India Solar Handbook 2016

India is set to become the fourth largest solar market in the world with expected capacity addition of 6 GW in 2016

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In a ground-breaking step for the Indian solar market, Solar Energy Corporation of India (SECI) has announced that it will soon release tenders for solar project developers to install storage solutions along with their projects. In the upcoming tenders for 100 MW capacity in Andhra Pradesh and 200 MW in Karnataka, each 50MW project would be connected to a storage capacity of 2.5 MWh (refer). These tenders would help India draw attention of some key storage systems suppliers such as NGK Insulators, AES Energy Storage, Sumitomo Electric, LG Chem, Samsung SDI, NEC Energy, BYD, Toshiba, GE and Saft. BYD is already known to be exploring this opportunity and may offer a joint bid with SkyPower (refer).

  • The primary commercial objective of these particular tenders would be to showcase India as an upcoming market for utility scale energy storage solutions
  • For proposed specifications, including storage may lead to a 10 paisa increase in tariffs, however, the technical benefits of storage of this size will be negligible
  • These projects should just be seen as a start of the process to acclimatize project developers and grid operators with utility scale storage

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The Indian government seems to be ready to push through the much anticipated Goods and Services Tax (GST) bill in the Parliament in the upcoming monsoon session (July 18 to August 13). If passed, the government will aim to implement the reformed tax regime from April 2017. A key proposal of the reform is to do away with a maze of taxes and exemptions therein and replace them with uniform tax structure across different states and product categories. While this new tax regime promises to be positive for the overall economy, it is not good for the solar industry which stands to lose several tax exemptions.

A committee constituted by the current government has recommended three tax slabs for GST: a standard rate of 17-18% for most items, a merit list where the rate would be 12% and a demerit list where the rate would be 40%. This is in addition to an exemption list of around 100 essential items where GST would be completely waived off.

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Recent market reports suggest that an oversupply situation is building up in PV module manufacturing in China, especially for the second half of 2016 and this is likely to lead to significant price corrections in the market (refer to story 1, story 2 and story 3). China has a target of supporting 18 GW of solar installations in 2016 as against 15 GW of actual capacity addition in 2015. But the fall in Feed-in-Tariff (FiT) from 30th June brought forward demand in Q2-2016 and 13 GW is estimated to have been installed in the first half itself. As a result, demand is expected to slow down sharply in the remaining part of the year. Analysts from IHS research believe that PV installations in China in Q3-2016 may drop by as much as 80%. (refer).

  • For global sales, module prices shipping in the fourth quarter of 2016 have already declined by as much as 10%, since the first half of 2016
  • Price reduction in India is being further aided by a significant depreciation of the Chinese Yuan against the Indian rupee
  • Indian solar project developers will be relieved to see prices coming down much more sharply than expected, providing an opportunity to improve returns despite aggressive bidding

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SECI has completed auctions of 160 MW capacity of projects to be developed in the Charanka solar park in Gujarat under the viability gap funding (VGF) scheme. The original tender of 250 MW was broken down into five projects of 40 MW each and two projects of 25 MW but bids were received for just four projects of 40 MW. Auctions for other projects may now be completed at a later date. Most private developers steered clear of this Gujarat tender due to the extremely high solar park charges – INR 9.6 million per MW – equivalent to the VGF ceiling of INR 10 million/MW and more than double the solar park charges in Andhra Pradesh. This effectively means that even if a developer got the maximum VGF of INR 10 million/MW, it would spend the entire VGF on paying for solar park charges. The combination of VGF plus fixed tariff of INR 4.43/kWh as payable by SECI was not seen as attractive by most developers.

  • Bidding for this tender has been delayed for over 10 months as developers have been reluctant to participate
  • Considering that Gujarat has one of the highest RPO requirements in the country and its Discoms are most bankable amongst peers, the state must aim to add more capacity
  • There is a need for the state to revisit its high solar park charges but short-term project development opportunities in the state are very limited

FULL STORY

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