Solar Shines: Segment crosses 60 GW of capacity

Segment crosses 60 GW of capacity

The Indian solar power market has grown rapidly over the past few years to cross 61 GW of total installations, much more than any other clean power source including wind power, biopower or even the decades-old and more mature large hydropower. This trend is set to continue with a strong government impetus to increasing solar power uptake as it will be a major contributor to achieving India’s target of 500 GW of non-fossil fuel power by 2030. Thus, as in previous years, 2022 also saw regular enabling policy interventions from the government across various subsegments of solar such as rooftop solar, open access, utility-scale solar as well as manufacturing.

Further, many large auctions were successfully conducted with capacity allocations. In addition, large pu­blic companies announced their intentio­ns of setting up GW-plus solar capacities. The solar ind­us­try, meanwhile, is en­thu­siastic about de­ploying capacities in the utility-scale solar space and is also innovating with attractive opex-based busine­ss models to tap the expanding commercial, industrial and residential markets. In ad­dition, floating solar has become a po­pu­lar choice in many states and for large hydro and thermal power companies to solarise their portfolios.

As a result, apart from utility-scale so­lar, which has historically been the major driver of solar power growth in India, distributed solar subsegments such as roof­top solar, offgrid solar and hybrids have also grown. Thus, while the major portion (roughly 50 GW) of the total installed solar power capacity is contributed by utility-sc­ale solar, an impressive capacity of about 10 GW is contributed by other subsegments such as rooftop solar and offgrid solar with smaller capacity projects.

Meanwhile, the solar manufacturing spa­ce, which was limited till now to only a few manufacturers and smaller capacities, has exploded owing to the recent government thrust on reducing imports. Thus, im­pressive announcements of the existing capacity expansion and the foray of new players in this space has become quite common.

This article provides an overview of the recent policy developments, tenders and major trends across various subsegments of solar power, and the outlook for the future…

Series of auctions and project announcements

Since December 2021, we have seen a fl­urry of successful bidding rounds by cent­ral as well as state agencies. It began with significantly low-priced bids and Rs 2.17 per kWh was the lowest bid in the Solar Energy Corporation of India’s (SECI) De­cember 2021 auction. However, tariffs witnessed a steep hike later, owing to the increase in project costs as a result of ba­sic customs duty imposition on solar cell and module imports as well as the gl­obal surge in polysilicon thereby, leading to a rise in solar module prices.

The results of key auctions of the past 12 mo­nths are highlighted below:

