Bridge India

India’s Ministry of Finance has released a mid-year macro-economic assessment of the country in the form of second volume of the Economic Survey 2016-17. The Survey reflects work of various government departments and provides valuable guidance to future policy making. The chapter on climate change and energy reiterates recent Central Electricity Authority (CEA) projections – capacity addition for coal based power is expected to be around 50 GW between 2017 and 2022 and nil between 2022 to 2027. As for renewables, the Survey takes a curiously negative view and recommends that India should ‘calibrate’ investments in renewables. – The Survey assesses social cost of renewable power to be around 3 times that of coal power at INR 11 per kWh; – Underutilization of coal fired power stations causing losses for investors and lenders is classed as the most significant contributor to “social cost of renewables”; – The Survey’s ambivalent messaging betrays lack of clarity between different parts of the government, which is a very worrying sign for the sector; The Survey argues that various sources of energy should be prioritized based on an analysis of their holistic impact (“social cost”) on the economy. It defines social cost of a power… Read More »

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We have released our latest report – India Solar Compass – a quarterly update on the Indian solar market. The report contains key information and analysis including tender and project updates, leading players, financing deal flow, policy and market trends etc for Q2 2017 as well as our market forecasts for the upcoming quarters. Q2 2017 was a landmark period in the Indian solar sector with tariffs falling below the critical threshold of INR 3.00/ kWh making solar power the cheapest new source of power in India. But this has led to all sorts of problems. As we commented in a recent blog, “Falling tariffs are a double-edged sword for the sector. They make solar power more attractive for consumers but are also making investors and lenders jittery. In the near term, they are also creating uncertainty in the minds of policy makers and creating new risks for older projects auctioned at 2-3x higher tariffs.” India is expected to become the third biggest solar market worldwide in 2017 with estimated utility scale and rooftop solar capacity addition of 8.4 GW and 1.1 GW respectively; Rising competition is squeezing investor returns in both primary and secondary markets; Even as long-term market… Read More »

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NITI Aayog, India’s central planning agency, recently released the draft National Energy Policy (NEP). The document sets out national objectives and planning framework for the energy sector for the next 23 years (up to 2040). It comes at an opportune time when India is going through a critical energy transition period. Its main thrust is to let market-based mechanisms guide growth in various energy sources with minimal government intervention. And while a document of this nature is inevitably high-level in its scope, it comes across as simplistic and wishful due to lack of detail, reasoning or prioritization of different plans. By envisioning the share of variable renewable energy (RE) in the electricity generation mix to increase from 5% in FY17 to 24-29% by 2040, the policy sets an optimistic tone for RE growth; The policy suggests gradual withdrawal of all incentives including ‘must run’ status, renewable purchase obligation (RPO) and inter-state transmission charge waiver for the RE sector; Emphasis on traditional large hydro as a source of balancing power and just a passing mention of storage, smart grids and electric vehicles doesn’t fit with the fast-changing technology landscape; The policy envisions RE capacity (excluding large hydro) to grow from 58… Read More »

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Greenko and Azure Power have together raised USD 1.5 billion from sales of green bonds in the last two weeks. Other offshore green bond issuances by ReNew Power, NTPC, Rural Electrification Corporation (REC), IDBI Bank, Axis Bank, Yes Bank and L&T Infrastructure Finance mean that India is amongst the top ten green bond markets in the world with a cumulative issuance of over USD 4 billion. In the first seven months of 2017, India’s green bond issuance reached USD 2.1 billion, sufficient to fund debt for over 3.5 GW of new renewable energy projects. Indian renewable sector needs a significant amount capital (about USD 150 billion) to achieve the ambitious 175 GW target and there is abundant capital available internationally; Renewable assets in India are still considered too risky by global funds due to poor offtaker ratings, frequent payment delays and weak regulatory enforcement; The Indian government should try to reduce risks for private investors but the recent trend of PPA cancellations and renegotiation attempts is not helpful in this regard; In 2015, the Securities and Exchange Board of India (SEBI) had endorsed the internationally recognized green bond principles, providing regulatory clearance for Indian renewable assets to tap into offshore… Read More »

