“India needs to install 90 GW of solar in five years”
Says Priyadarshini Sanjay, Managing Director, Mercom Communications India, in conversation with R Srinivasan.
Kindly comment on the solar scenario especially since solar tenders and auctions have slowed in India and what will be the ramifications of these developments?
Since September 2016, tenders have slowed down for IPPs. Discoms are currently in a wait-and-watch mode since solar tariffs are constantly falling. They want to procure solar at the cheapest rate and they are sitting back and waiting for tariffs to keep dropping which is causing everybody to postpone tenders and auctions. Tenders cannot be delayed indefinitely and many developers who have invested millions in anticipation of increased activity to meet government goals are beginning to panic. Markets don’t react well to uncertainty and foreign investors are going to conclude that India is not a stable market that can meet its set goals unless tender and auction activity picks up again.
The latest record low tariff is Rs 3.15 per kilowatt hour (kWh) and is expected to fall below Rs 3 a unit during auctions for the Bhadla solar parks in Rajasthan. To what extent are fears, that it may affect smaller players in the market, justified?
The Kadapa auction shows that aggressive bidding in this case is more than just project economics as most of these projects can procure components at approximately the same price levels (or at least within a few points). It comes down to developers willing to give up returns to develop a pipeline. Tenders and auctions have slowed down over the past couple of quarters in India and bank guarantees are stuck and overheads are increasing. There is a huge pent-up demand for large-scale projects as companies have invested and staffed up to meet India’s aggressive solar installation target but are not seeing the auctions. It is expected that if states and implementing agencies tweak their tenders effectively, solar costs can be brought at par with thermal throughout the country. Smaller developers will find it hard to bid aggressively as interest rates and other costs tend to be a little higher for them. If tender activity increases, it will benefit everybody including smaller players.
Your views on large-scale deployment of EVs (adopting solar charging stations) in India and the resulting benefits. Also in view of the fact that India’s energy import bill is expected to double from around $150 billion to $300 billion by 2030.
EVs are just making their entry into Indian market and it is still very early. There are not many manufacturers of EVs in the country plus cost is a huge deterrent, EVs have gained ground in the US and some parts of Europe as EV purchases are subsidised to a certain extent ($2,500 to $7,500 per vehicle in the US) to make them affordable. Total EVs in the US as of last year was only about 1% - that gives you an idea as to how long it will take for India to get there. India sees an opportunity to reduce its energy import bill but how much has the government spent on R&D for EV and charging stations? If you depend on imported technology, it will still be pretty expensive. The government has to lay out a long term strategy and invest for all this to happen.
Your views on viability of the 100 gigawatts (GW) solar target by 2022.
The target is aggressive, but not unachievable. Based on forecast from our recently released Q1 India Solar Quarterly Update we are estimating solar installations to the tune of 65-70 GW by 2022 based on current market conditions and challenges. India needs to install 90 GW of solar in five years – a rate of 18 GW per year. Most states have specified RPO targets. However, due to the lack of enforcement of RPO regulations and the absence of penalties when obligations are not met, many state discoms are not fully complying with their RPO targets. The financial health of discoms has to improve, power demand needs to pick up and transmission infrastructure needs to be improved to be able to get to 100 GW by 2022.