Supreme Court clarifies commissioning timelines in renewable energy projects: Solar Energy Corporation of India Limited vs. Wind Four Renergy Private Limited (27 February 2024)

Date of the Judgment: 27 February 2024
Citation: 2024 INSC 160
Judges: Hon’ble Mr. Justice Sanjiv Khanna and Hon’ble Mr. Justice Dipankar Datta. The judgment was authored by Justice Sanjiv Khanna.
Can a delay in the operationalization of a power transmission system justify an extension of commissioning deadlines for renewable energy projects? The Supreme Court of India recently addressed this question in a dispute between Solar Energy Corporation of India Limited (SECI) and Wind Four Renergy Private Limited (WFRPL) concerning the commissioning of a wind power project. The court clarified that extensions should be tied to the actual operationalization of the transmission system and not to the date of the appellate tribunal’s order.

Case Background

This case involves a dispute arising from five Power Purchase Agreements (PPAs) between Wind Four Renergy Private Limited (WFRPL) and Power Trading Company India Limited (PTC), with Solar Energy Corporation of India Limited (SECI) acting as the implementing agency. Each PPA was for establishing a 50 MW wind power unit. The initial Scheduled Commercial Operation Date (SCOD) was set for 04.10.2018, 18 months from the Letter of Award (LoA) on 05.04.2017. WFRPL was also entitled to an additional 9 months, until 05.07.2019, with liquidated damages and tariff reductions. The maximum period allowed for commissioning was 27 months from the date of LoA, i.e., until 05.07.2019.

The core issue arose because the inter-state transmission licensee, Power Grid Corporation of India Limited, could not operationalize the Long Term Access (LTA) necessary for the project until 14.04.2019. The Ministry of New & Renewable Energy, Government of India, issued a letter on 22.10.2019, granting a 60-day extension to wind power projects following the operationalization of the LTA.

WFRPL claimed they were not informed about the LTA’s operationalization until 22.11.2019, and sought a 132-day extension, pushing the deadline to 21.11.2019. The Central Electricity Regulatory Commission (CERC) accepted this claim, setting the revised commissioning date to 23.10.2019. However, WFRPL appealed to the Appellate Tribunal for Electricity (APTEL), which ruled that the 132-day extension should commence from the date of its judgment, 11.01.2022.

Timeline

Course of Proceedings

WFRPL initially approached the Central Electricity Regulatory Commission (CERC), arguing they were not informed about the LTA’s operationalization until 22.11.2019. The CERC accepted this, extending the commissioning date to 23.10.2019. However, WFRPL appealed to the Appellate Tribunal for Electricity (APTEL), which directed that the 132-day extension should begin from the date of its judgment, i.e., 11.01.2022. SECI appealed this decision to the Supreme Court.

Legal Framework

The judgment primarily revolves around the interpretation of the Ministry of New & Renewable Energy’s letter dated 22.10.2019, which states,
“the wind power projects shall be granted extension in scheduled commissioning of the project for a period equal to 60 days, subsequent to operationalisation of LTA.”
This letter provided an additional 60 days for completing commissioning activities after the inter-state transmission system was ready. The court also considered the Power Purchase Agreements (PPAs) and the overall objective of promoting renewable energy.

Arguments

Appellant (SECI) Arguments:

• SECI argued that the APTEL’s direction to commence the 132-day extension from the date of its judgment was irrational and contrary to the scheme of the PPAs.
• SECI contended that the purpose of timelines is to ensure early supply of green energy and reduce the carbon footprint.
• SECI highlighted that tariffs for green energy have substantially decreased, and delaying the project would be detrimental.

Respondent (WFRPL) Arguments:

• WFRPL argued that they were not informed about the operationalization of the LTA until 22.11.2019.
• WFRPL claimed that they should be granted an extension of 132 days, which should commence from the date of the APTEL order.

Innovativeness of the argument: The Supreme Court found the argument of WFRPL to be illogical and irrational, as the extension of time should be linked to the operationalization of the LTA and not the date of the APTEL order.

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

1. Whether the Appellate Tribunal for Electricity (APTEL) was correct in directing that the 132-day extension for commissioning the project should commence from the date of its judgment (11.01.2022) instead of being linked to the operationalization of the Long Term Access (LTA).