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India has initiated a new investigation to probe dumping of solar cells and modules from China, Taiwan and Malaysia. The petition for this investigation was submitted by Indian Solar Manufacturers Association (ISMA) on behalf of Indosolar, Websol and Jupiter Solar. The investigation covers both crystalline and thin-film technologies and will affect all imports making up more than 85% of total cell and module sales in India. Proving dumping for solar imports should be relatively easy as Chinese suppliers have been selling modules in India at prices lower than in China; The investigation provides a great test case for design of Indian policy making as there is no evidence from other countries of protectionist duties benefitting the prospects of domestic manufacturers; But with solar capacity addition growing at 100% CAGR in last 3 years and cost of solar power crashing to INR 2.44/kWh, we feel that the government may be more sympathetic to the demands of domestic manufacturers this time; Dumping is defined as exporting a product at a price that is lower than the domestic price for the same product. For solar imports, proving dumping may not be difficult as it is common knowledge that Chinese suppliers have been selling… Read More »

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BRIDGE TO INDIA has released its latest edition of the India Solar Rooftop Map report. As per the report, India added 678 MW of rooftop solar capacity in FY 2016-17, growing at 81% Y-o-Y. Total installed rooftop solar capacity reached 1.4 GW as of March 2017. Strong market fundamentals including falling costs and improving debt financing mean that the market will continue strong growth trajectory for many years to come. Commercial and industrial customers (C&I) remains the biggest market segment as economic viability is most pronounced for such customers; OPEX model has been gaining market share, doubling from 12% in FY 2014-15 to 24% last year and large public sector procurement programs will drive further growth in this market in the next few years; Yearly capacity addition is expected to scale up to over 2 GW by 2019 and over 3 GW by 2020 presenting attractive growth opportunities for all market participants; With 65% of total installed capacity, C&I remains the biggest market segment. These consumers account for more than 50% of India’s total power demand and make savings of up to 50% through rooftop solar systems as their grid tariffs are typically between INR 7-10 (US₵ 11-16)/ kWh. Public… Read More »

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Two months ago, we wrote about how Uttar Pradesh (UP) could be the dark horse for solar power demand in the country. Since then, the state has announced a 750 MW tender with Solar Energy Corporation of India (SECI) in Bhadla and a new solar policy to build 10.7 GW of solar capacity by 2022. But UP can be a tough place to do business as proven yet again by the state renewable nodal agency, UP New & Renewable Energy Development Agency (UPNEDA), asking developers to reduce tariffs for a 215 MW state tender closed in 2015. UPNEDA claims to be acting on behest of the state electricity regulator (UPERC), which is apparently refusing to approve power procurement at tariffs ranging between INR 7.02 – 8.60/kWh even though the benchmark regulated tariff for the tender was INR 9.33/kWh. Many project developers are already wary of entering UP and the state’s move to renegotiate tariffs after signing PPA’s will further damage its credibility; It makes no sense for UP to renegotiate tariffs for a mere 165 MW of capacity when it wants to add more than 10 GW of solar capacity in the next 5 years; Such unilateral, post-facto moves to… Read More »

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Three days into implementation of the Goods and Services Tax (GST), Indian solar industry continues to face uncertainty regarding GST rates. We know that GST will be applied to solar modules at a concessional rate of 5%. Central government officials including the Minister for Power, Piyush Goyal, have confirmed on multiple occasions that the 5% concessional rate will extend to all equipment for solar power generating plants. But operational clarity for these other capital goods used in solar projects is lacking in practice. There is confusion in the market on how to avail of the concessional 5% GST rate when many of the same components are taxed at higher rates for use in other industries; MNRE is still working to evolve a mechanism in consultation with Ministry of Finance to try and resolve this issue; Net increase in project EPC costs is expected to be around 6% if the issue is not resolved; We spoke to four inverter suppliers today – two of them said that the GST rate for inverters is 18%, one said that it is 5% and another one said that that it is 5% for end-users and 18% for EPC companies. The reason for the rate… Read More »

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