260 GW Renewable energy sector: Needs symmetry to maintain momentum

India is said to touch renewable energy capacity of 260 GW by 2024, the announcement has left the industry discussing their hopes and how to tackle the current concerns plaguing the industry. Only post which, India can reach the latest target.

As the country sees rapid growth in renewable capacity backed by government orders, private equity and pension fund investments, the latest announcement that India expects to achieve a renewable energy capacity target of 260 gigawatt (GW) by 2024 by a government official has left the industry talking.

Touching 260 GW by 2024
Over the last few years, India has been attempting to expand its renewable energy capacities, by setting up more and more solar projects in the country. Sunil Rathi, Director Sales & Marketing, Waaree Energies Ltd welcomes the government’s new and ambitious target of achieving 260 GW capacity. However, the domestic solar manufacturing industry is yet to receive similar support from the government, which is vital to encourage solar adoption in the country, he says.

India’s renewable power capacity soared by almost 150 per cent in the last five years to reach 77.6 GW, while the government set a target of 175 GW by 2022. By formulating a policy to build a 30 GW local capacity for manufacturing solar cells and modules by 2024, India might surpass the 175 GW target and achieve 225 GW of capacity by 2022, says Neha Maurya, Manager Business Analyst, Bharat Solar Traders and Suppliers.

A capacity target of 260 GW seems to be aiming low. according to Shashikiran N K, Managing Director, Arushi Green Energy (India) Pvt. Ltd. He says, “If the problems of constrained bank credit and regulatory hurdles are removed, there will truly be energy security to its industry, commerce and citizens. There is a very little realisation that distributed power generation such as solar rooftop will greatly improve the financial health of government generating and distribution companies.”

Safeguard duty: It’s current implications
Solar developers, currently, import modules from countries such as China and Malaysia, and are exempted from safeguard duties if the project was commissioned before July 30, 2018. When safeguard duties were imposed, it was to provide respite to local manufacturers. However, developers still lean towards import of modules, owing to significantly cheaper costs.

Rathi says, “The effect of even the interim relief that safeguard duty would have provided is diminished due to the easy pass-through that international modules enjoy in the country. Despite being at par with their international counterparts, regarding quality standards, Indian manufacturers are currently unable to realise their growth potential, due to feeble policy implementation.”

Indian solar manufacturing segment should leverage the international market to attain economies of scale is a critical factor. Additionally, the anti-dumping duties imposed on imported solar cells must also be expanded to cover components such as glass and EVA sheets, in order to prevent high manufacturing costs. Thus, the need of the hour is favourable for export incentives from the government, as well as appropriate import duties to support Indian manufacturers, and motivate them to expand internationally, as well, adds Rathi.

Not having sustainable policies
The government must be serious about capacity addition and not be satisfied by only bringing out tenders that are so complicated to fill in by the developers with too many financial constraints, according to J Krishna Sankar, Chairman and Managing Director, Eastern Powers and Systems Pvt Ltd. Saving 10 paise is not a big deal but capacity addition is. “We should scrap the process of tendering and go back to fixed tariffs approved by the regulators,” he adds.

The shift to renewable power generation is already underway. The government needs to facilitate this transition by creating an ecosystem for private sector investors to come in. Imaan Javan, Director, Suntuity REI says, “Solar is not affordable for everyone. Tax credits should be introduced so that we are not left with policies that can only help a certain group of people.”Sectors such as battery energy storage, e-vehicles will also be benefited as this government was the one to introduce these concepts in India.

According to Maurya, many countries have set themselves targets for renewable energy and a wide range of policy instruments are being deployed to help overcome economic, technical and institutional barriers. A growing number of countries are using competitive auctions to achieve cost-effective deployment of renewables.

Solar rooftop, the most untapped source
India, though, does have an ambitious plan for solar rooftop (SRT), a target of 40 gigawatts (GW) capacity by 2022. But so far, the achievement has fallen short of the goal. nly 2,158 megawatt (MW) of SRT systems had been installed in the country till December 2018.

