Bridge India

There has been a significant lull in announcement of utility scale solar tenders from the Solar Energy Corporation of India (SECI). It has announced only one tender – Bhadla 750 MW – this year in comparison to around 5 GW of new tenders in 2016. There have been expectations of new tenders totalling in Odisha, Chhattisgarh, Delhi, Karnataka, Andhra Pradesh and Bihar but none of these have materialised until now. Furthermore, SECI has again extended bid submission timelines for the ongoing Bhadla-III (250 MW) and Bhadla IV (500 MW) tenders. These projects were supposed to be allocated to developers in Q3 2017. Meanwhile, NTPC has also not made any progress on new guidelines for development of solar projects. Tendering delays have been caused by multiple factors. We have written extensively about weak growth in power demand affecting DISCOM appetite to issue any new tenders. But equally importantly, the new competitive auction guidelines announced in August 2017, which require use of standard bidding documents, have impacted the timelines. We understand that delays in finalization of these documents is holding up progress of many tenders. Our discussions with sector players also suggest that the Ministry of New and Renewable Energy (MNRE) decision… Read More »

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The Government of India has launched SAUBHAGYA scheme for providing universal electricity access to all households in India by March 2019. The government estimates that there are 46 million unelectrified households in India at present and this scheme will primarily target the 30 million below poverty line households not covered by other ongoing electrification schemes. Target households will be provided free or nominally priced connections (but not free electricity). Households in remote, inaccessible areas will be offered decentralised solar power generating systems of 200-300 Wp each with integrated batteries and 5 LED lights, a fan and a power socket. The scheme would potentially have huge multiple economic benefits for the country although the government estimate of 7% demand growth is highly optimistic; The government has announced multiple schemes with seemingly similar objectives and it is not clear how the SAUBHAGYA scheme will be different; Despite provision of decentralised solar power generating systems for remote locations, the scheme is likely to deal a blow to the private off-grid businesses unnerving investors and consumers alike; The new scheme is operational with immediate effect and is budgeted to cost INR 163 bn (USD 2.5 bn) at an average of INR 5,400 per connection… Read More »

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The Indian solar market is being tested to its limits. GST has increased execution costs. Module prices have shot up when bidders were factoring in another 20% price decline by the end of this year. Chinese module suppliers are even reluctant to supply to India. The government is considering anti-dumping duty petition to support domestic solar manufacturers. But perhaps, the biggest challenge facing the sector is slowing power demand. Lack of visibility over project pipeline is forcing developers to bid aggressive tariffs and reconsider strategic options including consolidation. It is therefore relevant to ask what does the future pipeline scenario look like? Seven states – Karnataka, Andhra Pradesh, Tamil Nadu, Telangana, Rajasthan, Madhya Pradesh and Punjab – together make up over 80% of India’s total installed and pipeline capacity of 27 GW; Other states continue to lag and progress is expected to be slow because of surplus power situation in the country; After peaking at about 8 GW in 2017, India’s utility scale solar capacity addition is expected to stabilize at a much lower level of 5-6 GW per annum for next few years; The ten largest states in India have power consumption greater than 50 billion units each and… Read More »

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NLC India Limited, a government of India owned coal mining company, recently completed auction for a 20 MW solar project integrated with 28 MWh storage capacity in Andaman & Nicobar Islands. This is the first utility scale storage tender in India to announce results. The tender includes provision of complete EPC and O&M services for twenty-five years. Mahindra Susten won the auction with a final all-in price of INR 2.99 bn (USD 46 mn). Replacement of diesel fired power is the most obvious application for solar cum storage plants both commercially and environmentally; Large variation in bid prices suggests inconsistent understanding of technical specification amongst bidders; Utility scale storage adoption in India is expected to be slow as DISCOMs are highly cost sensitive and lack awareness of its technological potential; There have been four other utility scale storage tenders in India until now by Solar Energy Corporation of India (SECI) and NTPC in the states of Andhra Pradesh, Karnataka and Andaman & Nicobar Islands respectively. But all these tenders, with aggregate capacity of 35 MWh, have been scrapped without any reasons being given. Andaman & Nicobar Islands is a group of islands in the Bay of Bengal with a total… Read More »

