The solar power segment has remained resilient to disruptions caused by the pandemic. In recent months, the Ministry of New and Renewable Energy (MNRE) has worked extensively to promote domestic manufacturing, introducing basic customs duty (BCD) and floating guidelines for the production-linked incentive (PLI) scheme, among other things. The issues relating to BCD impact solar developers due to the expected increase in module costs and, thereby, project costs. Apart from this, developers are facing issues with respect to the Approved List of Module Manufacturers (ALMM); delays in the signing of power sale agreements (PSAs); cancellation and renegotiation of power purchase agreements (PPAs), which hamper investor confidence; and the recent Supreme Court order to lay high voltage power lines underground in Rajasthan and Gujarat in order to protect the great Indian bustard. At the 14th edition of the “Solar Power in India” conference organised by Renewable Watch, senior industry executives discussed these issues and gave suggestions to address the ongoing challenges. Edited excerpts…
We have an operational capacity of 900 MW. There are no projects in the pipeline at present, but we are looking forward to future bids. Over the next three to four years, we plan to set up 500-750 MW of solar projects per year to reach a portfolio of over 2.5 GW. During the pandemic, the government has supported developers with their issues related to electronic bill submissions and extension of project commissioning deadlines. There is a lot of support from the local administration as well. Developers too have learned how to manage constraints caused by the pandemic. We are facing challenges related to BCD and the ALMM, and the recent Supreme Court order on the great Indian bustard has added to our concerns. There is another key challenge related to change in law. We have been struggling with this for almost three years for our project in Karnataka as we are not able to get clear guidelines from the regulator. We will have to take the Appellate Tribunal for Electricity route, but are concerned about the amount of time that will be required. In my opinion, for all change in law issues there should be a grandfathering approach in all PPAs going forward. Post the imposition of BCD to solve the issue of lack of domestically manufactured modules in the short run, there could be provisions in tenders that state 40 per cent of the modules need to be procured domestically while the remaining can be imported. The renegotiation and cancellation of bids after the auction has impacted investor confidence. Also, there should not be any risk of delays in the signing of PSAs. And if there is a delay, then there should be compensation by the counterparty. There should be no provision for the termination of the PPA. Going forward, we are keen to look into the green hydrogen market as solar power will play a significant role in the industry.
ReNew Power’s total operational solar capacity is 2.5 GW. A similar capacity is in the pipeline. The operational wind capacity is around 3 GW. In total, 5 GW of renewable energy projects are operational and a similar capacity is in the pipeline. We continue to participate in tenders
floated by central agencies; however, we are quite selective in the states. The solar power industry has attracted a huge amount of capital, but the tender trajectory has not been in line with this development. To promote domestic manufacturing from the supply side, the government has been working on policy instruments like BCD and the ALMM, and has recently floated guidelines for the PLI scheme. Manufacturers may require a greater visibility on the buyers of the domestically produced modules. There may be a mismatch in demand and supply right now, but eventually this will be smoothened.
ReNew Power has announced plans to develop a solar cell and module manufacturing facility in the Dholera Special Industrial Region, approximately 100 km from Ahmedabad, Gujarat. The greenfield facility will manufacture 2 GW of solar cells and modules annually using monocrystalline passivated emitter and rear contact (PERC) and large wafer technology. The facility has been allocated 100 acres of land by the state government, ensuring adequate land availability for future capacity expansion. The plant is expected to be vertically integrated in terms of processes and infrastructure for the manufacturing of solar cells and modules and is anticipated to commence operations from financial year 2022-23. However, our core business is that of an independent power producer (IPR) and we feel de-risking can take place if we enter the manufacturing space.
Most of the bids floated are on the interstate transmission system (ISTS) front and from central agencies. This is a positive trend, both in terms of the availability of the transmission system for power evacuation and the credit rating of offtakers. Transmission planning is done simultaneously with generation planning. However, I think it should be done in advance. Powergrid’s transmission corridor, Phase III and Phase IV, is being planned with a capacity of 20 GW. Of this, 80 per cent has already been blocked by the forward tenders, which have been issued and won by the bidders. The next expansion of the transmission infrastructure has to happen soon. Furthermore, the ISTS waiver is till June 2023. Going forward, there should be discussions regarding the extension of these waivers.
NTPC has created a separate 100 per cent subsidy for renewable energy and has been very aggressive with capacity additions. As of now, the company’s commissioned renewable energy capacity stands at 1,500 MW and about 2,500 MW is under implementation, most of which is in Rajasthan. In the state, project implementation was happening smoothly; however, the Supreme Court order on the great Indian bustard has created some roadblocks. On the bright side, in the last year or so we have learned to work in a Covid environment.
The motive behind the ALMM is good. It is promoting the industry and it is a platform for Indian companies to make a mark inside and outside the country. However, a project in the pipeline today faces uncertainties pertaining to the expansion of lines and the new design of cells. Hence, there must be a mechanism to persuade manufacturers and other relevant stakeholders to be prepared and undertake more capacity additions, make faster decisions, and offer a reasonable price. It is important to not quote higher prices, unless there is competition in the market.
Manufacturing is a good opportunity now, but NTPC’s core competency has been as a developer and an operator of power projects. As of now, the company is leveraging that strength and therefore, has no plans of expanding into manufacturing.
NTPC’s primary focus has been on standalone solar projects. Wind installations are proving difficult as there are challenges at the bidding stage itself. Going forward, hybrid combinations may be more viable given the market conditions as compared to stand-alone wind installations. The development of supporting infrastructure should be synchronised with project bidding and capacity addition. The whole transmission capacity including evacuation should be planned well before project implementation. Finally, the emergency concerning the Great Indian Bustard in Rajasthan could lead to as much as 13 GW of stalled capacity. This must be addressed on priority.
When there is such a large solar programme in the country, there is a need to have an equally strong domestic manufacturing industry. Before an investor invests in India’s manufacturing sector, it is important to have a clear road map in terms of offtake. This is available as the government has committed a large capacity ramp-up in the coming years. Further, if one must invest locally, there needs to be some incentive. This has been provided through the levy of BCD, which is a very clear signal for companies to invest both in cell and module manufacturing. A challenge in this regard is that while India has a significant module manufacturing capacity, it does not have as much cell manufacturing capacity. As the cell capacity is very limited, cells will mainly be imported till India develops its manufacturing base, which, again, might raise tariffs. Hence, if the ALMM has been introduced after the manufacturing capacity had been built up, it would have been more appropriate.
There are also concerns regarding delays in PPAs and tariff renegotiations. The central government and the MNRE are often helpless in persuading the states when such a situation arises. It is important to have a very strong system to prevent such instances. When a company has large plans of development and it wants to secure a reliable supply chain, entering the manufacturing space is a good move. Being an IPP and a manufacturer requires competencies, but these can be built over time. Unfortunately, even if a domestic player enters cell and module manufacturing in India, there will still be dependence on silicon from China and other countries.
Going forward, the government needs to maintain the tender trajectory for solar, wind, hybrid and storage projects. Also, issues related to change in law, the Supreme Court order on the great Indian bustard and regulatory delays need to be solved. The MNRE is aware of these issues and is taking the best possible steps. While there are keen private investments, the blips now and then slow down the entire trajectory and the country falls short of its targets.