Bridge India

The Indian solar market is ready for the NSM boost

The April 2014 edition of  BRIDGE TO INDIA’s quarterly publication, the India Solar Compass, has been released. Following are some highlights.

• India signs 1,232 MW of PPAs in the first quarter of 2014
• India to add 1,065 MW of solar PV capacity in the next financial year
• India added 89 MW of solar PV capacity in the last quarter, lowest since Q3 2012

Project Allocations

The highlight of the last quarter (January 2014 – March 2014) was allocation of solar PV projects under batch one, phase two of NSM. ACME, Azure Power and SunEdison emerged as the big winners with 100 MW each. Prominent players who missed out included Green Infra, Tata Power, Mahindra Solar, Welspun (except for 5 MW), Renew Power and First Solar amongst others. The bid levels were broadly as expected although quite aggressive in our view.  Our key takeaways and observations are as follows:

–         DCR has been a failure costing in excess of INR 10 million/MW as local manufacturing has not gained anything meaningful for the long-term.

–         Extremely competitive bidding means there will be too much pressure on costs i.e, poor project quality. Although the Viability Gap Funding mechanism has been a relative success, a more performance focused regime such as GBI is far more favorable in our view.

–         Considerable interest shown by foreign project developers and IPPs is very welcome as it brings more credibility to the market and hopefully, will result in much needed international expertise in project execution and deliverability.

On the state policy front, 482 MW of new power purchase agreements (PPAs) have been signed across four states in the last quarter – 42 MW in Andhra Pradesh (against a target of 150 MW), 80 MW In Karnataka (after a delay of six months), 110 MW in Uttar Pradesh (towards the tail end of the preceding quarter) and 250 MW in Punjab. Another 300 MW of projects are expected to be allocated in UP after general elections in May. Madhya Pradesh expects to sign PPAs for 100 MW solar PV projects in the ensuing quarter.

Capacity Addition

In the first quarter of 2014, we added just 89 MW of new capacity – the lowest since Q3 2012. Out of this, 55 MW has come from three state level projects with the balance 34 MW being primarily driven by captive or third party sale projects relying on accelerated depreciation (AD) and Renewable Energy Certificate (REC) incentives.

–         Rajasthan: 20 MW project by Essel Mining (commissioned on time)

–         Madhya Pradesh: 25 MW project by EDF backed ACME

–         Andhra Pradesh: 10 MW renewable purchase obligation (RPO) project by NTPC

As the REC market has failed to take off, project developers have moved away from selling power to local utilities at APPC (typically INR 2.50-3.00/ kWh, USD 0.04-0.05/kWh) to finding private consumers with tariffs in the range of INR 6 – 9/ kWh (USD 0.1-0.15/kWh). BRIDGE TO INDIA expects this market to grow rapidly as election fever subsides (reducing political pressure to keep tariff increases low) and grid parity is attained across more states.

Distributed Generation

The rooftop market is slowly gaining momentum with Delhi and Kerala (following on from Andhra Pradesh, Tamil Nadu) announcing net metering policies in the last quarter (Delhi policy is still in draft stage). At the central level, SECI continues to provide capital subsidies for rooftop projects – it has allocated 25 MW till date and aims for a further 50 MW during the year.

The policy support to the rooftop segment needs to be much bolder, especially considering its future potential. Based on a study carried out by BRIDGE TO INDIA for Greenpeace, Delhi alone has a rooftop solar potential for 2 GW.

About INDIA SOLAR COMPASS

As part of their extensive research on the Indian solar market, BRIDGE TO INDIA produces a quarterly market analysis report, The India Solar Compass, which provides analyses on the latest developments in the market. It provides key insights on the primary solar market driver of policy, projects and industry. Subscribers include leading international component manufacturers, EPCs, project developers, investors, banks, insurance companies as well as public sector players and international organizations. To download this report, click here.

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