  • In December 2021, SECI awarded ca­pa­cities to six winning bidders in its auction for 1,785 MW of solar power projects (Tranche IV) in Rajasthan. With a quoted tariff of Rs 2.17 per kWh, NTPC Renew­able Energy won a capacity of 500 MW, Sprng Energy Natural Power Source won 200 MW, Calpine Subsico Solar Energy (an SPV of UPC Renewables) won 90 MW and Metka EGN Singapore Pte won 20 MW. ReNew Solar Power received 600 MW and ACME Solar received 375 MW. Both companies quoted a tariff of Rs 2.18 per kWh.
  • In February 2022, winners of SECI’s au­ction for 1,200 MW interstate transmissi­on system (ISTS)-connected solar power projects (Tranche X) in Karnata­ka were Project Eight Renewable Power (Ay­ana Renewable Power) and Solar­One Energy (Fortum). The capacity was allocated for two different substations – Ko­ppal and Gadag. For the Koppal su­b­station, Aya­na and Fortum were awarded a capacity of 300 MW each at a tariff of Rs 2.36 per kWh and Rs 2.37 per kWh respectively. Similarly, Ayana and Fo­rtum were awarded 300 MW each at Rs 2.35 per kWh and Rs 2.36 per kWh respectively for the Ga­dag substation.
  • In March 2022, Gujarat Urja Vikas Nigam Limited’s (GUVNL) auction for 500 MW of solar projects (Phase XIII) saw successful bids from four parties at the same tariff of Rs 2.29 per unit. The winners in this auction were Fortum (through Alpha Energy) with 200 MW, SJVN with 100 MW, Hinduja Renewable Energy with 120 MW and UPC Renewables with 80 MW capacity.
  • Soon after, GUVNL conducted another auction in June 2022 to develop 500 MW of solar projects under Phase XIV with a greenshoe option of up to 500 MW of additional capacity. The auction was won by Aditya Birla (ABREL SPV 2), Hi­nduja Renewable Energy and SJVN (Tranche XIV). Aditya Birla and Hinduja Renewables Energy secured 300 MW and 120 MW respectively, at a tariff of Rs 2.30 per kWh. At Rs 2.31 per kWh, SJVN was allocated 80 MW out of a total capacity of 200 MW.
  • In August 2022, the results of Maha­rashtra State Electricity Distribution Co­mpany Limited’s (MSEDCL) auction to purchase power from 500 MW of grid-connected intra-state solar projects (Phase-VII) were announced. SJVN and Juniper secured capacities of 200 MW and 75 MW, both quoting Rs 2.90 per kWh. Tata Power and Su­kh­bir Agro we­re allotted ca­pacities of 150 MW and 50 MW res­pectively, whe­rein each quoted Rs 2.91 per kWh. Avaada that quoted Rs 2.91 per kWh for 300 MW got allotted only 25 MW un­der the bucket filling method.
  • In September 2022, NTPC Renewable Energy and Avaada Energy were declar­ed winners in MSEDCL’s auction to procure power from 500 MW of grid-connected inter- or intra-state solar projects (Phase VIII) on a long-term basis. NTPC Renewable Energy secured a capacity of 200 MW by quoting a tariff of Rs 2.82 per kWh. At the same time, Avaada Energy quoted Rs 2.83 per kWh for a capacity of 500 MW, but was granted only 300 MW as per the bucket filling method.
  • GUVNL conducted another auction in September 2022 for 750 MW of grid-connected solar projects with a greenshoe option of an additional capacity of up to 750 MW (Phase XVI). The winners of this auction were Solarcraft Power In­dia 2 (BluPine Energy), Solairedirect En­ergy (Engie), Tata Power Renewable En­ergy and Utkrrisht Solar Energy (UPC Renewables). BluPine won 120 MW at Rs 2.49 per kWh. Engie won 200 MW at Rs 2.50 per kWh, while Tata Power was awarded 300 MW at a quote of Rs 2.65 per kWh. Of the 280 MW quoted capacity, UPC Renewables won 130 MW at Rs 2.66 per kWh.
  • Along with these projects that have been allocated because of bidding, various pu­blic sector companies have recently de­clared their intention to develop massive solar power capacities, so as to green the­ir energy mix as part of their corporate strategies. For instance, the Oil and Natu­ral Gas Corporation is planning to build a 1 GW solar power plant in Rajasthan. Sim­i­larly, Coal India Limited signed an MoU with Ra­jasthan Vidyut Utpadan Nigam Li­mi­ted for the development of a 1,190 MW solar pow­er project. SJVN Limited submitted a letter of intent to construct 10,000 MW of solar power projects in Rajasthan over the next five years. Tehri Hydro Deve­lopment Corp­o­ration India Limited signed an MoU with Renewable Energy Corpora­tion Limited for the development of large solar power projects with a total capacity of 10,000 MW in Rajasthan.

While these large project auctions and announcements are surely encouraging, certain urgent steps need to be taken to ensure that they are implemented in a timely manner. First, land acquisition and grid-related concerns need to be add­res­s­ed. Second, delayed payments from discoms need to be stopped to improve project bankability and investor confidence. Third, tariff approval and signing of power purchase agreements (PPAs) need to be fast-tracked so that project costs and, thereby, returns are not impacted during months of delay. Finally, contract sanctity needs to be ensured and instances of re-negotiating of PPAs should be strongly discouraged.

Floating solar to avoid land issues

Although these tender and project anno­uncements indicate a rapid and large-scale build-up of capacity in the solar po­wer space in the near future, they will re­quire massive tracts of land. Land acquisition has historically been a challenging pro­s­pect in India and has often caused many delays in project implementation. Th­us, floating solar projects are gaining traction across the country, with many assets planned to be implemented across large reservoirs in hydro and thermal power plants as well as other waterbodies.

