With the country reaching a 20 GW installed solar capacity milestone in 2018-19, the future looks bright for the entire solar segment. However, the recent implications of safeguard duties, financing constraints and power evacuation issues have put a dampener on an otherwise positive outlook. In an interview with Renewable Watch, Vineet Mittal, Chairman, Avaada Group, speaks about the key developments, biggest challenges and the outlook for the Indian renewable energy sector. Excerpts…
What have been the most noteworthy developments in the renewable energy space in 2018?
India has made major headwinds this year, especially with the central and state government looking to explore avenues to realise Prime Minister’s vision of sustainable growth and delivering on COP21 commitments. The country reached a 20 GW installed solar capacity milestone this year. We have been recognised as the second largest market globally for auctioning renewable energy projects. The sector also saw solar tariffs hitting a new low. Recent developments indicate that floating solar and electric vehicles (EVs) have been widely embraced by state governments. Given that India has a large number of reservoirs, floating solar projects presents a significant opportunity for clean energy generation. Growing thrust on energy storage for renewable projects will be a game changer.
In your opinion, what are the biggest challenges and risks looming in the renewable energy sector in India?
India has the potential to be a global leader in clean energy generation. The sector’s past growth has already demonstrated that the renewable energy sector will continue to grow rapidly. There are a few challenges that require due diligence and attention from the government authorities.
Policy certainty and contract compliance: The change in approach from capital subsidy-driven solar manufacturing to linking power purchase agreements (PPAs) with manufacturing is not inspiring. The sector needs a stable policy framework for at least the next five years. For solar power generation, both the central and state governments should come up with concrete annual capacity addition programmes, which are in sync with the transmission evacuation infrastructure. Solar manufacturing can be an important element for India’s energy security and requires much more deliberation.
Priority sector and financing: While the issue is not limited to renewable sector, it is critical that the liquidity level of public sector banks is increased as soon as possible, to enable them to commence lending to viable projects. Also, if renewable energy exposure can be classified under priority lending, it can lead to a reduction of interest rates by 75-100 basis points. The government and the Reserve Bank of India must examine this possibility. In addition, the government should also consider resuming buyers’ credit facility, which will help reduce the borrowing cost. The total funding required for 175 MW is around $84 billion. Renewable energy sector is already classified as a priority sector, but the limit needs to be increased to Rs 1 billion-1.5 billion from the current Rs 150 million. This will open up the banking space for the huge fund requirement and reduce the cost of borrowings.
Inadequate power evacuation: The current transmission infrastructure is not adequate to meet the country’s energy requirement demand. The quantum of bids that are being offered for development should include major expansion of the current transmission network.
What is your opinion about the safeguard duties imposed on solar imports from China and Malaysia? How will it impact the import profile?
We need to recognise that solar energy industry is undergoing rapid development. With technological changes, the efficiency of the power projects also increases tremendously. In such an environment is it critical that the modules are available in the quantities needed coupled with high conversion efficiency. Indigenous manufacturers, however, do not possess the scale to meet domestic demand vis-a-vis India’s solar energy targets. On the other hand, countries like China and Malaysia are able to meet global needs due to their extensive manufacturing capabilities backed by research and development capabilities. To ensure that IPPs are able to build capacities in time and with maximum efficiency, they might continue to look at sourcing equipment from global leaders.
What are your views on the feasibility of the recently quoted low solar and wind tariffs in the long run? How can the government ensure that project quality is not compromised in a low tariff scenario?
It is anticipated that globally module prices will see a downward trend. In such a scenario, lowering tariffs is feasible as long as there is a conducive policy framework. There are a few concerns with respect to implementation of safeguard duty and GST pass through rule. In a scenario where a project developer is using indigenous modules, quality of the modules has to be assured. Most global modules are accredited to quality standards by leading agencies. The government has mandated that the indigenous module manufacturers have to abide by the quality standards laid down by the Bureau of Indian Standards. This is a welcome move. However, for other components like mounting structures and cable manufacturers, a more detailed study needs to be conducted to devise appropriate quality standards.
What new opportunities do you see in the renewable energy space in India?
Clean energy business is in a constant state of innovation, especially given its wide applicability and usage. With the government committed to its environment sustainability and clean energy targets, these are exciting times for adoption and implementation of clean energy innovations. Floating solar projects and EVs have already made their way into the market. It will be interesting to see how these projects are developed. According to a recent report, there is a 16.4 GW storage opportunity in India. Power projects coupled with storage will continue to be explored. There is also a rising demand from large industrial and manufacturing facilities for sourcing solar energy to meet their energy needs. Further, industrial heating solutions powered by solar energy have made a small advent in the Indian market but over time that should grow as well.