Bridge India

India imported 5.7 GW or about 89% of its total solar module requirement in FY 2016-17. Value of these imports is estimated at USD 3 billion, equivalent to 2.8% of the country’s total merchandise trade deficit. An increasing reliance on imports in a growing and strategically important sector is creating various stress points and raises the risk of a knee-jerk policy reaction by the government which has, until now, been unable to effectively support domestic manufacturing. China dominates global manufacturing and is trying to secure control on the technology upgradation roadmap for solar PV; Over reliance on a single country puts Indian solar sector at a risk of disruption in global supply chain and change in Chinese government policy; The Indian government needs to consider long-term implications for the sector and draw up a well thought out plan for domestic manufacturing instead of introducing short-term support measures; China has been pumping in billions of dollars in subsidies and other support measures to scale up solar PV manufacturing and dominate global market. The result is massive increase in manufacturing capacity from 23 GW in 2013 to over 70 GW today despite steep fall in prices. It has also been strategically providing… Read More »

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BRIDGE TO INDIA has released the March 2017 edition of India Solar Map. As per our project database, India installed 5.5 GW of utility scale solar capacity in the last fiscal year reaching total cumulative solar capacity of 12.5 GW by March 2017. Another 12 GW capacity has been allocated to developers and is in various stages of development. – We expect southern states to continue to dominate the sector in the short-term as 53% of total pipeline is concentrated in Andhra Pradesh, Karnataka and Telangana; – Adani remains the largest developer with a total portfolio exceeding 2 GW (780 MW commissioned and 1,250 MW pipeline); – Market volumes are likely to expand by 45% in the upcoming year but we don’t anticipate any new entrant to gain a meaningful foothold as India remains an intensely competitive market; Southern domination continues in the sector with Andhra Pradesh replacing Tamil Nadu at the top with a commissioned capacity of 1,962 MW. We expect the southern states to continue to dominate the sector for the next 12-18 months as 53% of total solar pipeline is concentrated in the Andhra Pradesh, Karnataka and Telangana. Greenko, NTPC and ReNew Power are the top three… Read More »

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“In order to fulfill my solemn duty to protect America and its citizens, the United States will withdraw from the Paris climate accord,” US President Donald Trump said last week. The move has already been criticized extensively within and outside the US. No other country seems willing to support the US, and in fact, the action has prompted several countries to reiterate their commitment to the climate accord. The reason simply is that renewable energy has crossed the point of no return. It is financially and operationally viable and the old ‘carrot and stick’ approach is fast becoming irrelevant. We see a limited short-term impact of this announcement within US and almost no impact on India. Most states and end-consumers, even within the US, will continue to accelerate adoption of renewable energy and other green energy programs because of their improving techno-commercial merits; As the US can only exit the accord after three years, many analysts point out that the decision could be overturned by a new US President before it is implemented; The US decision to withdraw from the Paris accord is unfortunate but largely, a non-event for India’s renewable energy sector; Soon after President Trump said he would… Read More »

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Last week, we wrote that the proposed 18% Goods and Service Tax (GST) on solar modules could cause major disruption in the industry and affect over 10 GW of projects. Following uproar in the industry, India’s revenue secretary, Hasmukh Adhia, has clarified that the rate of tax on solar modules should be 5% and not 18%. He said that an official clarification in this regard may be issued on June 3 when the GST council meets next. Earlier last week, secretary for Ministry of New and Renewable Energy (MNRE) had also issued a statement that the 18% rate on solar modules seems to be an anomaly and that it should be corrected. Total project capital cost is likely to rise by about 4% as against 10-12% envisaged earlier; Revised rate structure will not have any material negative impact on the industry and will allow project developers to proceed with construction; MNRE needs to still play a hands-on advisory role for all affected entities to ensure smooth transition for the industry; 5% GST rate for solar modules sounds reasonable and consistent with government guidance leading up to the rates announcement. The new tax regime will result in effective rate of indirect… Read More »