Auctions are also being conducted now in this space to allocate projects at competitive prices. For instance, in May 2022, winners of Rewa Ultra Mega Solar Limit­ed’s (RUMSL) auction for the first phase of a 600 MW floating solar park in the Om­ka­reshwar reservoir in Madhya Pradesh were declared. Amp Energy, NHDC and SJVN were all awarded 100 MW each at the quoted tariffs of Rs 3.21 per kWh, Rs 3.22 per kWh and Rs 3.26 per kWh res­pectively. Then in October 2022, SJVN won the Maharashtra State Power Gene­ra­tion Company’s auction to build a 105 MW floating solar project at the Erai Dam Solar Park in Maharashtra’s Chandrapur district at a tariff of Rs 3.93 per kWh.

More recently, in November 2022, Phase II of RUMSL’s auction was conducted for the floating solar park at the Omkare­sh­war reservoir in Madhya Pradesh. NTPC Renewable Energy won a capacity of 90 MW at Rs 3.69 per kWh, while SJVN Gr­een Energy and Hinduja Renewables won 83 MW and 80 MW respectively, by quoting a tariff of Rs 3.70 per kWh each. Furth­er, recently Assam Power Distribution Company Limited (APDCL) announ­ced a tender to procure energy from 100 MW of grid-connected floating solar projects that will be constructed on various waterbodies across the state and operated for 25 years. In another big announcement, SJVN Green Energy signed an MoU with APDCL to develop 1 GW of floating solar projects in Assam.

Required policy focus on open access

Power procurement through open access arrangement, although permitted, has historically been very challenging. Open ac­cess procurement of solar power is prefe­r­red by energy-intensive commercial and industrial (C&I) consumers to reduce their energy bills through cheaper and greener solar power. However, discoms often do not want to let go of these high-revenue C&I consumers. Thus, open access projects often face bureaucratic delays or lengthy permits while transmission, whee­ling and various surcharges make them un­viable in many states. Hence, while captive and group captive arrangements continue to grow, open access remains constrained by various roadblocks and the developer community has long been waiting for a policy move to enable streamlined uptake of open access projects.

This came in the form of the much-awaited Green Open Access Rules, 2022 that were notified by the government in June 2022 for promoting generation, purchase and consumption of green energy throu­gh open access. The notified rules enable simplified procedure for open access to green power, which will help in faster ap­proval of green open access, uniform ba­nking, voluntary purchase of renewable power by C&I consumers, applicability of op­en access charges, etc. Further, the limit of open access transaction has been re­duced from 1 MW to 100 kW for green energy. Grid Controller of India Limited (for­merly Power System Operation Coo­pe­­ra­tion Limited) has been appointed as the central nodal agency for setting up and operating a single-window clearance system for green energy open access.

To further fast-track renewable power op­en access projects, the Green Energy Op­en Access portal was launched in Novem­ber 2022. Any consumer with a connected load of 100 kW or above is eligible for renewable energy through open access from any renewable energy generating plant set up by self or by any developer. The open access must be granted within 15 days. The application for open access can be made on the portal.

With utility-scale solar power projects often facing issues of land and transmission, delayed PPAs as well as unpaid dues from discoms, these open access projects can significantly help in increasing solar power deployment and reaching the country’s renewable power goals. The C&I segment remains a major market with significant potential and such policy steps are a welcome development for not just the solar industry but also consumers wanting to switch to green power.

Promoting uptake of residential solar

While the C&I solar segment is gaining traction, owing to attractive cost economics and opex-based business models, residential rooftop solar remains largely untapped due to lack of awareness, perceived cost concerns, complicated application procedures and subsidy disbursement issues. However, there is a vast potential for conversion to solar power in this space. To enable the ease of rooftop solar uptake in the residential segment, the prime minister inaugurated the National Portal for Rooftop Solar in July 2022. This portal will enable online tracking of the installation process of rooftop solar plants, starting from registration of applications to subsidy release in residential consumers’ bank accounts after the installation and inspection of the plant. With the launch of this portal, which was first proposed by the government in early 2022, consumers will have the choice to select any vendor registered with the local distribution company, solar modules of quality and efficiency, solar inverter and other balance of plant. The process of registration of vendors with the discom is also simplified and vendors can provide their information and rates on the portal for consumers to reach them.

