THE BRIDGE TO INDIA BLOG
Karnataka Electricity Regulatory Commission (KERC) issued an order on August 18th 2014 exempting open access charges for solar projects within the state (refer). Karnataka is the first state in India to give a long-term visibility on the open access charges. This is a very good precedent. Uncertainty around grid charges is a key deterrent for a healthy development of open access solar transactions in India. The highlights of the order are:
- Wheeling, banking and cross subsidy charges are exempted for open access and captive solar projects
- This exemption is provided for 10 years from the commercial operation date (COD) for all projects commissioned before 31st March 2018
- Captive solar plants availing REC benefits are liable to pay wheeling, banking and cross subsidy charges as per KERC order on 9th October 2013 (refer)
The new Indian government seeks to provide all Indians with reliable 24×7 power before the next elections in 2019. According to estimates, there are still 300-400 million Indians without access to electricity.
- The government has two broad options in trying to meet the target. It can extend the grid to un-electrified households (and ensure there is sufficient power supply in the grid) or it can develop distributed solutions, typically micro-grids
- In the end, determined by the location and accessibility of a household, it will be a mix of both the approaches
- But where should the main thrust of India’s electrification plan be?
In a major relief to the solar sector, the Ministry of Finance (MoF) has not acted upon the recommendations made by the Ministry of Commerce (MoC) for imposing anti-dumping duties on import of solar cells and modules. No official communiqué has been issued by the MoF yet but the deadline of 22nd August 2014 for acting upon the recommendations has gone by.
- Government to focus on growing the market and thus promote domestic manufacturing
- Indian government can focus on its ambitious plan for the industry
- NTPC is on board and planning to build over 3000 MW of solar capacity in the coming years
In his Independence Day speech on the 15th of August, Prime Minister Narendra Modi invited Indian and international companies to come to India to manufacture, or in his words “make in India”. A decision on anti-dumping duties (ADD) is due this Friday (22nd August). On the face of it, it might seem that ADD supports “make in India”, however, this is a fallacy. In reality, ADD will hamper manufacturing of solar cells, modules, inverters and other Balance of System (BOS) components in India because it will set back the market as a whole.
- The prime driver for solar manufacturing in India is the domestic market size
- The imposition of ADD will shrink the market size by over 67% in the next year
- In order to encourage domestic manufacturing the focus should be on reducing, not increasing the cost of solar in India
By tomorrow, Friday, August 22nd, the Indian Ministry of Finance will notify its decision on anti-dumping duties (ADD) on solar cells and modules. If the duties are imposed as suggested by the Ministry of Finance, they will have a highly disruptive effect on the Indian solar market. Employment in this sector is likely to suffer a major setback, as significant number of jobs would be lost downstream (EPC, installation, project development, maintenance), as compared to the figures that would be protected upstream in the fairly automated manufacturing processes. Given that job creation is a measurement index for the growth of Indian economy, this is worth considering.
- By a rough estimate, solar sector creates around 10-11 jobs per MW of installed capacity
- A reduction in installed capacity through ADD by around 20% would reduce solar jobs by ca. 23,000
- Many more jobs are created in installation than in manufacturing
After a long delay, the Ministry of New and Renewable Energy (MNRE) has finally received a budgetary allocation to go ahead with sanction of 30% capital subsidy for a 25 MW rooftop solar capacity under the Central Financial Assistance (CFA) scheme (refer). This allocation has been deferred for a considerable time period, leading to adverse impact on the sector. Since there is already enough back-log of projects to be sanctioned, new projects are unlikely to get any sanctions.
- Due to budgetary constraints MNRE has reduced the maiximum project size to 100kWp
- The restricted availability of subsidies, reduces effectiveness of the subsidy process
- Industry stakeholders believe that the subsidy mechanism in its current form is doing more harm than good
Mr. Tarun Kapoor, Joint Secretary for the Ministry of New and Renewable Energy (MNRE) announced at a conference last week that India might look at following Germany’s lead by going ahead with fixed Feed-in Tariffs (FiT) as opposed to the current system of reverse auctions. The government is considering this in order to rapidly expand India’s solar program.
- The FiT based approach may result in cutting down project development cycle
- MNRE needs to specificy clear criterions to lend transparency and certainty to the market
- A location adjusted FiT structure may ensure a wider spread of solar projects across the country
Going from a nascent market with a mere 22 MW of total installed PV capacity in 2011 to over 2.5 GW in 2014, the Indian solar market has held up to its promise for being one of the most exhilarating markets. This has been achieved largely due to the flagship JNNSM scheme of the Indian government as well as state policy driven projects. India added 171 MW of PV capacity in the last quarter, taking the total installed capacity for utility scale, grid-connected PV to 2523 MW (as of 18th June, 2014). In-depth details, data and analysis is available in our latest edition of the India Solar Compass (July 2014 edition) here.
- India added much lesser solar capacity in FY 2013-14 as compared to FY 2012-13
- The difference can be attributed mainly to absence of capacity addition under JNNSM during the last year
- However, the non-policy market gained momentum and a capacity of around 300 MW was added outside of policy-driven feed-in-tariffs in the last four quarters