tamperfinder10 MW in 2010 to 21 GW of installed grid-connected solar capacity in 2018 shows the testament of the Government of India’s success in supporting renewable energy, especially solar, in India.
The Government of India has brought new projects and conducive policies for rapid solarisation within the country. Infrastructural development, rooftop solar, new projects and export opportunities in India have started growing at the end of 2017. Solar parks in India have recorded 103 per cent year-on-year growth in the first quarter of 2018. Added to that, the Ministry of New and Renewable Energy (MNRE) planning to award 77 GW of solar power projects within 2020 and thinking of offering 5-10 GW of floating solar power projects will definitely improve the market for domestic manufacturers.
Additionally, with the International Solar Alliance, new untapped solar markets are supposed to get a boost, through which technology and strategy exchange can be possible, which will aid in improving the market for the products.
However, the current confusion regarding 25 per cent safeguard imposition on SEZ-based solar manufacturing companies, GST rates and incoming module oversupply from China due to its current energy policy has created instability in the demand creation for domestic manufacturers.
That said, Ivan Saha, BU Head- Solar Manufacturing and CTO, Vikram Solar, believes that the Government of India would soon focus towards changing the scenario and prioritise domestic manufacturing by clarifying GST, exemption from safeguard and lack of demand issues to see any real improvement in the sector.
Solar tariff
According to the experts, decreasing solar tariff is making solar projects financially unviable by shrinking down the Return on Investment (ROI) generation. This is scaring off the investors and is putting the Indian solar growth on an unstable ground. Although, the Indian Government has identified the tariff drop as a forward step towards making Power for All a reality. However, with instability in the sector and the future of the projects not secured (due to financial unavailability and investors’ hesitation), it is hard to see how India would be able to build an energy-rich future. ‘The government has welcomed the tariff fall and indicated it as a right way for solar sector to reach grid parity with cheapest conventional fossil fuel-coal. However, uncontrolled fall, without any indication of cost stabilisation in future is not a good thing,’ Saha said.
Although, the government and consumer would both favour getting cheapest solar tariff, what needs to be understood is that a continuous fall in solar tariff is scaring away investors and is leading the states (in India) to re-negotiate the PPAs. Both are dealing a damaging blow to the nascent solar sector in India. Therefore, solar tariff stabilisation is needed to foster solar growth while we create a vertically integrated supply chain to control the solar prices without introducing quality issues and losing investors.
Funding scenario
Currently, around 293 global and domestic companies have committed to invest approximately USD 310-350 billion to set up a cumulative capacity of 266 GW (solar, wind, mini-hydel and biomass-based power) within 5-10 years. And between April 2000 and September 2017, the industry attracted USD 12.3 billion in Foreign Direct Investment (FDI). So, it is easy to glean that the Indian solar industry has become a lucrative enough market to attract funding. However, what is lacking is a sustainable funding mechanism that can continue to invoke interest in foreign investors.
The Government of India still needs to take care of the above discussed issues as they are delaying projects, and in some cases making them unviable, carving out investor’s interest. The Indian solar sector has the opportunity and attention of the world to become an investment magnet by prioritising the solar industry and solving its issues that increase investor’s confidence and better funding mechanisms. The government also needs to bring forth flexible financing solutions while encouraging banks within the country to support solar projects.
Positive impacts
Several landmark policy initiatives undertaken in the renewable energy sector have resulted in making India the third largest solar power market in the world and one of the largest wind energy markets in the world. In recent years, there has been a surge in foreign investment in the renewable energy sector and India remains one of the hot beds for foreign investment. The MNRE is playing a proactive role in promoting the adoption of renewable energy resources by offering various incentives such as Generation-Based Incentives (GBIs), capital and interest subsidies, Viability Gap Funding (VGF), concessional finance, fiscal incentives, etc. The National Solar Mission aims to promote the development and use of solar energy for power generation and other uses, with the ultimate objective of making solar energy compete with fossil-based energy options.
