Post trade restriction with China, what are the challenges facing the solar sector in India?
The recent steps taken by the government, involving the imposition of duties on the import of solar-related equipment from China due to the ongoing geo-political tension between China and India, will render imports costlier and thereby impact capacity addition in the solar space. However, this will provide an opportunity to domestic manufacturers for manufacturing solar-related equipment to contribute to solar capacity additions in line with the ambitious target.
How is ‘Aatmanirbhar Bharat Abhiyan’’ for the renewable energy sector shaping up?
Indian renewable energy sector is dependent on Chinese imports. The announcement of ‘Aatmanirbhar Bharat Abhiyan’ and the discussed proposal to shift from the use of short term safeguard duties to basic custom duties, to protect domestic manufacturers, has induced the domestic player to make long-term commitments. Also, the proposal to provide for separate manufacturing zones for solar manufacturers will incentivize the manufacturers.
The Solar Power tariffs have plunged to a low of Rs. 2/kWh. How do you view this development?
Even though the low solar tariffs are good for the country as solar power can now compete with thermal in terms of affordability, but it is also important to consider if the projects can be implemented with such low tariffs. There have been many instances where the awarded projects have been abandoned and actual production could not happen as the projects were considered unviable because of such low bids.
Will India hit the target to produce 175 gigawatts of renewable energy by 2022. Your views?
As on 31 March 2020, India’s installed capacity was 369 GW; of this, renewables accounted for 86.30 MW. The Indian government is targeting for 175 GW of renewable capacity by 2022, of which solar energy has the biggest chunk, of 100 GW, and as per the Ministry of New and Renewable Energy (MNRE), the long-term target is 450 MW by 2030. As seen in the last 18 months, growth in power from the renewable sector has somewhat slowed down. This is partially due to the delay in payments by Discoms and their preference to buy power from cheaper sources. Policy inconsistency is another factor, wherein to achieve the target of low-cost renewable energy, PPAs were signed at low prices, while at the sametime, project costs were increased by the imposition of import duties.
What has been the impact of Covid-19 on the renewable energy sector, especially the solar industry?
The impact of Covid-19 and growing border tension between India and China have seen exponential growth in negative sentiments towards Chinese imports. This is expected to increase the cost of projects, which in turn will shrink the margins for players and may cause projects to become unviable (as due to low bid prices, the cushion for shocks is already low). The solar power sector space, which has seen huge growth in capacity additions compared to wind power, has remained the focal point in the renewable space since last few fiscals. However, it is expected to be hit hard by the pandemic as solar PV modules are dependent heavily on imports, due to the lack of domestic manufacturing capability while imports have been disrupted due to Covid-19.
What is your assessment for the next financial year 2021-22?
In FY22, we do not expect much change in the capacity mix of conventional and renewable energy due to ongoing problems in the renewable sector and the geo-political changes seen in the last six months.
India's gigantic ambition to increase its renewable energy target to 450 GW by 2030 requires huge investment, which is not forthcoming. How can India overcome its financial constraint to achieve its renewable obligation?
To attract more investment, the government needs to reduce off-take risk by ensuring that Discoms do not go back on the contracts and make timely payments to the Gencos. Strict compliance of Renewable Purchase Obligations (RPOs) will also ensure flow of funds to the sector. The recent downgrading of the sovereign credit rating has increased risks for the global investors. Government needs to counter this by reforms and policy certainty. Additionally, with the advent of International Solar Alliance (ISA) in the recent years as an initiative to bolster solar power capacity/ infrastructure around the world, there is a proposal for setting up a World Solar Bank which can alleviate the funding concerns of such projects to a great extent even in India.
For any industry to grow and sustain requires favourable government policies and regulations. What is your take on the current regulatory framework and tweaks needed to propel the sector?
Government of India (GOI) has taken various policy measures to support the renewables sector. Electricity (Amendement) bill, 2020 with stress on RPOs and minimum percentage purchase from renewable sources for states is one such step. Also, the proposed setting up of the Electricity Contract Enforcement Authority (ECEA) will reduce the off take risks for the Discoms and ensure enforceability of contracts. New schemes like development of Solar Park and Ultra Mega Solar Power projects, UDAY Scheme (Ujjwal Discom Assurance Yojana), and others will create the infrastructure required for propelling the use of renewable energy sources. Along with that the recent liquidity infusion scheme to assist Discoms shall provide support to the Gencos. GOI has to continue providing robust policy support and work towards establishing a robust infrastructure for the renewable industry to prosper.
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