Notwithstanding Centre’s efforts to maximise output of green energy, several issues are serving as a drag on its prospects
As India scrambles to implement its ambitious renewable energy (RE) plan for 2022, it is widely expected that the
175-GW target would be missed by around 55 GW. This is because notwithstanding the Union government’s attempts over the last five years to maximise the contribution of green energy to overall generation, several issues vital to the sector’s growth remain unresolved.
The figures for FY19 highlight some of these stumbling blocks. While the Centre issued around 58.7 GW of RE tenders and announced results for 24.5 GW capacity, tenders for 17.3 GW got cancelled, including 6.5 GW for which results had been announced. Further, 6.8 GW of tenders for which results were announced in FY19 were under-subscribed by 4.2 GW.
The fiscal saw RE capacity addition fall to 8.6 GW from 11.8 GW in FY18—the figure was 11.3 GW for FY17. As of March 31, India’s RE capacity stood at 77.6 GW, which included 35.3 GW of wind and 28.6 GW of solar capacity.
The fall in capacity addition has been attributed to rising finance costs, tariff caps and cancellation of project tenders.
Factors like poor designing of tenders, low tariff expectations and transmission sector bottlenecks have dulled the private sector’s enthusiasm for projects, as also issues like GST, safeguard duty and mandatory BIS standards. One segment in the renewable sector which has clearly failed to take off is rooftop solar. As against the 40-MW capacity it was estimated to reach by 2022, merely 4-MW capacity has been installed so far.
Vinay Rustagi, MD of Bridge to India tells FE, “The sector faces huge challenges on policy, operational and financial fronts. We need a stable policy regime with advance planning for provision of land and transmission infrastructure. The financial health of discoms is also very important as payment delays pose a huge risk.” Given the current scenario, he expects “about 120 GW of RE capacity by March, 2022.”
Prashant Khankhoje, director, Global Energy, holds that inconsistent policies have partially undone the benefits of generation based incentives, viability gap funding and hybrid policy offered by the government. The failure to work in sync with state governments and discoms has also been a dampener. “There was a major break in capacity addition due to the imposition of GST for solar projects and safeguard duty on import of solar panels,” he says.
However, Sunil Rathi, director, sales and marketing of Waaree Energies thinks issues relating to the safeguard duty and low tariff rates are being sorted, highlighting that tariffs have bottomed out to an extent. “The major issue now is discovery of new prices. If we analyse the latest auctions, the deviation in pricing for L1 (lowest bidder), L2, L3 and L4 is almost nil. This indicates the participation of serious players. I expect the government to get close to the target provided issues relating to infrastructure and funding are resolved,” Rathi says.
As for rooftop solar, the Institute for Energy Economics and Financial Analysis (IEEFA) expects the segment to witness CAGR of 50% over the next three years, achieving capacity of 13 GW by 2022. However, IEEFA has stressed the need for policy certainty, creation of awareness, and financial support from the government if residential and government buildings are to harness the potential of the segment.
On the RE sector’s overall prospects, Khankhoje says, “short-term strategies will not work. Important in this context is the syncing of central and state government plans. If issues like funding, evacuation infrastructure, and grid integration are resolved, we can expect to have close to 120-GW capacity by 2022.”