Views of Manoj Kumar Upadhyay

“There is a hunger for projects”

The Indian solar power segment has scaled up rapidly over the past two years, with even better growth expected in the next four years. While this provides a significant opportunity for developers, it also comes with its set of challenges. ACME Solar is one developer that has been at the forefront of the segment, expanding rapidly in tandem with the growing market. In a recent interview with Renewable Watch, Manoj Kumar Upadhyay, founder, ACME Group, spoke about the challenges faced by the sector, the impact of recent regulatory developments, the ongoing market consolidation, and where ACME Solar stands in the midst of it all. Excerpts…

What are the biggest challenges faced by the solar power segment in India?

With an ambitious goal of installing 175 GW of renewable energy capacity by 2022, the government is promoting all renewable energy segments. Among these, solar is leading the sector because of its versatility, efficiency and scalability. Its scalability is determined by the continued reduction in tariff, which must be closer to Rs 2.50 per kWh for it to displace the variable cost of thermal power. Tariff is dependent on the cost of solar panels, global horizontal irradiance (GHI), debt interest rate, taxes and duties. The cost of panels is rapidly decreasing and the trend is likely to continue, while GHI is specific to a location. However, high interest rates with unfavourable lending conditions by public sector financial institutions and frequent changes of tax and duty structures are the two important challenges faced by the solar power segment. Another impediment is the way load is currently being managed by the state load despatch centres. It is time to move on to regional and national load management, following the merit order despatch system. Transmission constraints of the interstate transmission system located in high GHI areas is another matter of concern. The Solar Energy Corporation of India needs to act as a facilitator rather than as a penalty-imposing body for tenders issued by them.

What have been the most promising developments in 2017-18? What will be their likely impact in the long term?

A rapid decrease in the prices of solar panels in the international market with a marked improvement in efficiency is the most promising development of the year. This has brought down tariffs to an attractively low level. The large capacity tendered this year is another positive development.

What are the key hurdles in the uptake of storage solutions in this segment? What are the possible solutions and what is the way forward?

The capital cost of storage is quite high at present. However, a recent tender in Colorado for solar-plus-storage discovered a tariff of 3.6 cents per kWh, which translates into about Rs 2.50 per kWh. Bloomberg New Energy Finance predicts the capital costs for this technology to fall from the existing $209 per kWh to $73 per kWh by 2025, although it could happen much earlier. The government must now invite tenders with a storage component and the market will find ways to innovate to bring down tariffs and scale up the solar storage system solutions.

Is there adequate government focus on strengthening the grid infrastructure to be able to absorb 175 GW of intermittent power?

Transmission capacity for renewable energy is inadequate at present as it is outpaced by capacity addition. Priority for adding transmission lines must be given to areas with high GHI, much ahead of the solar power capacity addition. Transmission inadequacy will be the biggest bottleneck in solar capacity addition.

What is your opinion on imposing anti-dumping and safeguard duties? Is there an alternative solution to promote domestic manufacturing?

Solar power capacity addition in the country is largely sensitive to the prevalent solar tariff. A recent study by KPMG also underscores this fact. The analysis says that at a tariff of Rs 3 per kWh for solar power, India would be able to set up only 30 GW of solar power capacity, but at Rs 2.50 per kWh, it may be able to achieve the target of 100 GW. At a tariff of Rs 2 per kWh, there would be a demand for nearly 200 GW of solar power by various utilities, railways and other bulk consumers. With a continuous fall in global solar panel prices and increasing solar cell efficiency, tariffs have reduced globally. Tenders in Mexico, Chile and Saudi Arabia during October-December 2017 witnessed tariffs ranging from Rs 1.15 to Rs 1.39 per kWh.

Meanwhile, in India the tariff had dropped to Rs 2.44 per kWh in a tender opened just before the introduction of the goods and services tax (GST) regime and since then, there has been a gradual increase in tariffs. Now, 5 per cent GST is levied on solar panels as against zero per cent imposed earlier. However, the threat of anti-dumping duty (ADD) and safeguard duty has created an environment of uncertainty, resulting in higher tariffs quoted by developers. Two similar tenders issued by Gujarat Urja Vikas Nigam Limited witnessed a significant difference in tariff. The tariff obtained in the September 2017 tender was 12 per cent lower than that in March 2018 on account of the uncertainty over increased taxes and duties.

The demand for solar power by discoms has increased due to low tariffs. The duties of 25-30 per cent proposed to be levied will increase tariffs by Re 0.50 to Re 0.65, making the tariffs unattractive to utilities, which may bring solar power development to a halt.

Given that consumers need access to low-cost power, logically, all efforts are needed to ensure tariff reduction for the benefit of the people and the country. Low-cost power makes industries competitive and thus creates more jobs. Any measure that results in an increase in tariffs will, needless to say, be counterproductive. Thus, the imposition of safeguard duty and ADD is entirely avoidable.

Where is ACME positioned today in terms of project capacity in operation and in the pipeline? What are the key challenges faced by the company?

ACME is one of the leading solar power generators in the country. We currently have an operational capacity of over 1.2 GW and another 1.7 GW is in the pipeline. Land acquisition and lending are some of the major challenges faced by the sector. Being part of the same family, we are also struggling with similar challenges.

What is your opinion on the bids being quoted in recent tenders? What is the tariff outlook?

ACME has quoted the lowest solar tariffs in the solar power segment so far. This has been possible due to the increasing market competition and the opportunities being provided by the government for the development of this segment. Looking at the bids quoted in recent tenders, one can clearly observe the hunger for projects. If we consider the tariff rates in the past five years, there has been a tremendous drop in solar tariff rates, from about Rs 15 per kWh to Rs 2.44 per kWh.

What are ACME’s plans in the solar-plus-storage space?

We have a lithium-ion battery manufacturing facility in Uttarakhand. We plan to improve and expand the capacity to meet the demand for energy storage solutions and electric vehicles as and when the market opens.

The industry is witnessing significant consolidation. Is ACME also looking to participate in such activity?

The company is targeting a clean energy portfolio of 3.5-4 GW by 2019 and 7.5 GW by 2022. Even though we are focusing on expanding our portfolio organically, we could be open to acquisitions in order to achieve the target. However, acquisition is something we will consider on a case-to-case basis. Also, since we are a construction company as well, we build our own assets and like to grow that way. ACME recently won an additional 250 MW of capacity to be developed in Maharashtra, so there are enough projects in the pipeline to help us expand our capacity. For ACME, at this juncture, acquisitions would largely depend on the cost and profitability of assets.

“ACME is targeting a clean energy portfolio of 3.5-4 GW by 2019 and 7.5 GW by 2022.”

 “A rapid decrease in the prices of solar panels in the international market with a marked improvement in efficiency is the most promising development of the year.”

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