RE Developers Weigh Invoking Force Majeure

Rare earths supply crunch is also likely to increase solar and wind tariffs

- Rituraj Baruah

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 people 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.

Starting April 4, China banned the export of rare earth magnets across the world amid a tariff war with the U.S.

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