Views of SECI’s S.K. Mishra

“The future of renewables in India is bright”

The role played by the Solar Energy Corporation of India (SECI) has gained prominence in recent years as the solar and wind power segments move from the sidelines to the mainstream power basket of the country. Its status has evolved from being only a tendering agency to an offtaker, working to instil greater confidence among developers and taking the sector forward. It has deftly handled sector-related challenges by introducing innovative market mechanisms. At a recent Renewable Watch conference on “Solar Power in India”, S.K. Mishra, director, power systems, SECI, outlined the issues in the solar and wind power segments, the various innovative initiatives taken by SECI to resolve these issues, the capacity tendered, and the future trajectory. Excerpts…

At SECI, we are responsible for floating and executing tenders under the various government schemes. The response to most of these tenders has been good, except for a few. There are a host of issues that have impacted the rapid development of the sector. Land procurement for projects is getting increasingly difficult. Power evacuation due to transmission constraints is proving to be a challenge. As the bulk of renewable energy is generated in resource-rich states and procured by other states to fulfil their renewable purchase obligations (RPOs), availability of transmission capacity becomes important. The third most important issue is the demand for renewable energy from the states, which is primarily based on their RPOs. Since the state and central RPOs are different, the demand across the states varies. However, the government is committed to solve these issues and fast-track the adoption of renewable energy in the country.

New initiatives

One of the most important initiatives in this regard is the solar park policy. As per this policy, SECI has to only acquire the land for the development of solar parks in areas where a transmission system has been planned. A 66 GW transmission system has already been planned; of this 12.5 GW is at the tendering stage, another 15.5 GW will soon be tendered, and the remaining 38 GW is being discussed with the relevant state agencies. The secretary, Ministry of New and Renewable Energy (MNRE), has already held a meeting for procuring land in the states of Rajasthan, Andhra Pradesh, Gujarat and Madhya Pradesh. SECI is now approaching different states for acquiring  land where the transmission system is planned to ensure there are no stranded projects in this segment.

The tariffs discovered in recent bids have increased the demand for solar energy among the states. While wind power tariffs are hovering around Rs 2.80 per kWh, hybrid between Rs 2.65 per kWh and Rs 2.70 per kWh, solar is at about Rs 2.50 per kWh. At such attractive tariffs, the demand for solar energy from the states is increasing whereas that for wind and hybrid power is gradually decreasing. This has created a bit of a challenge in terms of mainstreaming renewable energy and the role it is expected to play in the baseload in the near future. Therefore, a healthy mix of power from all renewable energy segments is required. For this, the states will need to be made aware of the advantages of wind and hybrid power and the fact that opting for the lowest cost of energy may not necessarily solve the states’ energy challenges. One of SECI’s mandates is also to create awareness along with creating a healthy market.

New tenders

In the first six months of this calendar year, 6 GW of capacity has already been auctioned by SECI. Further, a manufacturing-linked tender, which entails the setting up of 2 GW of manufacturing capacity and 6 GW of solar power generation capacity, and a 1.8 GW wind tender have been launched. Two more solar tenders of 1.2 GW capacity each have been floated. While the project for one of these capacities can be located anywhere in the country, the other one is for a specific substation in Madhya Pradesh where connectivity is readily available. Another tender that has gained popularity and is now the most sought after is hybrid power tender. A hybrid power tender makes it mandatory for the offtaker to procure power for at least three hours in a day. Developers can set up hybrid projects with a combination of solar and wind power, and energy storage of any type. For these tenders, there will be a two-part tariff mechanism wherein one part will be fixed for off-peak power and the other for peaking power. The peaking power tariff will be quoted by the developers to win projects. With that, SECI has launched a total of around 11.4 GW of tenders in June itself. The trajectory for SECI, as set by the MNRE, for this year is to tender 18 GW of solar power capacity and 10 GW of hybrid and wind power capacities. However, SECI has been directed to not be very particular regarding capacities and alter the tenders as per the need and demand.

The manufacturing-linked tender requires the winner to set up capacity for manufacturing 500 MW of cells and modules to be able to set up three times this capacity (1.5 GW) of solar power and sign a power purchase agreement (PPA) with the counterparties. It also requires manufacturers to install ingot and wafer production facilities. This requirement is primarily for manufacturers who already have cell and module facilities. This is expected to encourage backward integration of manufacturing facilities, as bringing solar equipment manufacturing to India is a priority for the government. Meanwhile, another tender has been launched to set up 7.5 GW of renewable power capacity in the Leh-Kargil region. This tender includes the setting up of transmission lines by the bidder. Given the large swathes of land available, good insolation, low pollution levels, and good wind speeds, the tender is expected to generate good response among developers.

The newly launched rooftop solar tenders are largely for the residential and institutional segments. About 145 MW of this along with another 138 GW for government buildings have been successfully commissioned. A third tender of 97.5 MW has been launched. There was a slight delay in tendering this capacity as the benchmarking cost for the year had not been finalised.

Outlook

Besides the challenges mentioned above, SECI’s tenders are now equipped to tackle the issue of delayed payments from discoms. To this end, the tenders now come with a three-layered payment security system. This includes a bank guarantee to be provided by the discoms for two months worth of estimated payments; a payment security mechanism, which has already accrued around Rs 8 billion-Rs 10 billion; and a third-party payment guarantee by the Government of India, this forms the last layer of this system. The third-party payment guarantee helps provide better payment assurance to developers and power generators. Among other modes to solve the delayed payment issue, the government is mulling over a prepaid model. As per this model, the discom has to declare the amount of power required at the load despatch centre, submit the payment and procure the power. Another important initiative in this regard is the distribution joint venture being formed by NTPC and Power Grid Corporation of India Limited. This would provide a greater degree of safety to power generators with regard to timely payments and support in project execution.

Considering the government initiatives and SECI’s proactive role in implementing them, the future of renewable energy in India looks bright. Meanwhile, once the cost of batteries reduces, stabilised renewable power would become a reality and contribute even more to the country’s power basket.

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