The Solar Energy Corporation of India (SECI) has emerged as one of the most successful tendering agencies for renewable energy projects in India. After having conducted large auctions in the solar and wind power segments, the organisation, in 2018, ventured into new and emerging segments such as solar-wind hybrids, floating solar and energy storage. Of these, floating solar and solar-wind hybrid project tenders witnessed an encouraging response while energy storage-based projects tenders encountered several roadblocks. In an interview with Renewable Watch, Jatindra Nath Swain, managing director, SECI, speaks candidly about the major developments and achievements of 2018, the tendering plans for the coming years, the emerging opportunities and the issues plaguing different renewable energy segments. Excerpts…
What have been the most noteworthy developments and the lows in the solar power segment in 2018?
Apart from its regular ground-mounted solar and wind tenders, SECI launched three innovative tenders in 2018 – the manufacturing-linked solar projects tender, the floating solar projects tender and the greenfield solar-wind hybrid plants tender. Although the response to the manufacturing-linked tender was below expectation, the tariff quoted was quite reasonable. In the floating solar space, reverse auctions for 50 MW have been successfully completed and bids have been submitted for another 100 MW.
The floating solar project will be implemented on the reservoir of the Govind Ballabh Pant Sagar Dam, also known as the Rihand Dam, on the river Son. SECI plans to install similar floating solar projects on other large reservoirs like Hirakud, Gobind Sagar, and at a few sites in Jharkhand. The 1,200 MW solar-wind hybrid tender received a response for 1,050 MW of capacity, and the reverse auction is under process. A ceiling tariff of Rs 2.70 per kWh has been fixed for this auction.
What are the reasons for promoting floating solar projects? What are the advantages of setting up such projects for developers?
SECI is promoting floating solar projects only in the eastern parts of the country where the land parcels are too small to set up large-scale ground-mounted projects. In states like Uttar Pradesh, Jharkhand and Odisha, land aggregation is challenging and even government-owned land is available only in patches. Since these areas are highly cultivated, drawing transmission lines and getting right of way are challenging. In contrast, the sites identified for floating solar projects already have a transmission network due to existing hydropower projects. Hence, the cost of transmission augmentation is reduced drastically. Apart from that, floating solar plants can help in reducing water evaporation and hence, conserve the water in the reservoir.
Developers need to concentrate only on project development in the case of floating solar. Since the reservoirs are owned by the government, the land-related issues are taken care of. They also do not need to worry about transmission augmentation as the existing hydropower projects already have their transmission networks.
How does the tariff for floating solar projects differ from that for conventional ground-mounted solar projects?
The tariff discovered for the floating solar project at the Rihand reservoir in Uttar Pradesh is comparable with the tariffs discovered for ground-mounted solar projects in the state. After accounting for the money payable to the Uttar Pradesh Jal Nigam, the tariff discovered for this floating solar project was Rs 3.22 per kWh. For the state government’s ground-mounted solar projects, the tariffs were in the range of Rs 3.17 to Rs 3.22 per kWh. So actually, there is no difference in the tariffs of these two types of projects.
However, there was a stark difference in the tariffs at the Bhadla Solar Park in Rajasthan and the floating solar project at Rihand Dam, primarily due to the difference in radiation. SECI prefers solar projects to be well-distributed throughout the country so as to avoid the concentration of such projects and hence, keep the grid stable.
What are some of the reservations that module manufacturers have against setting up solar capacity? Will there be any incentives for solar inverter manufacturers in the future?
One of the major reasons for the hesitation of manufacturers to set up solar capacity in India could be the high cost of power, particularly for manufacturing ingots and wafers. Power charges account for a significant part of the total production cost of ingots and wafers.
Through the manufacturing-linked tender, SECI has tried to create a ready market for manufacturers by also awarding solar projects for development to them. Hence, even if these manufacturers are not able to find a market for their products elsewhere, they can set up their own projects. Since this tender was the first of its kind, many manufacturers and developers could not form partnerships and bid together within the stipulated time period of the tender. However, going forward, more such partnerships will surely be formed and future tenders should get a better response. Many solar inverter manufacturers have already set up manufacturing facilities in India. As the market grows, more players will set up capacities on their own.
Do you think the recently quoted solar and wind power tariffs are sustainable in the long run? How does the government plan to ensure project quality in the face of such low tariffs?
The government has developed quality standards for solar project components under the Bureau of Indian Standards. There were certain issues in the beginning, especially pertaining to the few laboratories available for testing. This is being taken care of. For SECI-promoted solar projects, the quality standards are mentioned in the tender document itself and the quality certificates are thoroughly vetted before the project commission certificate is issued. SECI believes that the developers also do not compromise on quality.
How much solar capacity is expected to come online in 2018-19?
As far as SECI’s tenders are concerned, by the end of 2018-19, 750 MW of capacity will be online in the Bhadla Solar Park. This capacity is coming with PPAs at the lowest ever tariff of Rs 2.44 per kWh. Some capacity from the 5,000 MW viability gap funding scheme will also come online this year in Odisha. Other projects as part of SECI’s tenders will come online only in 2019-20. However, projects under many of the state tenders are likely to come online in the next four months. Till date, around 25 GW of solar capacity has been commissioned and around 15 GW is at various stages of commissioning.
What is your outlook on solar rooftop development in India?