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India’s southern region comprising Andhra Pradesh, Telangana, Karnataka, Tamil Nadu and Kerala accounts for 25% of national power consumption but 45% of total wind and solar power capacity in the country. Penetration of variable wind and solar energy, defined as generation from both these sources as a percentage of electricity consumption, in the southern region was 9% in 2016-17 as against the national average of 5%. Such high rate of penetration raises concerns regarding management of the grid and can result in high grid curtailment rate. South India represents a test case for the country for integration of variable renewable energy into the grid. Increased RE deployment is changing the energy landscape in southern region and raises concerns regarding grid stability and power curtailment; While strides have been made in enhancing transmission connectivity, a lot still needs to be done to enhance grid flexibility and develop ancillary services market; Lessons should also be learnt from successful international experiences in allowing high renewable energy grid penetration; Enhanced transmission connectivity as well as rapid RE deployment has helped south India in considerably reducing its power deficit from 7.3% in 2013-14 to only 0.2% in 2016-17. But another 9 GW of wind and… Read More »

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The Indian government has released final Goods and Services Tax (GST) rates under the new indirect tax regime proposed to be rolled out from July 1. The biggest surprise for the power and renewable sector is the announcement of 18% tax rate for solar modules as compared to a present effective rate of zero. In contrast, GST rate for coal has been lowered to 5% as against current rate of 11.69% and most other renewable projects and equipment including wind mills, waste to energy plants, tidal energy plants and bio-gas plants and even solar power based devices or generating systems have been classified under the 5% rate bracket. The new regime will result in an increase of 18% in module cost, about 12% in inverter cost and 3% in all service costs – increasing overall project cost by about 12%; New rates would hit more than 10 GW of ongoing utility scale projects and pose a threat to their viability; It is critical for MNRE to step up and play a coordinating role with central and state regulators to ensure that the process of tariff adjustment is as smooth as possible; As of today, most states levy a 5% Value… Read More »

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Last week, Solar Energy Corporation of India’s (SECI) 750 MW utility scale auction in Bhadla solar park saw tariffs fall to a new astounding low of INR 2.44 (US¢ 3.79)/ kWh. This comes after much brouhaha over tariffs falling to INR 3.25/ kWh (levelized) and INR 3.15/ kWh in Rewa, Madhya Pradesh and Kadapa, Andhra Pradesh respectively in the last three months. At the same time last year, tariffs for most tenders were observed around INR 4.60 (US¢ 7.1)/kWh mark. What explains a tariff reduction of almost 50% in one year or 25% in just three months? Module prices fell by 30% in the last one year and developers seem to be counting on a similar fall next year; Competition amongst developers has intensified due to easing up of new tender announcements and greater private sector interest; The industry is evolving at break-neck speed and catching policy makers, DISCOMs and even developers unawares; Winning bidders for the two tenders in Bhadla include ACME (INR 2.44/kWh, 200 MW), Softbank (INR 2.45/kWh, 300 MW), Phelan (INR 2.62/kWh, 50 MW), Avaada (INR 2.62/kWh, 100 MW) and Softbank (INR 2.63/kWh, 100 MW). A key obvious contributor to falling tariffs is sharp reduction in module… Read More »

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The pace of new tender announcements and completed auctions has slowed down significantly in the last year (-68% and -59% respectively). Southern states have frontloaded capacity buildout – Andhra Pradesh (installed plus tendered capacity of 74% as against March 2022 target), Telangana (70%), Karnataka (69%) – and are bound to slow down. Amongst other large states, Maharashtra and Gujarat, like many others, have surplus power availability and remain unenthusiastic to large solar procurement programs. Some states that have completed auctions with prices of INR 4.00-5.50/kWh in the last 6-12 months are refusing to sign PPAs creating uncertainty in the market; Visibility for new tenders has dropped sharply because of surplus power supply in most parts of the country; Gujarat and Uttar Pradesh could be the two major demand drivers for solar power in the coming years; Rewa and Kadappa tender results have given new food for thought to policy makers, DISCOMs, project developers and investors. Greenfield solar power at current prices of INR 3.00- 3.50 (US 5¢)/ kWh should create strong demand pull in the medium-to-long term. But in the near term, it is leading to buyer’s remorse for projects already built and under development. In particular, states that have… Read More »

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