March 2019

Editor Dolly Khattar

The solar power segment has taken off in a way that most people would not have anticipated. From an almost non-existent solar market in 2010, India today is home to the fifth-largest installed solar power generation capacity in the world.

The most significant trend is that the majority of the new capacity being planned or developed in the power sector is in the form of solar. Solar parks have emerged as a successful model. Solar-wind hybrid projects have started being set up on a commercial scale. Floating and canal-top PV technologies have met with success amidst landrelated constraints. The rooftop solar segment has finally started looking up, especially in the commercial and industrial space.

The policy and regulatory landscape has also evolved significantly. Competitive bidding has become a standard practice. All states have solar power policies and net metering regulations in place. However, all this may not be enough for the country to be able to meet the 100 GW solar target by 2022. Adding about 25 GW of capacity in each of the next three years is a mammoth ask, given that the segment continues to face a number of policy and regulatory uncertainties and institutional challenges. Land and transmission constraints and macroeconomic issues have already slowed down the rate of growth of late. So much so that the targets set for 2018-19 are far from being met.

Throughout 2018-19, the segment faced frequent cancellation of bids. In July 2018, SECI cancelled all but the lowest-priced bid when auctioning 3 GW of capacity because the bid tariffs were higher than its expectations. A number of state-level tenders also shared the same fate, often due to higher than expected bids, but largely owing to infrastructure issues. The rooftop solar segment is being promoted in a big way but is way too short of meeting its target.

On their part, the discoms too have concerns. Their financial health has improved post UDAY, but only marginally and variably. They continue to be the weakest link in the power chain, despite the fact that PPA bankability rests mostly on their financials.

Finally, the financing scenario can at best be termed weak, with an overall high-risk sentiment. The industry seemed to have a false start with a series of consolidations and IPOs being announced early in the year. However, owing to an expectation mismatch between the sellers and the buyers, most of these fell through.

The primary problem of the solar segment can be resolved if tender timelines are adhered to and the tariffs discovered through competitive bidding are considered and adopted rather than being artificially capped. But the real challenges lie in strengthening the transmission infrastructure in order to handle variable solar power, and persuading the policymakers to address the land conundrum. The rooftop segment will require a totally new approach at the grassroots level as mere policy streamlining will
not push households to install a solar power system on their roofs.

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