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Solar Energy Corporation of India (SECI) completed a 1,000 MW wind project auction last week. Tariffs fell to a new low of INR 2.64 (US¢ 4)/ kWh. Winning bidders include ReNew (INR 2.64, 250 MW), Orange Power (INR 2.64, 200 MW), INOX Wind (INR 2.65, 250 MW), Sembcorp Green Infra (INR 2.65, 250 MW) and Adani (INR 2.65, 50 MW). This auction comes 7 months after the first wind auction in India when tariffs were observed to be around INR 3.46 (US¢ 5.3)/kWh, implying a price reduction of 24% in a relatively short time. Parity in prices means that there is likely to be further alignment between wind and solar power procurement policies and regulations; The main reason for the reduced tariffs is simply increased competition; Rapid reduction in tariffs makes wind power more attractive but also increases dissonance risk for DISCOMs who have agreed to previously pay much higher feed-in-tariffs; Developers will sign 25-year, fixed price PPAs with SECI, which will in turn sell power to DISCOMs in Uttar Pradesh, Bihar, Jharkhand, Assam and Goa. The developers are free to locate projects anywhere in India and connect to the more reliable inter-state transmission network. Fall in tariffs makes wind… Read More »

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Acme Solar and Sembcorp have announced plans to access capital markets for raising equity capital. Acme has filed preliminary papers for an INR 22 bn (USD 336 mn) initial public offering (IPO) with Securities Exchange Board of India (SEBI). Sembcorp has said that it may list its Indian unit either in India or elsewhere. Azure Power was the last Indian renewable IPP to list on New York Stock Exchange (NYSE) about 12 months ago. Our understanding is that Renew Power is also keen to launch an IPO sometime in the coming year. Financial investors looking for exits and developers looking to raise capital for new projects is creating urgency in equity market activity; Deals are held up because of mismatch in pricing expectations and portfolio performance, investors are likely to take a cautious view because of poor performance of previous issues from both conventional and renewable IPPs; Investors are driving hard bargains and closures are likely only for credible developers at the right price levels; Solar sector has seen significant capacity addition and allocations in the past two years and developers are scrambling to raise capital to sustain business growth. Nine private developers have built up solar portfolios exceeding 500… Read More »

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US trade case resonates in India

The US International Trade Commission (USITC) has unanimously agreed that solar imports have caused “serious injury” to local manufacturers. Suniva and SolarWorld are calling for duties of US¢ 40/ Wp on imported cells and a floor price of US¢ 78/ Wp on modules. But USITC may consider all possible remedies including new tariffs, minimum prices or import quotas. Solar industry in the US is against the suggested trade remedies, which they say will lead to market contraction and substantial job losses. USITC has the deadline of November 13 for finalizing its recommendations to the President, who has the authority to accept, reject or modify the recommendations. Trade barriers are expected to have a huge negative impact on the downstream solar industry without any guarantee of positive impact on the manufacturing industry; Past protectionist measures in the US, Europe and India have almost completely failed to meet their objectives; It is highly unlikely that new manufacturing investments will be made at a time of long-term policy uncertainty in an industry facing global oversupply and rapid change; The reason for a rare use of Section 201 for this investigation is that existing anti-dumping duties on solar imports from China and Taiwan were… Read More »

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Average clearing price for power on the energy exchange has been inching up from INR 2.61/kWh seen on 2rd September 2017 and spiked up to a high of INR 9.91/kWh last week. Current prices are in the range of INR 5.00 – 6.20/ kWh range. These high prices are in stark contrast to the past two years, when power was selling at near a ten-year low of INR 2.20-3.80/kWh. Exchange prices are regarded as a barometer of overall power demand-supply balance in the country and low prices have been seen as an indicator of excess supply situation. The current spike in spot prices has come about largely because of supply side issues rather than any sustained pick-up in demand ; Shortfall arising from scheduled maintenance of 10 GW of thermal and nuclear capacity, reduced wind and hydro generation and an uptick in demand could not be compensated through India’s underutilized thermal fleet due to a seasonal coal shortage; The spike sends a signal to consumers and DISCOMs that they need to proactively manage their power procurement plans and that reliance on short-term trading comes with its own set of challenges; DISCOMs meet bulk of their power requirement through long-term purchase… Read More »

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