Bridge India

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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“We are going to introduce electric vehicles in a very big way,” India’s Minister of Power, Piyush Goyal, stated last week. The Ministry of Heavy Industries and the NITI Aayog are working on a comprehensive policy for promotion of electric vehicles. This policy is expected to provide support for both domestic manufacturing and scaling consumer demand. India’s electric vehicles industry is nascent with just 0.1% global market share and almost no competitive advantage; Other countries, particularly China, are spending billions of dollars subsidizing local companies to push them at the forefront of storage and electric mobility technologies; Growth in electric vehicles can facilitate greatly in energy transition but the market poses formidable infrastructure and financing challenges for Indian policy makers; India has made little progress in electric mobility since the announcement of the National Electric Mobility Mission Plan in 2013 aiming for over 6 million electric/hybrid vehicles by 2020. As per available government data, only 790 battery operated electric passenger cars were sold in India in 2015-16 (global market share of 0.1%). The National Electric Mobility Mission Plan provides financial incentives of up to INR 138,000 (USD 2,100) for electric and hybrid vehicles. But the budget of INR 1.75 billion… Read More »

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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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