Bridge India

In our last weekly update, we discussed the state of domestic manufacturing and Indian government’s efforts to improve prospects of the sector after the domestic content requirement mechanism was challenged successfully by the USA at the World Trade Organization (WTO) (refer). Recent reports suggest that the government is planning to offer incentives directly to domestic manufacturers instead of compulsory domestic content requirement (refer). The Indian government seems totally committed to support local manufacturing with Mr Piyush Goyal, Minister for new and renewable energy, being emphatic that India needs a vibrant manufacturing sector to go hand-in-hand with boost in solar power generation. Existing manufacturers may not gain any direct benefit from the new policy, which is likely to focus on creating new, large scale and vertically integrated investments Financial incentives and/or assured market demand may be provided using a bidding based mechanism Long-term outlook for the sector will remain uncertain unless there is a genuine competitive advantage arising from lower costs, better infrastructure and/or access to superior technologies

...
FULL STORY

As part of the memorandum of understanding signed under the UDAY scheme, the Ministry of Power has allowed a roll forward of the Renewable Purchase Obligation (RPO) for Uttar Pradesh by seven years (refer). Meanwhile, state power distribution companies in Odisha have got a stay on enforcement of RPO from the state High Court. These incidents set bad precedents for the country’s solar targets, which are conceptually based on compliance with the RPO mechanism. On the other hand, states such as Telangana, Andhra Pradesh, Karnataka and Jharkhand are rapidly scaling up their solar programs and going way beyond their RPO targets. In fact, there is more solar power capacity planned in Telangana and Jharkhand in the next two years than their respective 2022 targets set by the Ministry of New and Renewable Energy (MNRE). The RPO mechanism has by and large failed because of poor regulatory framework and non-compliance on the pretext of poor financial health of distribution companies Some states are increasingly adopting solar power because of its economic advantages combined with environmental and political credentials Going forward, we expect the RPO mechanism to become more of a measuring stick than an underlying driver for new capacity addition in… Read More »

...
FULL STORY

Last week, Jharkhand, one of India’s largest coal producing states and governed by BJP, announced a new tender for 1,200 MW of solar capacity allocation under its state policy (refer). This is the first such tender for the state. Projects under this tender are expected to be allocated under two categories: 200 MW for projects smaller than 25 MW (minimum size is 1 MW) and 1,000 MW for projects ranging between 26 MW and 500 MW. The projects in the first category will get 13 months for commissioning and those in the second category will get 18 months. • If all projects under this tender are successfully commissioned, the state will be able to meet over 90% of its peak consumption and over 20% of its overall power requirement through solar in the year 2018-19 • In view of Jharkhand’s higher risk profile and availability of several other project development opportunities in the market, we believe that bids under this tender may not be as competitive • The state’s recent approval to join the central government’s debt recast scheme is likely to improve the off-take risk in the state

...
FULL STORY

Telangana successfully completed auction for 2,000 MW of grid connected, ground mounted solar projects in India in August 2015 and PPAs were expected to be signed by October 2015 (refer). However, there has been a considerable delay in signing these PPAs. The process appears to be stuck at senior levels in the state government purportedly because the subsequent auction processes completed by Punjab and NTPC (500 MW under National Solar Mission) received record low tariffs of INR 5.09 and 4.63/kWh respectively. Out of 1 GW of projects allocated under state policies in the past two years, nearly 40% of capacity is either significantly delayed or cancelled for various reasons Policy certainty and delays in state government solar initiatives are a major concern for the Indian solar industry Such delays and uncertainties are a huge setback to private sector confidence, especially affecting the plans of foreign investors and suppliers

...
FULL STORY

Earlier this month, India’s minister for new and renewable energy, Piyush Goyal, announced that the country’s rooftop solar policy is now ready to be placed before the union cabinet (refer). This policy is expected to lay out yearly targets to reach 40 GW of rooftop solar capacity and provide comprehensive details of operational and fiscal support for the rooftop solar market. The Indian rooftop solar market grew 66% in the last 12 months despite the lack of any specific rooftop solar policy initiatives The new rooftop policy is likely to consolidate and detail out already known aspects such as yearly targets, changes in capital subsidy scheme and schemes for low cost financing If the new policy does not introduce mandatory rooftop solar installations for buildings, the policy release will likely be a non-event

...
FULL STORY

Mr. Piyush Goyal, Minister for New and Renewable Energy, announced last week that the government plans to waive interstate transmission charges for electricity generated by renewable sources (refer). This waiver was earlier included in the proposed amendments to the country’s existing tariff policy of 2005 (refer), but the amendments are yet to be approved. However, for speedy promotion of renewable energy projects, the central government is actively moving to implement amendments such as the waiver of interstate transmission charges that are under its control. To meet the 60 GW of utility scale solar target, interstate power transmission is essential and needs to be encouraged. Waiver of interstate transmission charges will allow developers to install solar projects in states with cheaper land (wasteland) and higher irradiation. The grid infrastructure will need to be strengthened to evacuate power. Waiver of transmission charges is a positive short term support for the sector but it is more important to make the necessary investment commercially viable for sustainable growth of the sector.

...
FULL STORY

The Indian Parliament recently concluded a literally washed out monsoon session. The key Amendments for Electricity Act 2003, which the Parliamentary Standing Committee had already recommended was ready but not tabled (refer here to read why this matters for the solar sector). Another important proposal to amend the National Tariff Policy 2005 has been severely watered down (refer here to read about its proposed impact on the solar sector). Amendments to the Electricity Act are ready but could not be introduced in the parliament. Dropping of the compulsory adherence clause in the amendment to the National Tariff Policy will undermine the impact of the reform. Written replies to questions raised by parliamentarians revealed several aspects of various government initiatives.

...
FULL STORY

On Sunday, 5th June 2015, one of India’s leading economic journalists, Swaminathan Aiyar, in his weekly column “Swaminomics”, wrote that India should wait for five years before trying to implement big plans for solar (refer). He argues that solar is still a comparatively expensive energy generation technology and that because India is an evening peak country, increasing the share of solar would be a “double whammy”, by driving up indirect costs for thermal, peak power generating sources. As a result, he concludes, India should go all out on solar only after it is fully established that the cost breakthrough has been achieved and the technology is more mature. While there are interesting insights in the article, we disagree with his conclusions. Here is why. Solar costs are not as high as Swami claims. In fact, upcoming NSM bids will show that it’s neck to neck with        new thermal projects. India is an evening peak country right now but as the economy develops the peak will move into the daytime          (cooling). Global investors already see the social and economic appeal of solar and are moving out from coal to the                sector.

...
FULL STORY