Treatment of the Issue by the Court

Authorities

The Supreme Court did not rely on any specific case laws or books to come to its conclusion. The Court relied on the facts, the Ministry of New & Renewable Energy’s letter dated 22.10.2019, and the Power Purchase Agreements (PPAs) to come to its conclusion.

Judgment

How each authority was viewed by the Court?

• The Ministry of New & Renewable Energy letter dated 22.10.2019 was used to determine the extension period for commissioning.
• The Power Purchase Agreements (PPAs) were considered to understand the purpose of the agreement and the timelines for commissioning.

What weighed in the mind of the Court?

The Supreme Court emphasized the importance of adhering to the timelines set for renewable energy projects to ensure the early supply of green energy and reduce the carbon footprint. The court noted that the tariffs for green energy have decreased substantially, making timely project completion crucial. The court found the APTEL’s order to be irrational, as it detached the extension from the actual operationalization of the transmission system.

The Court’s reasoning was primarily driven by the need for timely completion of renewable energy projects and the irrationality of the APTEL order. The Court considered both the factual aspects of the case and the legal framework to come to its conclusion.

Logical Reasoning

The Supreme Court rejected the APTEL’s interpretation, stating that,
“the objective and purpose of timelines is to ensure early supply of green energy and reduction of carbon footprint. Tariffs of green energy, it is well known, have come down substantially.”
The Court emphasized that the extension should be tied to the operationalization of the LTA, not the date of the APTEL’s order. The Court noted that,
“Even otherwise, once WFRPL became aware and had knowledge that LTA was functional, and they had been granted benefit of 60 days in terms of the letter dated 22.10.2019 and 132 days in terms of the order of the CERC, the direction that the period of 132 days shall commence from the date the APTEL order is irrational.”

The Court also noted that,
“The wind power generation units which were subject matter of the 4 PPAs were located in the same vicinity as in case of the 5th PPA. This appeal and impugned order relates only to the 5th PPA. WFRPL has not been able to operationalise this PPA by commissioning the wind power generation units. The four other PPAs have been operationised.”

The court did not consider any alternative interpretations, as the APTEL’s order was deemed to be illogical and irrational. The Court restored the CERC order, which had correctly linked the extension to the operationalization of the LTA.

The Supreme Court set aside the APTEL judgment and restored the CERC order, which had extended the commissioning date to 23.10.2019. The Court also directed that SECI was entitled to recover Rs. 10 crores, which it had refunded to WFRPL, along with simple interest at 12% per annum from the date of payment until the amount is refunded. If the amount is not refunded within six months, it will be treated as electricity dues and recovered as per the Electricity Act, 2003.

Key Takeaways

• Commissioning extensions for renewable energy projects must be linked to the operationalization of necessary infrastructure, such as transmission systems.
• Appellate orders should not arbitrarily extend timelines, especially when it undermines the purpose of the project.
• Timely completion of renewable energy projects is crucial for ensuring the supply of green energy and reducing the carbon footprint.

Directions

The Supreme Court directed that:

• The order dated 08.03.2021 passed by the CERC is restored.
• SECI is entitled to recover Rs. 10 crores from WFRPL, along with simple interest at 12% per annum from the date of payment until the amount is refunded.
• If the amount is not refunded within six months, it will be treated as electricity dues and recovered as per the Electricity Act, 2003.

Development of Law

The ratio decidendi of this case is that commissioning extensions for renewable energy projects must be directly linked to the operationalization of necessary infrastructure, such as transmission systems and not to the date of the appellate order. This decision reinforces the importance of timely execution of renewable energy projects and ensures that extensions are granted based on actual delays in infrastructure readiness, rather than arbitrary dates. This decision clarifies the position of law by setting aside the irrational direction of the APTEL.

Conclusion

The Supreme Court’s decision in this case clarifies that extensions for commissioning renewable energy projects should be directly linked to the operationalization of necessary infrastructure, such as transmission systems. The court set aside the APTEL’s order and restored the CERC’s order, ensuring that the extension was tied to the actual delay in the operationalization of the LTA. This decision underscores the importance of timely completion of renewable energy projects and the need for rational and logical extensions of timelines.