November 2017

Editor Dolly Khattar

With this issue, we celebrate our seventh anniversary. As before, we use this occasion to share our take on the state of the sector.

A reflection on the past year indicates a lacklustre performance by the renewable energy sector, in terms of capacity addition as well as new capacity allocation across segments.

The year has also witnessed a number of transformational changes. One of the biggest developments has been the wind industry moving away from the FiT structure to competitive bidding. The tariffs that have emerged from this development spell good news for the discoms, which will be able to procure this new wind power at Rs 2.64 per kWh.

But the same cannot be said for the industry. Given that only 2 GW of capacity has been tendered so far, and there is an unsaid “freeze” on any new capacity allocation through the FiT route, the project pipeline is running dry. In the first half of 2017-18, only about 420 MW of wind power capacity has been commissioned, which is merely 10 per cent of the set target of 4 GW for the year.

Like wind, the performance of the solar segment has also not been that impressive. Post the Bhadla Solar Park tender that was concluded in May 2017, no new tender has been opened. As of September 2017, only 2.3 GW of additional ground-mounted solar capacity came online against a target of 9 GW for 2017-18. In the rooftop solar space as well, only 134 MW has come online against a target of 1,000 MW.

The slowdown in capacity addition and allocation has been accompanied by a crash in tariffs for both solar (Rs 2.44 per kWh) and wind power (Rs 2.64 per kWh), thereby raising concerns over the viability of projects set up at these tariffs.

The demand for power, meanwhile, also seems to have slowed down. If this continues, it will have a major impact on the discoms’ willingness to buy additional power, be it from thermal or renewable sources of energy. However, there is hope that the focus on rural electrification, industrialisation and 24×7 supply, and the promotion of electric vehicles will reverse this trend.

On the positive side, a recent announcement by the new minister for power and new and renewable energy to tender 21 GW of solar and wind power capacity in 2017-18 has given some assurance of business continuity to the industry. Another positive has been the improvement in discom finances, helped by the UDAY scheme, as the debt and interest costs have been significantly reduced. Moody’s upgrade of India to a solid investment grade level is yet another piece of good news. This will be especially beneficial for renewables where sectoral lending options for domestic financial institutions and banks are limited and interest costs are an important part of the project cost.

Now, what’s important is that the government supports these moves through relevant policy and regulatory interventions while also drawing up a clear roadmap for tapping emerging opportunities such as energy storage and renewable hybrids.

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