A major boost to the residential solar segment came in October 2022, when the Mi­nistry of New and Renewable Energy (MNRE) notified the extension of Phase II of the grid-connected rooftop solar progr­am­me till March 31, 2026. Further, the MNRE also notified clarification on the applicability of central financial assistance (CFA) av­ail­able under this programme for roof­top solar systems installed under a virtual net metering (VNM) arrangement. As per the notification, CFA will be provided for installation of rooftop solar plants in the residential sector by individual house­hol­ds or by group housing societies or residents welfare associations. In addition, CFA is applicable for projects under the VNM arrangement, wherein a group of consumers of a particular discom install a solar plant within the area of the same company and avail benefits of net metering against the solar power fed into the grid from that solar plant.

Domestic manufacturing set to soar

Historically, Indian solar power dep­loyments have majorly relied on imports from China and other countries. To reduce these imports, the government has taken a host of policy initiatives. A basic customs duty of 25 per cent and 40 per cent on solar cell and module imports respectively, applicable from April 2022 onwards, has been imposed. Further, in a recent move, the central government has excluded solar power projects from the list of goods that can avail a concessional 7.5 per cent import duty under the project imports scheme, further restricting impor­ts. In addition, the MNRE has enlisted eligible models and manufacturers of solar modules complying with BIS standards in the Approved List of Models and Manu­facturers (ALMM). Only the models and manufacturers on this list are eligible for government projects, government-assisted projects, projects under government sc­hemes and programmes, open acc­e­ss/net metering projects, and projects set up for the electricity sale to the government. As anticipated, the ALMM majo­rly comprises domestic manufacturers and their products.

While the focus of the above policies has been on reducing imports, the production-linked incentive (PLI) scheme focuses on scaling up the country’s domestic manufacturing capabilities. With Tranche I of the PLI scheme successfully allocated, the union cabinet approved the PLI scheme (Tranche II) on the “National Programme on High Efficiency Solar PV Modules” in September 2022. The programme has a budget of Rs 195 billion, with an objective of achieving GW manufacturing capacity for high efficiency solar PV modules. With the implementation of this scheme, it is expected that about 65,000 MW manufacturing capacity will be operated annually, including fully and partially integrated solar PV modules. Soon after, SECI invited bids from solar manufacturers to set up GW-scale manufacturing facilities for high efficiency solar modules in India under Phase II of the PLI scheme.

All these steps taken by the government have had a positive impact on the domestic manufacturing industry. Encouraged by these policy developments, various es­t­ablished and new players have announ­ced their plans to set up large solar manufacturing facilities. For instance, in June 2022, ReNew Power announced that it will increase its module manufacturing capa­city from the initially anticipated 4 GW to 6 GW. Then, in July 2022, Tata Power signed an MoU with the Tamil Nadu government, under which the former would invest around Rs 30 billion for developing a 4 GW solar cell and solar module manufacturing unit in the state. Further, in August 2022, Vikram Solar received approval of the Securities and Exchange Board of India to raise funds through an initial public offering, which will be used to establish an integrated solar cell and solar module manufacturing facility with an annual production capacity of 2,000 MW. Similarly, in October 2022, Waaree Energies raised Rs 10 billion in primary funding from a variety of investors to finance the company’s plans to expand its module manufacturing capabilities from 2 GW to 9 GW. Another solar manufacturer, Goldi Solar plans to invest Rs 50 billion by the year 2025 to expand its module manufacturing capacity to 6 GW.

Outlook

Overall, the solar power segment is witnessing a period of exciting developments across all its subsegments. While massive auctions and project announcements continue to create a strong solar project pipeline for the near future in both utility-scale and floating solar segments, the open access and residential solar segments have received a promising policy boost. Meanwhile, domestic manufacturing is expected to gain massive traction, enabled by the government impetus and private sector interest.

Net, net, the solar segment is poised to continue to shine in the coming years as India moves towards achieving its renewable energy targets.

 

By Khushboo Goyal