Renewable Energy: Some wind in solar auction sails

By: |
Published: December 9, 2019 12:37:57 PM

While a host of factors have contributed to the fall in sentiment from the highs of FY17 and FY18, the prospects for rooftop solar are looking up

Renewable Energy, solar auction, wind power, ICRA, RE sector, Solar installations, Azure Power, solar PV projects, Mercom Capital Group The sentiment hasn’t been helped by Andhra Pradesh recently revisiting PPAs to lower RE tariffs, with the state government writing to solar companies to reduce tariffs.

Notwithstanding investor sentiment taking a hit after the ratings downgrade by ICRA for 1.9 GW of installed capacity in the solar and wind power portfolio, the Solar Energy Corporation of India (SECI) has scaled up the auction process for renewable energy (RE) projects, with 1.3 GW of solar projects being auctioned in October, an increase of 36% over the preceding month. The overall solar capacity addition of 2,170 MW in the third quarter of the ongoing fiscal has registered a rise of 36% over the 1,510-MW capacity added in the second quarter.

However, tendering for RE projects continues to be slow. According to ICRA, the overall tendering for solar PV projects aggregated to a mere 2.9 GW in the first six months of the fiscal, a decline of 28% y-o-y, with many offers remaining under-subscribed.

RE capacity addition in the first seven months of the fiscal saw a rise, standing at 5.8 GW, compared to 3.0 GW in FY19. Solar installations of 3.5 GW in 7MFY20 represented a 52% jump over the 2.3 GW added in 7MFY19. The government had targetted RE capacity addition of more than 15 GW in FY20, of which 69% was expected to accrue from utility scale projects.

The fall in sentiment in the RE sector from the highs of FY17 and FY18 – which saw capacity addition of 11.3 GW and 11.8 GW, respectively – is reflected in the poor response of developers to RE projects, says Sudhir Kandavasal, co-founder of Distributed Energy, an RE aggregator that focusses on rooftop solar projects. Although there is no let-up in demand for renewables, investors are not putting money into utility scale projects owing to the significant drop in tariffs, he holds.

Outlining another factor that has contributed to the dull sentiment, Girishkumar Kadam, Sector Head and Vice President of Corporate Ratings, ICRA highlights that dues of Rs 9,700 crore are yet to be paid to RE players, with 67% of this amount to be paid by distribution utilities in Andhra Pradesh, Telangana and Tamil Nadu. Although there have been favourable orders by the Central Electricity Regulatory Authority and the state electricity regulatory authorities to pass-through GST and Safeguard Duty under the change in law provision in power purchase agreements (PPAs), independent power producers (IPPs) are having to meet their obligations through their working capital and debt service reserve account, Kadam says.

The sentiment hasn’t been helped by Andhra Pradesh recently revisiting PPAs to lower RE tariffs, with the state government writing to solar companies to reduce tariffs. Sources say Andhra Pradesh’s decision has led to a situation where projects are not getting commissioned despite being completely ready.

Highlighting the demand for solar power in industrialised states like Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh and Gujarat, Mathew Mazhuvanchery, CEO of Distributed Energy, says that even as IPPs are facing challenges in utility scale solar projects, the prospects for rooftop solar have looked up. With the Centre having announced customs and excise duty benefits to boost the solar rooftop sub-sector, its share in the solar portfolio is likely to grow from the present 17% to 25% in the next couple of years, Kandavasal says.

According to Raj Prabhu, CEO of Mercom Capital Group, the India Solar Market Board has a completely new set of market leaders like Azure Power, TMEIC (Toshiba Mitsubishi-Electric Industrial Systems Corporation), Trina Solar, Ganges Internationals and Scorpius Trackers who are focussing on rooftops and inverter supplies, given the enormous potential for this market to grow, although tariffs in the range of Rs 4.80-6 for residential solar power, as against sub Rs 3 levels for utility projects, remain a concern.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1DoT brings issue of cutting licence fee for telecom operators back on table — what could change
2After an exciting 2019, it may be a happy 2020 for Netflix, Hotstar and Amazon Prime
3IBM’s cloud business is much more expansive than those of its competitors