Green energy developers may invoke force majeure clause

RE DEVELOPERS EXPECT A RISE IN PRICES OF RARE EARTH ELEMENTS AND AN EVENTUAL INCREASE IN POWER TARIFFS

- Rituraj Baruah

NEW DELHI: Indian green energy developers and manufacturers are considering invoking "force majeure" clauses to delay project completion, citing disruptions in the supply of rare earth elements and magnets from China, three sources familiar with the matter said. The supply crunch is also likely to increase solar and wind power tariffs from upcoming renewable projects in the country, they added.

A force majeure clause in contracts allows parties to be excused from contractual obligations in case of an extraordinary situation that makes it impossible or impractical to fulfill the commitment as per the contract. Given that India's renewable energy contracts ensure stiff penalties for delays, the invocation of a force majeure clause will protect developers and suppliers from the risk of penalties, including fines and encashment of bank guarantees.