appeal by APTEL, that is, from 11.01.2022.” This additional extension raised concerns, leading SECI to appeal to the Supreme Court.

The Supreme Court, acting as the final arbiter, found APTEL’s decision to be an “irrational” overreach, exceeding the permissible timeframe for project completion. Recognizing the unforeseen nature of the transmission system delay, the Court upheld CERC’s initial, more measured extension of 132 days. This judgment could serve as a crucial calibration, ensuring project timelines are respected while acknowledging the need for flexibility in extraordinary circumstances.

The judgment also has financial implications for WFRPL. SECI is entitled to recover a previously refunded performance bank guarantee of INR 10 crore, which was encashed due to the project delays. WFRPL has six months to repay this amount with interest at 12% per annum. If the repayment is not made within the stipulated timeframe, the outstanding amount will be treated as electricity dues recoverable under the Electricity Act, 2003.

From the above, it can be observed that the aforementioned case clarifies the process for handling delays caused by external factors beyond a developer’s control. It emphasizes the importance of adhering to agreed-upon timelines while acknowledging that reasonable extensions may be granted in unforeseen circumstances and brings much-needed clarity to the renewable energy sector, promoting a balance between project completion timelines and addressing unforeseen obstacles.