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Published:September 19, 2017 6:17 PM
A remarkable progress is seen in the Indian Solar industry since 2015 and the price of solar power has achieved grid parity in recent tenders. India’s solar installed capacity has seen a capacity addition of 8.6 GW from 3.7 GW to 12.3 GW between 2014-15 and 2016-17 whereas Indian solar installed capacity between 2009-10 and 2014-15 was just increased from 161 MW to 3.7 GW. There are multiple factors involved in the difference of progress between the two periods. Key factors for high tariffs and slow progress during 2009 – 15 are as follows: 1. Costly technologies and high project costs – High tariffs 2. Market establishment stage 3. Less market players - Competition 4. Time taken to bring in policy initiatives and supporting models 5. Distribution companies financial constraints to purchase costly solar power 6. Grid constraints and intermittent nature of Solar Power The Government of India has given a major push to solar development by setting an ambitious target of 100 GW by 2022 besides proactively addressing the challenges in the solar industry as and when arises. Solar power in India has seen a revolutionary tariff trend over the years as shown in figure 1 and it is because of the continuous support in terms of monetary, managerial and policy and regular review of progress by the central government. Over the years, India has seen many favorable scenarios like reduction in module prices, improved technology, increased competition among the players, reduced project development requirements like project clearances, land acquisition, power infrastructure till the point of connection etc. Figure 1: Trend of Solar Tariff Bid results of Rewa and Bhadla have brought a revolutionary change in the tariff of solar power in India. According to various analysis reports, the main factors behind such lowest tariffs were 1. Payment security through tripartite agreement with SECI and Discoms, 2. Drop in module prices in international market, 3. Evacuation infrastructure development by State/ central transmission utilities 4. Narrow IRR expectation by developer and 5. Unhedged foreign currency loans at cheap interest rates However, solar market has been undergoing through some significant unexpected hurdles which seems to be the cause for mere stagnation in the number of upcoming solar tenders. Also, the total solar installed capacity addition during April-July’2016 was 1299 MW and it was 826 MW during the same period in this year. The major hurdles prevailing before the government to be addressed on war footing for timely achievement of set targets are as follows: 1.Anti-dumping probe filed by Indian Solar Manufacturers Association Indian Solar Manufacturers Association has an application for the investigation into dumping of cells from China, Taiwan and Malaysia to safeguard them from below-cost imports. If it will be evident that these countries are selling these equipment at lower cost in overseas than their actual domestic cost then the Directorate General of Antidumping and Allied Duties (DGAD) would recommend imposition of anti-dumping duty on the imports which may hamper the financial viability of projects which have quoted low tariffs in the recent past tenders by assuming the decreasing trend in solar module prices. 2.Chinese manufacturing firm’s renegotiation of existing solar module price contracts with solar developers Chinese module manufacturers have called for reneging their contracts for an upward price revision to supply the equipment already contracted for. Even a small price increase impact the cash flows of projects especially those which have won tenders and under construction stage. 3.Concerns over efficiency of imported cheap modules Solar power bids are at record lows with growing concerns over the quality of solar modules being used by project developers who quote record low bids. Hence, MNRE has recently introduced quality standards for solar photo voltaic systems, devices and components goods to address the above said concern. 4.States calling developers to renegotiate the PPAs for lower tariffs Six state governments have demanded developers to renegotiate tariffs with a threat to cancel the existing PPAs. To address this concern, the government has come up with new solar norms in which unilateral cancellation or modification of PPA is barred. 5.Curtailment of Must run renewable energy by states like Tamil Nadu, Rajasthan and Madhya Pradesh New solar bid norms have given some relaxation to this concern. 6.Banks being more cautious in disbursing new loans to renewable companies – Fear of NPA Renewable debt financing financial institutions are worried about the historical low tariffs and are increasingly becoming more cautious in lending to the sector on fears that their loans could turn into non-performing assets (NPAs). New solar norms and tripartite agreement are some of the steps taken by the government to address this uncertainty. 7.Recent Ministry of Power order to limit the waiver of inter-state electricity transmission charges to distribution companies meeting their renewable purchase obligations. This order will impact non-discom/ open access consumers which will significantly impact and discourage customers from opting for RE through open access. So, the government should work on war footing to address these significant factors affecting the progress of solar power in India to gain the confidence of developers and to open the doors for new entrants into the solar industry. As India has been continuously learning from its experience and acting on bottlenecks effectively, it is expected that it will soon bring a clear and encouraging environment in the solar market by clearing the clouds of hurdles on track. InfralineEnergy Disclaimer: The views expressed here are solely those of the author in his private capacity and do not in any way represent the views of the InfralineEnergy (Technologies India Pvt. Ltd.). The organization is not liable for any use that may be made of the information contained therein and any direct/indirect consequences resulting therefrom.
