Bridge India

As the Indian rooftop solar market grows, it is attracting more attention from investors and financiers. Shell is rumoured to be entering the market in partnership with Fourth Partner, a leading rooftop solar EPC. Several other prominent IPPs, international developers, contractors and PE investors seem to be actively interested. Access to both equity and debt capital has improved significantly addressing one of the key market constraints.

  • Rooftop solar is growing steadily and expected to become a 3 GW market annually by 2021 as per our projections;
  • Growing market size and intense competition in utility scale solar are drawing new players to the market;
  • More favourable policy environment is needed to reduce risks and sustain financing interest;

International Solar Alliance (ISA) conducted a founding summit in Delhi over the last two days. The event was organized with great pomp with 21 heads of state attending besides Indian Prime Minister, Narendra Modi and the French President, Emmanuel Macron. There were several new announcements on financing, project schemes and partnerships although most of these appear vague. That makes it difficult to assess real progress.

Karnataka’s attractive open access policy for solar projects is set to expire at the end of this month. That is leading to a rush in project development activity in the state, which already leads other states with a total installed open access based solar capacity of 334 MW. As much as 1,000 MW of new capacity is expected to be commissioned over February and March.

  • Many large developers have entered the Karnataka open access market to capitalize on the short window of cost exemptions;
  • Fierce resistance from DISCOMs, transmission companies and even regulators makes open access an unpredictable and challenging market;
  • We expect the market to muddle along at about 500 MW per annum driven by sporadic opportunities across select states;

Wind makes an emphatic case

In the latest wind auction for SECI 2,000 MW tender held on February 13, 2018, winning tariffs came out at INR 2.44 – 2.45/kWh. Winners include ReNew (400 MW), Sembcorp (300 MW), Inox (200 MW), Torrent Power (500 MW), Adani (250 MW), Alfanar (300 MW) and Engie (50 MW). There were five other participants including Sprng, Enel, Orange, Hero and Mytrah. The tender was oversubscribed by 1.85x.

  • The auction has conclusively demonstrated that wind is price competitive with solar power;
  • Most developers are indifferent to RE technology;
  • Wind offers compelling advantages over solar including less land requirement and significantly better domestic manufacturing capability;

Duty announcement seems imminent

Since announcement of preliminary findings by Director General of Safeguards (DGS) last month, a decision on provisional safeguard duty has been anxiously awaited by the Indian solar industry. We understand that the government is leaning towards a 20-25% duty and the decision process is fairly advanced. In fact, a DGS Board meeting had been convened last week. But a delayed High Court hearing in response to an appeal by Shapoorji Pallonji Infrastructure Capital, a project developer, has deferred the duty announcement.

It’s raining RE tenders in India

Gujarat Urja Vikas Nigam Limited (GUVNL), Gujarat government holding company for power distribution and transmission businesses in the state, announced a new 500 MW solar tender last week. The tender has an innovative provision in the form of a 500 MW green-shoe option. If GUVNL deems the lowest auction tariff attractive, it can exercise an option to increase the tender capacity up to 1,000 MW provided bidders are willing to match the tariff. With this tender, total new RE capacity tendered in India from December 2017 onwards has gone up to 12,755 MW.

Karnataka announced results of an 860 MW state solar tender last week. 11 developers have won 48 projects aggregating 760 MW at tariffs ranging between INR 2.94 – 3.54/ kWh. Big winners include Shapoorji Pallonji (185 MW), Acme (106 MW), ReNew (99 MW), Asian Fab Tech (85 MW) and Greenko (45 MW). Prominent losers include Aditya Birla, Avaada, Orange and EdF. 100 MW of the allocated capacity was reserved for domestic module manufacturers, but we expect this to be cancelled in view of the ongoing WTO dispute.

A mix of policy uncertainty and slowing pipeline is forcing Indian project developers, suppliers and contractors to look for opportunities anew – inorganic expansion, looking at other business segments, new markets outside India or even diversification into other parts of the energy sector.

  • Private sector players have scaled up hugely in anticipation of rapid year-on-year growth but if the market slows down permanently, there is a risk of many of them turning away to other opportunities;
  • Many developers, suppliers and contractors are looking to shift focus to the rooftop solar and open access markets;
  • Larger players are even looking to tap fast-growing emerging markets in the rest of Asia and Africa;