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October

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Temporary slowdown in India’s Grid-Connected Solar industry

by Harini

This year began with a promising note for the solar industry – policies were introduced and finalized and biddings of the capacity 2945 MW were to be conducted. Details of various state solar tenders are provided in the table below.

State Solar Bidding in 2013 - As of 23rd Oct, 2013

However as the year progressed the deadlines for these tenders got extended and resulted in a temporary slowdown of the solar industry.

A very prominent reason for this slowdown is the much awaited and delayed 750 MW solar PV bidding for Viability Gap Funding under JNNSM Phase-II, Batch- I. The very first draft guidelines for this were announced as early as in April which created a buzz in the industry and at the same time speculation about the Domestic Content Requirements (DCR) involved. In May the methodology draft was introduced and according to this the total capacity would be split up into Part A and Part B projects with DCR being a criteria for Part B projects. This led to further speculation about the capacity of Part B projects and the Union minister of MNRE was quoted saying that it would be 75% of the total capacity. Finally, on October 4th another set of draft guidelines were announced saying that 50% of the total capacity i.e. 375 MW would require DCR. Despite this announcement, the document is still in draft stage and it can only be hoped that it won’t be long before the final guidelines are announced along with the RfP.

At the state level as well we have seen a slowdown, especially among the southern states – Tamil Nadu and Andhra Pradesh. Both these states conducted bidding for 1000 MW capacity earlier this year and the initial enthusiasm with which the bidding was conducted did not hold through. Andhra Pradesh announced a tariff of Rs. 6.49/unit without escalation and Tamil Nadu announced Rs. 6.48/ unit with 5% escalation for the first 10 years. This happened over six months ago and even now we do not have any confirmation about the PPAs signed. AP not having received sufficient responses, extended the offer to those who did not participate in the bidding so as to attract more takers at the price offered. Among the northern states, Punjab announced bidding for 300 MW and concluded with LOIs issued to 26 developers for setting up 250 MW capacity in the state. Rajasthan announced bidding for 100 MW and closed with allocating 75 MW capacity. States like Odisha, Chhattisgarh and Bihar announced Solar PV bidding earlier this year but there has been an indefinite delay in conducting the same. Odisha cited not have received sufficient responses on their website. Bihar on the other hand hasn’t announced a reason but had extended the last date four times.

The latest trend for policies is the introduction of net metering guidelines. Andhra Pradesh has already announced the guidelines/formats and even conducted an exhibition to bring about awareness. Tamil Nadu and Punjab have also announced guidelines which are yet to be finalized.

The state of REC market has been in doldrums as well with only a very small percentage of RECs actually being traded in the market every month. Check out the latest REC trading stats here. Maharashtra and Punjab have made decisions for strict enforcement of RPO in their states and recently MNRE also made a proposition to the ministry of Power to make it mandatory for states to fulfil their RPO or forgo concessions from Centre under financial restructuring of State Discoms. With such measures taken, it can only be hoped that these decisions will be turned to actions and also that other states will follow suit to help revive the REC market. Lowering the Floor Price for Solar RECs or removal of lower band in general can help boost trading. But these are thoughts that are being mooted for some time now without any practical action.

To add to this, the recent decline in Rupee value has made importing of Solar equipment expensive leading to 6-7% increase in project costs. This has had a bearing on the solar biddings of states such as Andhra Pradesh and Tamil Nadu where quite a few Solar developers had dropped out in the last minute owing to non-viability of their quoted tariff for the increased project costs.

On a positive note, as per the latest information on the MNRE website, Solar PV capacity (grid connected and off-grid) has crossed 2 GW. Details regarding this capacity can be accessed here on the MNRE website. Also it was recently announced that the Cabinet Committee on Economic Affairs has approved to support VGF for the setting up 750 MW Solar PV projects from National Clean Energy Fun. It has also been mentioned that the RfP for this scheme is likely to be released by 24th October. More information regarding this is available in our blogpost here.

JNNSM Phase-II can give the much needed push to India’s Grid-Connected Solar Industry. The industry is already upbeat with plenty of positive expectations regarding the same.

Keep checking our blog for more latest updates.

 

 

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