A recent positive trend, particularly for developers in the commercial and industrial (C&I) space, has been in the greater interest of consumers in renewable energy. They are looking to not only reduce their operational expenses, but also to get serious about their climate commitments. Developers are also exploring new opportunities in this space such as provision of clean energy to data centres, adoption of solar-wind and storage hybrids for the supply of firm power, and green hydrogen development for cement, petrochemical and fertiliser companies. However, developers continue to face the same old challenges. These include power curtailment, delays in signing of power sale agreements, frequent changes and lack of clarity in policies, increase in project costs due to the imposition of basic customs duty and GST. Besides, the Supreme Court order on the Great Indian Bustard and the increase in project costs due to high petrol/diesel prices have left developers more concerned. Senior executives of leading renewable energy developers share their perspective on key opportunities, challenges and the policy environment. Excerpts…
With a greater push to renewable energy, from both the government and the industry, what changes (positive or negative) in the sector have you seen as a developer in the past year?
In the past one year, private sector companies have put greater emphasis on adopting renewable energy due to the increasing need to comply with ESG norms. Different industries, mainly textiles and data centres, are aggressively procuring renewable energy. The negative is that now most of the open access state-level policies are nearing their end and uncertainty over the next phase of policies is a big concern for developers. States such as Karnataka, Gujarat, Maharashtra, Tamil Nadu and Chhattisgarh are all forming new policies. These open access policies will need to be designed keeping the changing dynamics in mind to encourage the private sector to significantly increase renewables in their overall energy mix. These policies should be for at least five years so as to give developers certainty to plan ahead.
Last year has been tough for the sector with Covid-19-led disruptions affecting global markets, but the sector showed a lot of resilience and was able to hold up although project schedules and timelines were affected. The sector was quickly back on its feet and we were also able to reach the 100 GW renewable energy mark this year, which means renewable energy contributes about 25 per cent to the total capacity mix in India. In addition to this, the sector witnessed consolidation and new investments coming in along with new policy developments being introduced by the government such as the Approved List of Models and Manufacturers and the production-linked incentive scheme to promote domestic manufacturing.
However, the government has also notified additional duties and taxes such as basic customs duty and GST on developers. Adding to the woes of developers is the issue of increase in equipment prices (even post signing letters of credit), delayed shipments, contract deferment, and invoking of force majeure clauses by suppliers triggered by the power shortage situation in China. All of this will result in project cost inflation for developers and ultimately lead to an increase in the price of power for the end consumer, which would not be an ideal situation.
In the coming years, what will be the key focus area for renewable energy developers?
CleanMax will continue to focus on the C&I segment. We believe the renewables sector will grow faster going forward as storage solutions start becoming economically viable. It may be in the form of green hydrogen as well. The government should work towards a framework for converting excess renewable power towards green hydrogen production instead of wasting it via curtailments. We are also talking to various players to collaborate on battery storage and green hydrogen.
“A game changer for the renewables sector could be policy incentives for adopting storage technologies with hybrid projects.” – Tejus A.V.
Wind-solar hybrids, solar with storage and green hydrogen will be the fastest emerging technologies in the clean energy space. These would be helpful in managing renewable energy sources efficiently, and enhancing the viability and dispatchability of these renewable energy solutions. A wind-solar hybrid project will improve peak power availability and feed a better energy mix into the grid. Promoting storage solutions would provide a huge economic opportunity for India to become a manufacturing hub of batteries.
At present, what are the biggest challenges or constraints that lie ahead of developers?
One, there is policy uncertainty regarding banking across India and the policy around it needs to be eased. Two, for developers, recent changes in GST will be difficult to absorb and it will eventually be passed through as increase in tariffs. Three, commodity, modules and turbine prices have gone up, thereby increasing project costs by 35-40 per cent within six months.
Some of the major issues being faced by the solar sector in India that are derailing the sector and affecting growth are policy uncertainty, increase in the cost of supplies due to the imposition of duties and taxes, delayed signing of power purchase agreements and power sale agreements by the Solar Energy Corporation of India and NTPC, delays in approvals to non-utility projects, etc. The latest issue is the Supreme Court order for solar projects in Rajasthan and Gujarat to protect the Great Indian Bustard, which is creating challenges for project developers and affecting the sector adversely.
“The government is supportive and notifies policies to push the sector. However, a lot of times the policy changes are either frequent or unexpected or not timed well and this leads to disruptions in the sector.” – Shriprakash Rai
What are certain policy and regulatory changes that may be required to create a more conducive environment for renewable energy developers?
To promote open access projects, it is important to ease banking norms across India and get more long-term clarity around it. In addition, clarity will be needed on the interstate transmission system (ISTS) process on 15-minute settlement. So, a long-term policy for ISTS projects and energy banking is needed to further accelerate open access adoption at the national level. Furthermore, there should be a mechanism by which the excess renewable energy can be used for producing green hydrogen instead of it being considered deemed to the grid, with no incentives for developers to avail of excess/unutilised power. While wind-solar hybrid projects have a good policy for allowing solar and wind projects to evacuate at different substations (provided they are in the same distribution grid), policy incentives for adopting storage technologies with hybrid projects can be a game changer for the renewables sector.
One of the most important things would be to ensure policy certainty. Power is a regulated sector and hence any change in the policy or regulatory framework creates a ripple effect across the sector. The government is supportive and notifies policies to push the sector; however, a lot of times the policy changes are either frequent or unexpected or not timed well and this leads to disruptions in the sector.