2018-08-21
India may not reach 100GW solar power target by 2022: Crisil report

India will not be able to achieve its ambitious target of generating 100GW solar power by 2022, ratings agency Crisil said. In a report, Crisil’s industry research arm said that in the best-case scenario, the country will touch 78-80 GW, against the current capacity of 21.65 GW.

Crisil expects an additional 56-58GW of solar capacity addition between fiscals 2019 and 2023. While this is a vast improvement from the 20GW added during 2014-18, it still falls short of the National Solar Mission target by a fifth. (See chart) A safeguard duty on solar modules from China and Malaysia, which took effect this month and will continue for two years, is expected to slow capacity addition.

“We are more confident that projects with the Solar Energy Corp. of India (SECI) will be executed faster; their projects are better able to deal with evacuation concerns (i.e. connection to the national grid),” said Rahul Prithiani, director, Crisil Research in an interview.

Individual states have also set aggressive targets under their respective solar policies. While 7.3 GW is under construction, based on already allocated schemes, another 1.7 GW is expected to be tendered and allocated over fiscal 2019 based on upcoming tenders under various state policies as on July, the report shared exclusively with Mint said. “However, state government projects are not as well-funded and they have less access to cheap financing,” Prithiani added.

A key area of concern is the rooftop solar segment. The solar mission’s target for the rooftop segment—using the rooftops of commercial and industrial units to generate their own power and depend less on the grid—is 40 GW by 2022. Crisil expects this figure to be not more than 8 GW by 2023, because the cost of power here is expected to be far higher than from the grid.

“There are execution and counter-party risks to the rooftop segment, and that’s why we’re expecting the big shortfall here,” Prithani said. “Unless the rooftop solar segment is supported with a firm battery market and the legal enforcement of contracts because developers run the risk of the host establishment not honouring a contract when tariffs change, the rooftop market will struggle.”

Industry experts believe that the safeguard duty will raise capital costs by 15-20%, adding 30-40 paise per unit to bid tariffs so developers can maintain the same rates of return on their investments.

India achieved a record low solar power tariff of ₹ 2.44 per unit in May 2017. In July, tariffs again touched ₹ 2.44 per unit in an auction conducted by SECI.

However, uncertainty regarding the duty is making developers wary. Acme Solar, which had quoted the lowest tariff of ₹ 2.44 a unit, has about 2000 MW of projects where construction is either underway or yet to begin. On 7 August, Acme told Mint that it would pull out of these projects if it has to bear the additional burden of the safeguard duty.

States are also seeing tariffs rise. At a July auction by Uttar Pradesh for 1,000MW, the lowest bid came in at ₹ 3.48 a unit. The state cancelled these auctions. SECI also cancelled 950 MW of solar tenders in July, unhappy with the tariffs that developers were bidding.

“The government must be live with the outcome of bid price; it should go ahead with these projects even if tariffs are higher than what they like,” Prithani said. “It’s hard to say which tariff is unreasonable; it’s hard to predict whether module prices will go up or down in the future. If bids are scrapped, you’ll further delay the overall programme.” India is the world’s third-largest energy consumer after the US and China. Its renewable energy programme is ambitious where as it stands now.

Source- Mint