Azure Power Challenges Financial Impact Of Supreme Court’s Bird Protection Order On Solar Project

In a recent development, M/s Azure Power Thirty-Four Private Limited (APTFPL) has sought compensation for additional expenses incurred due to a Supreme Court directive issued on April 19, 2021. This directive mandates that all existing and future overhead low and high voltage power lines in the habitats of the Great Indian Bustard (GIB) must be laid underground. The petition was filed by APTFPL under Section 86 of the Electricity Act, 2003, and is associated with the Power Purchase Agreement (PPA) dated July 30, 2018, executed between APTFPL and the Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL).

APTFPL has a solar power project with a capacity of 130 MW in Jodhpur, Rajasthan. The Supreme Court’s order was aimed at protecting the GIB and the Lesser Florican, both endangered bird species primarily found in Rajasthan and Gujarat. The court directed the installation of bird diverters on existing overhead lines and the undergrounding of new power lines to prevent bird collisions. Although APTFPL was not initially part of the proceedings that led to this directive, it was impacted due to its project being located within a GIB potential area.

The order has significantly affected APTFPL’s economic position. The company had to install 4,200 bird diverters at an additional cost of approximately ₹86,27,511. APTFPL argues that this unforeseen expense should be considered a change in law event as defined in the PPA, which necessitates compensation to restore the company to its original economic position before the change.

In its petition, APTFPL highlighted that the directive from the Supreme Court qualifies as a law under Article 141 of the Constitution of India, making it binding on all courts within the country. This directive was issued after the last date of bid submission, thus constituting a change in law event. APTFPL also cited previous regulatory decisions supporting their claim for compensation due to similar conditions imposed by authorities.

The Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL) responded by arguing that the Supreme Court’s directions were primarily intended for the state governments of Gujarat and Rajasthan and not for private entities like APTFPL. MSEDCL contended that there was no specific mandate for APTFPL to comply with these directives and that doing so placed an undue financial burden on the Maharashtra state utility and its consumers. MSEDCL further stated that APTFPL cannot claim to be an aggrieved party under the current PPA and that the petition lacks merit.

The resolution of this case will have significant implications for solar power developers operating in regions with vulnerable wildlife. It will set a precedent for how unforeseen regulatory changes affecting project costs are managed and compensated. The decision will also influence future contractual agreements between power developers and distribution companies, especially in areas where environmental conservation measures are likely to impact project economics.

The outcome of this petition will be closely watched by stakeholders in the renewable energy sector, as it addresses the balance between environmental conservation and the economic viability of renewable energy projects. The case underscores the need for clear policies and frameworks to handle such contingencies, ensuring that the objectives of environmental protection and sustainable energy development are both met without imposing disproportionate financial burdens on specific parties.