Dampener for Modi govt’s ambitious project: India to miss solar capacity addition target for 2022

By: | Updated: April 23, 2016 9:11 AM

The solar power industry has pegged the solar capacity addition forecast at only 57 gigawatt (GW) by 2022, which is substantially lower than the government's ambitious target of 100 GW, says a survey by consultancy firm Bridge To India.

The solar power industry has pegged the solar capacity addition forecast at only 57 gigawatt (GW) by 2022, which is substantially lower than the government's ambitious target of 100 GW, says a survey by consultancy firm Bridge To India.The solar power industry has pegged the solar capacity addition forecast at only 57 gigawatt (GW) by 2022, which is substantially lower than the government’s ambitious target of 100 GW, says a survey by consultancy firm Bridge To India.

The solar power industry has pegged the solar capacity addition forecast at only 57 gigawatt (GW) by 2022, which is substantially lower than the government’s ambitious target of 100 GW, says a survey by consultancy firm Bridge To India.

The survey, which was released on Friday, was conducted among the chief executive officers (CEOs) of various solar firms including developers, engineering procurement and construction (EPC) companies and equipment manufacturers.

A whopping 56% of the respondents thought that solar capacity addition for the country would be restricted to below 60 GW by 2022. Nearly one-third of the respondents cited transmission capability and grid stability as the major concern for solar capacity addition. This was followed over one-fifth of the survey participants choosing unavailability of feed-in tariff (FIT) for the sector as a hurdle in expansion. In FIT, the regulators fix tariff for a stipulated period for all developers, which ensures a stable internal rate of return and viability of the project as opposed to bidding mechanism that tends to drive down the tariff and thus the return on projects.

“The government has decided to go with the auction route for solar capacity addition which has been successful so far. However, unless the auction tariffs start climbing up in future, we don’t see the government opting for FIT,” Vinay Rustagi, managing director, Bridge To India, said.

The demand for FIT is a reflection of very thin margins that the projects with R5 per unit tariff. “Just over one-fifth of of participants believe that post-tax project IRR at current tariffs is less than 12% and another 42% believe the internal rate of return to be in the 12-14% range, which is barely enough to cover risk adjusted cost of capital,” the survey said.

The outlook for rooftop solar installation was particularly subdued with 48% of the survey participants pegging it between 5-10 GW. This compares unfavourably with government’s target of 40 GW by 2022. “This should be an alarm call particularly for the government and all policy makers. Most of government focus so far has been on large policy driven, ground based projects whereas the biggest benefit of solar power lies in distributed generation and market driven solutions,” the survey said.

The prominent companies that took part in the survey includes Aditya Birla Group, US-based First Solar, Finnish utility Fortum and Hero Futures Energies. The other companies in the EPC and equipment manufacturers domain included L&T, Mahindra Susten, Vikram Solar, First Solar and Moser Baer Solar.

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