Bridge India

First round of bids was submitted for Solar Energy Corporation of India’s (SECI’s) 750 MW tender in Bhadla Solar Park, Rajasthan last week. A total of 33 developers are believed to have submitted bids for an aggregate capacity of 8,750 MW – an oversubscription of almost 12x. Coming in the wake of intensely competitive bidding in Rewa and Kadappa tenders, the signs are that competition for new projects is getting fiercer particularly as the supply of new projects has slowed down in the last twelve months. The large oversubscription in Bhadla can be attributed primarily to easing up of new tender announcements and greater private sector interest in the sector; Lower solar tariffs should ideally provide demand boost for solar projects but ironically they are adding to short-term slowdown as central and state governments reconsider procurement policies; We expect a slight reduction in new solar capacity addition in India in 2018 before activity picks up again from 2019 onwards; Most of the active project developers in India including Adani, ReNew, Acme, Azure, SolaireDirect (Engie), FRV, Sembcorp, EDF, Canadian Solar, Aditya Birla, Shapoorji Pallonji, Mytrah, Fortum and Trina Solar have participated in this tender. Notably, Welspun has made a comeback after… Read More »

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India achieved a record low solar tariff of INR 3.29 (US¢ 5.1)/kWh in the Rewa tender in February. That record was surpassed last week in an auction conducted by National Thermal Power Corporation (NTPC) for a 250 MW project in Kadappa, Andhra Pradesh, where Engie’s Solairedirect submitted the winning bid of INR 3.15 (US¢ 4.9)/kWh. The project will be built in a solar park, developed by the state government. Ostro, Canadian Solar, Greenko, Azure Power, Adani and Mahindra were some of the unsuccessful bidders. Given that the overall Rewa tender structure was seen as uniquely beneficial to the developers, it is somewhat perplexing to find that tariffs have fallen even further so soon; Slowdown in new tenders is putting pressure on developers, who are anxious to deploy capital and scale up quickly to monetize previous investments; With module prices expected to keep falling through 2017, we are likely to see progressively new lows being achieved throughout the year; Overall risk profile for Rewa and Kadappa projects is somewhat similar although it can be argued that the Rewa tender is more beneficial to project developers. It incorporates many unique provisions such as state government guarantee, deemed generation benefit and extended construction… Read More »

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Energy transformation has arrived in India. According to the Ministry of New and Renewable Energy (MNRE), India’s total renewable capacity including solar, wind, bio-mass and small hydro grew by around 11.2 GW in FY 2016-17, at par with thermal capacity addition, which registered a decline of 50% in the year. The country added 5,526 MW of new solar capacity (up 83% over FY 2015-16) and 5,400 MW of new wind capacity (up 63%) in the year. While these numbers are impressive, it is worth noting that the solar capacity addition including rooftop solar is almost 50% below the annual target of 12,000 MW. In contrast, wind capacity addition was +35% over the 4,000 MW target. Figure – Renewable and thermal power capacity addition, MW Sources: CEA, MNRE, BRIDGE TO INDIA research India added 5.8 GW of renewable capacity in a single month as implementing agencies pushed for commissioning of projects before the close of the financial year; There has been a downward trend in new renewable allocations in FY 2016-17 and the 2017-18 target of 20,450 MW will be impossible to meet; As renewables continue to grow, prospects for thermal capacity addition seem limited and we expect renewables to decisively… Read More »

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It has been nearly eighteen months since the Ministry of Power announced the vital Ujwal DISCOM Assurance Yojana (UDAY) scheme for financial and operational reform of power distribution companies (DISCOMs) in India (refer, refer). Twenty six states and union territories, including four of the worst affected states – Rajasthan, Tamil Nadu, Uttar Pradesh and Haryana – have signed up for the scheme. The only notable omission is Odisha, which has not signed up because its DISCOMs are partly privately owned. The scheme has been undeniably successful in achieving its most important objective – of restoring financial health of DISCOMs – by transferring almost 75% of their debt to the state governments and reducing interest cost burden on the remaining 25% debt. The financial surgery to deal with soaring debt and losses of the DISCOMs will provide vigour to the entire power sector; As expected, progress on operational parameters such as aggregate technical and commercial (AT&C) losses and tariff hikes remains comparatively weak; Scheme monitoring and enforcement need to ensure that there is no relapse of the bad times;