Solar rooftop development has a lot of potential in India, and it has also become fairly affordable. However, the progress in this segment has been quite slow, unlike in the utility-scale segment. Apart from a lack of awareness, managerial issues and delays in subsidy disbursement are creating significant challenges in solar rooftop uptake. Another issue that needs to be tackled is the lack of innovative business models for large rooftop plants that can serve the interests of developers as well as discoms.
What is the status of the energy storage-based renewable projects that SECI has been promoting?
SECI itself has ventured into project development and is setting up a solar-wind hybrid project with 40 MW of wind capacity, 120 MW of solar capacity and 20 MWh of battery capacity in Andhra Pradesh. This will be a pilot plant where a number of concepts will be tested. Apart from this, SECI has plans to issue a couple of solar tenders with energy storage in the next five to six months. It had consulted with a number of energy storage players that have plans to set up storage capacities as large as 700 MWh at a single location.
In many projects worldwide, energy storage is used as an ancillary service due to the distributed nature of solar power. Since SECI does utility-scale solar projects, it is more cost competitive to install energy storage on the DC side of the solar plant. Hence, excess solar power can be stored in the energy storage system and then used by the discom at peak power times.
How has the progress in the wind segment been since the advent of competitive bidding?
SECI has conducted 8 GW of wind auctions since the introduction of competitive bidding in 2017. It started with a 1 GW capacity auction, followed by four more tranches of auctions. NTPC Limited has also carried out an auction for 1.2 GW of wind capacity. Among the states, Gujarat Urja Vikas Nigam Limited (GUVNL) has tendered significant wind power capacity. Tamil Nadu has also recently got approval from the state regulator to auction 1.5 GW of wind capacity. All of this capacity has been bid out, except the 1.5 GW of capacity planned to be tendered by Tamil Nadu.
All of SECI’s wind power auctions are being conducted for inter-state transmission of power since most of the windy states have already created enough wind capacity for their own use. They will not be able to absorb more wind power in their own states; hence, this wind power will be transported to non-windy states like Uttar Pradesh, Bihar, Chhattisgarh, Haryana and Delhi.
By when are these capacities expected to be commissioned?
Certain projects bid under SECI Tranche I have already started coming online. In fact, Sembcorp’s 250 MW project is fully commissioned and Ostro’s project is partly commissioned. The remaining projects are in pipeline and are expected to come online by the year end. The SECI Tranche II projects are also likely to be commissioned as per schedule, with most of them having achieved financial closure. SECI Tranche III and Tranche IV may get delayed by a few months. Transmission unavailability may be one of the reasons. However, transmission-related issues have been mostly addressed and future plans are in place.
The more important factor is the change of land grant policy in the wind-rich areas of Gujarat, especially since most of the projects of Tranche III and Tranche IV are coming up in the high-wind regions (Wind Zone 5) of Gujarat and Tamil Nadu. Only one developer is setting up a project in Karnataka. These wind sites offer the highest plant load factors and developers will move to other regions only when the wind-rich sites in these zones are exhausted.
Are tariffs expected to increase when developers move to low-wind resource regions?
As developers move to low-wind regions in the future, the tariffs are going to increase since the total amount of energy produced will decrease. It remains to be seen whether power procurers will be willing to buy wind power at the higher tariff levels. However, estimates suggest that Kutch region in Gujarat has enough wind power potential for 7-8 GW of projects, which can be implemented over the next four to five years. Hence, wind power off-take in the case of higher tariffs is not an immediate concern.
Is India on track to achieve its wind power capacity target?
India is definitely on track to achieve its target of 60 GW of wind power capacity by 2022, as only about 20 GW is remaining to be commissioned. About 43 GW of wind capacity has been commissioned or tendered till date. Hence, only about 16 GW remains to be completed in the next three years. The country’s bidding trajectory for wind power is about 10 GW per year; hence, the target should be achieved on time. The remaining capacity will be tendered in the next two years, so that by December 2022, all the tendered capacity is commissioned.
What are the government’s plans to improve the health of discoms?
There are many conflicting reports about the efficacy of the Ujjwal Discom Assurance Yojana and the Integrated Power Development Scheme. There have been remarkable improvements with respect to certain parameters, while there has been a decline on many other parameters, which, however, might just be temporary. Most discoms have finally realised the need for discipline to remain profitable. The increasing share of solar power will allow them to provide cheaper power to the agricultural sector without incurring losses and this will probably help them regain their financial health.
What new opportunities do you foresee in the renewable energy space in India?
A few years back, high costs were the major impediment in renewable energy development. However, that issue no longer exists since renewable energy has become probably the cheapest source of energy today. The major advantage is that these cheaper tariffs being discovered in auctions will remain the same for the length of the PPA period without any escalation. However, the problem of renewable energy being infirm is still there.
At present, renewable energy accounts for just 5 per cent of the total electricity produced, and the grid is able to manage it. Once this level rises to 10-15 per cent, specific mechanisms will be needed to balance this power. The decline in battery costs is an encouraging development in this context, as it will make a stronger case for storing renewable energy, thus dealing with the intermittency issue.
The second issue is that power demand has not risen as expected. However, the government is planning to promote electric vehicles and solar-based induction stoves in a massive way. This may lead to an increase in not only the total power demand of the country, but also the demand for renewable energy.