Sanjeev K Ahuja, Head-Marketing, Su-Kam Power Systems thinks that the government has created a liberal environment for foreign investment in renewable energy projects. The establishment of a dedicated financial institution, the Indian Renewable Energy Development Agency (IREDA) makes for renewed impetus on the promotion, development and extension of financial assistance for renewable energy and energy efficiency or conservation projects.
Although the government has laid down many policies which are aimed at achieving the ambitious renewable energy target that will dispel all power woes in the long run, the whole process is very cumbersome for the common man. For instance, the net metering policy is a great way to help India achieve greater energy security but it has failed to pick up even in the states where it has been implemented. The entire process is confusing and complicated for the common man. A lot of changes that have to be made in the policies have still not been implemented. So, people are wary of renewable energy as there are no clear guidelines on availing incentives. On the same lines, Power Purchase Agreements have been signed but not executed. So the government should make policies that are easy, clear and hassle-free.
India is considered one of the countries with the largest production of energy from renewable sources, looking to have at least 175 GW of installed renewable energy capacity by 2022.
Safeguard duty
Following on the recommendation of the Directorate General of Trade Remedies (DGTR), the Ministry of Finance has issued a notification on July 30, 2018, approving the imposition of safeguard duty of 25 per cent on solar cells (assembled into modules or not) imported from China and Malaysia. The safeguard duty of 25 per cent will be applicable for a period of one year from July 30, 2018, followed by a reduction to 20 per cent in the first six months of the second year and further to 15 per cent in the latter half of the second year. The notification also states that the safeguard duty would be lowered to the extent of levy of anti-dumping duty (if any). This would result in an increase in the capital cost for a solar power project by 15 per cent, which in turn would result in an increase in tariff by about 30-35 paise per unit to maintain a similar level of returns for project developers.
Sabyasachi Majumdar, Group Head-Corporate Ratings, ICRA said, ‘The solar bid tariffs largely remained below Rs 3 per unit in CY2018 varying between Rs 2.44 per unit and Rs 2.75 per unit, with the expectation of favourable price movement in PV modules following the policy changes in China. The imposition of safeguard duty is likely to increase the bid tariffs to Rs 2.9-3.1 per unit for the upcoming bids.’
‘For the project already bid out, the amendment to bidding norms approved in April 2018 allowing pass-through of changes in taxation, duties and cess would allow the developers to pass through the tariff increase to the off-takers. However, the timely approval by the regulators and pass-through of the tariff increase to the off-takers is critical from the cash flow perspective of the project developers,’ he added.
While the imposition of safeguard duty on imported solar cells and modules would improve the competitiveness of domestic module manufacturers, the extent of benefit is likely to be constrained by the recent fall in the imported PV module prices owing to the policy changes in China. Moreover, the imposition of safeguard duty for a short period of two years is unlikely to lead to any significant increase in the domestic solar module or cell manufacturing capacity in the near term.
That said, with 300 days of sunshine, over a dozen perennial rivers and a coastline of more than 7,500 km, India is truly a haven for renewable energy. India has, in the recent years, made huge strides in the renewable energy sector and is committed to transforming into a green economy. India’s installed renewable power (grid interactive) generation capacity (including hydropower) increased from 42.4 GW in FY07 to 116.7 GW in June 2018, which is 33.72 per cent of the total installed capacity.
“Solar tariff stabilisation is needed to foster solar growth while we create a vertically integrated supply chain to control the solar prices without introducing quality issues and losing investors.”
“With instability in the sector and the future of the projects not secured (due to financial unavailability and investors’ hesitation), it is hard to see how India would be able to build an energy-rich future.”
“The imposition of safeguard duty for a short period of two years is unlikely to lead to any significant increase in the domestic solar module or cell manufacturing capacity in the near term.”
[Source:Power Today,http://www.powertoday.in]
Add comment