A remarkable progress is seen in the Indian Solar industry since 2015 and the price of solar power has achieved grid parity in recent tenders. India’s solar installed capacity has seen a capacity addition of 8.6 GW from 3.7 GW to 12.3 GW between 2014-15 and 2016-17 whereas Indian solar installed capacity between 2009-10 and 2014-15 was just increased from 161 MW to 3.7 GW. There are multiple factors involved in the difference of progress between the two periods.
Key factors for high tariffs and slow progress during 2009 – 15 are as follows:
1. Costly technologies and high project costs – High tariffs
2. Market establishment stage
3. Less market players - Competition
4. Time taken to bring in policy initiatives and supporting models
5. Distribution companies financial constraints to purchase costly solar power
6. Grid constraints and intermittent nature of Solar Power
The Government of India has given a major push to solar development by setting an ambitious target of 100 GW by 2022 besides proactively addressing the challenges in the solar industry as and when arises. Solar power in India has seen a revolutionary tariff trend over the years as shown in figure 1 and it is because of the continuous support in terms of monetary, managerial and policy and regular review of progress by the central government. Over the years, India has seen many favorable scenarios like reduction in module prices, improved technology, increased competition among the players, reduced project development requirements like project clearances, land acquisition, power infrastructure till the point of connection etc.
Figure 1: Trend of Solar Tariff
Bid results of Rewa and Bhadla have brought a revolutionary change in the tariff of solar power in India. According to various analysis reports, the main factors behind such lowest tariffs were
1. Payment security through tripartite agreement with SECI and Discoms,
2. Drop in module prices in international market,
3. Evacuation infrastructure development by State/ central transmission utilities
4. Narrow IRR expectation by developer and
5. Unhedged foreign currency loans at cheap interest rates
However, solar market has been undergoing through some significant unexpected hurdles which seems to be the cause for mere stagnation in the number of upcoming solar tenders. Also, the total solar installed capacity addition during April-July’2016 was 1299 MW and it was 826 MW during the same period in this year. The major hurdles prevailing before the government to be addressed on war footing for timely achievement of set targets are as follows:
1.Anti-dumping probe filed by Indian Solar Manufacturers Association
Indian Solar Manufacturers Association has an application for the investigation into dumping of cells from China, Taiwan and Malaysia to safeguard them from below-cost imports. If it will be evident that these countries are selling these equipment at lower cost in overseas than their actual domestic cost then the Directorate General of Antidumping and Allied Duties (DGAD) would recommend imposition of anti-dumping duty on the imports which may hamper the financial viability of projects which have quoted low tariffs in the recent past tenders by assuming the decreasing trend in solar module prices.
2.Chinese manufacturing firm’s renegotiation of existing solar module price contracts with solar developers
Chinese module manufacturers have called for reneging their contracts for an upward price revision to supply the equipment already contracted for. Even a small price increase impact the cash flows of projects especially those which have won tenders and under construction stage.
3.Concerns over efficiency of imported cheap modules
Solar power bids are at record lows with growing concerns over the quality of solar modules being used by project developers who quote record low bids. Hence, MNRE has recently introduced quality standards for solar photo voltaic systems, devices and components goods to address the above said concern.
4.States calling developers to renegotiate the PPAs for lower tariffs
Six state governments have demanded developers to renegotiate tariffs with a threat to cancel the existing PPAs. To address this concern, the government has come up with new solar norms in which unilateral cancellation or modification of PPA is barred.
5.Curtailment of Must run renewable energy by states like Tamil Nadu, Rajasthan and Madhya Pradesh
New solar bid norms have given some relaxation to this concern.
6.Banks being more cautious in disbursing new loans to renewable companies – Fear of NPA
Renewable debt financing financial institutions are worried about the historical low tariffs and are increasingly becoming more cautious in lending to the sector on fears that their loans could turn into non-performing assets (NPAs). New solar norms and tripartite agreement are some of the steps taken by the government to address this uncertainty.
7.Recent Ministry of Power order to limit the waiver of inter-state electricity transmission charges to distribution companies meeting their renewable purchase obligations.
This order will impact non-discom/ open access consumers which will significantly impact and discourage customers from opting for RE through open access.
So, the government should work on war footing to address these significant factors affecting the progress of solar power in India to gain the confidence of developers and to open the doors for new entrants into the solar industry. As India has been continuously learning from its experience and acting on bottlenecks effectively, it is expected that it will soon bring a clear and encouraging environment in the solar market by clearing the clouds of hurdles on track.
InfralineEnergy Disclaimer:
The views expressed here are solely those of the author in his private capacity and do not in any way represent the views of the InfralineEnergy (Technologies India Pvt. Ltd.). The organization is not liable for any use that may be made of the information contained therein and any direct/indirect consequences resulting therefrom.
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