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The Indian power sector is in early stages of transformation from coal-centric generation to variable renewable power generation (refer). This transformation will pose several daunting commercial and technical challenges for both policy makers and market players. It will also inevitably result in growing incidence of grid curtailment of renewable power, as seen worldwide, for a variety of reasons. It is time to institute a sweeping range of both demand and supply sides regulatory reform for effective management of the grid and providing long-term visibility to private sector investors. As renewable capacity grows, capacity utilization for conventional power fleet could start touching 50% by 2021-22 assuming all renewable power output is evacuated; In an era of cheaper renewables, we need to move away from the ‘must run’ incentivized structure to a comprehensive reform of pricing, grid utilization and related ancillary services; As renewable power becomes more mainstream, it should stop expecting special advantages and compete on equal terms; A back-of-the-paper calculation shows that if India realistically adds a combined wind and solar power capacity of 110 GW by 2021-22 and power demand grows by 5% annually, capacity utilization for conventional power fleet would drop below 50% at various times in the… Read More »

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BRIDGE TO INDIA is launching India Solar Price Indices, a series of indices to track and monitor key price trends in the Indian solar market. Our objective is to publish pricing data specifically applicable to the Indian solar market – devoid of exchange rate movements or source of equipment. We expect the indices to bring more transparency to the sector and provide reliable, independent information to all key stakeholders including government and regulators, financial institutions, developers, equipment suppliers and contractors. We plan to release updated price indices every quarter across for four categories: Modules Inverters Utility scale EPC cost (excl land and transmission connectivity costs) Rooftop solar EPC cost Methodology We aim to get pricing information by conducting interviews with a diversified group of 6-10 leading project developers, EPC contractors and module suppliers. Final pricing is obtained by taking a simple average of all responses while ignoring any outliers. BTI India Solar Module Price Index This index aims to provide pricing information for multi-crystalline PV modules from tier 1 Chinese suppliers for delivery in the next 3 months with a minimum order size of 50 MW. Based on the methodology described above, our module price index for March 31, 2017… Read More »

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Last week, BRIDGE TO INDIA launched its latest report: “Analysis of utility scale solar tenders in India”. This report examines recent bidding history for all PPA-based, open category tendered projects to understand risk-return relationship in the sector. From July 2015 to December 2016, India allocated 12.6 GW of solar projects to private developers through an open, competitive tender process. These tenders have seen tariffs trending downward from about INR 5.50 – 6.00 (US¢ 8.4 – 9.2)/ kWh in mid-2015 to INR 3.29 (US ¢ 5.0)/kWh in 2017 (refer), equivalent to an annualized decline of over 25%. Common perception is that auctions and increased competition are forcing developers to bid aggressively resulting in tariffs coming down so fast. But our analysis shows that changes in equipment costs and other factors are responsible for most of the decline. Adjusted for these changes, tariffs haven’t trended down in the last 18 months. Average harmonized tariff across 24 tenders gives us equity IRR of 14.20%, significantly below the benchmark expectation of 18-20%; Auction based tender process has forced developers to build forward-looking, favorable assumptions for solar module prices, debt refinancing and many other parameters; Inadequate risk pricing poses a severe viability challenge for the sector; To compare tariffs across different… Read More »

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After squeezing global solar module manufacturers out of business, China is at it again. It is using every trick available – government subsidies, domestic quotas, restriction on foreign players and cornering raw material supplies – to dominate energy storage industry, which has been so far led by Japanese and Korean manufacturers such as Panasonic, Samsung SDI and LG Chem. The country is spending billions of dollars subsidising local companies to push them at the forefront of storage and electric mobility technologies (refer). China is spurring a huge domestic supply ecosystem for lithium-ion based batteries through demand creation and incentives; By 2020, it is expected that China will have over 60% of the global lithium ion battery production; Unless India acts now, it is going to miss the bus on domestic manufacturing for a vital upcoming technology;

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