It is undoubtedly a concern that, in India, solar rooftop is largely untapped source. The primary reason is of availability of solar financing banks in India. Both state owned and private sector have not considered solar PV assets as a primary security and look for collateral security.

Shashikiran says, “Industrial units are not able to convince bankers on the economic reasons for investment in solar and lack of collateral security with developers has hindered growth of solar rooftop. The solar developer, on the other hand, while ready to meet the 30 per cent equity contribution, are unable to source bank finance; even a bank such as SBI which handles World Aided Solar Fund for rooftop has stringent conditions for collateral security.”

Most developed economies started their solar programs by targeting household rooftops; as a result, they now have a sizable share of installations in the residential rooftop segment. Maurya says, “China and India have used large-scale solar installations in an effort to quickly achieve scale and simultaneously push down costs. In the case of India, this focus on large utility-scale solar seems to have become an unintended obstruction in the development of the rooftop segment.”

Solar rooftop power is cheaper than grid-supplied electricity. These consumers have the financial resources to make the necessary investments, which are sizable, to install SRT systems.Moreover, they also have access to the Renewable Energy Service Company (RESCO) model (in which developers install the system on the consumers’ premises and sign a long-term contract to sell them electricity), under which they do not need to make any investments.The dominance of ‘large-scale’ rooftop installations by commercial industrial, institutional and government/PSU segments has meant that attention to the residential solar rooftop segment has lagged behind.
Rathi attributes the major reason for this as the high cost and dearth of suitable financing options. Affordability and lack of awareness among the consumers stands as a major roadblock.

However, as per reports, in recent years, the government has taken steps to improve the availability of loans for SRT projects. The Reserve Bank of India has identified solar rooftop as a priority sector for lending. Eight public sector banks have included SRT systems under their housing or housing improvement loans.Mauryasays, “Multilateral banks are providing concessional loans against sovereign guarantee to public sector banks to support subsidised lending to the segment. Despite this, collective lending from them until 2017 for solar rooftop financing was only to the tune of $1.4 billion, just 3.5 per cent of the total required funding.”

In a country like India, sunlight is a plentiful resource. A lot of places in India get solar radiation for more than 300 days in a year. So, it is indeed a travesty that we have not tapped solar power anywhere close to the extent we should have. Maxson Lewis, MD, Magenta Powerstates the primarily reasons for this as the initial cost of solar. However, the cost of rooftop solar installations has gone down significantly in the last couple of years to such an extent that one can expect breakeven in 3-4 years. This means that they get more than 20 years of free electricity!

The other reason, Lewis says as to why consumers still have second thoughts about investing in a solar plant is the question, “Does it really work like they say?”. Here,Lewis says, “It is the job of the solar installer to educate the consumer and to share case studies to make a compelling case.”

However, Shankar has a really positive outlook toward rooftop gaining popularity. He says, “I think that is not really true. Rooftops are gaining traction; to give a push open access, they should be given wider role in the capacity addition.”Roofs for the installation of solar are not a good solution due to various uneconomical reasons of the roof’s angle, shading, roof structural designs, difficulty in approach for cleaning and the economic viability of installing for single units with low capacity of off take.

According to Javan, “Our age old roofs are not designed for solar installation.” Initially without rooftop policies in place, solar discouraged many private homeowners, owing to the high investments. But recently, people are opting to switch to clean energy. In new constructions, appropriate considerations are taken to incorporate rooftop solar. India is growing at a hectic pace in this sector, with the government taking great initiatives to bring rooftop solar- a helping hand. We are heading towards the growth but the real growth will be seen when there will be viable financing, and policies, adds Javan.

The effect of under-performing DISCOMs
According to Shankar, this is a golden opportunity for DISCOMs to clean up the balance sheets by shutting down low PLF Coal plants and with capacity addition from solar and solar plus storage. He says, “I amof the opinion that “the bad health of the DISCOMS” is a situation with no remedy. It requires a surgical strike and all the DISCOMS should be taken under Central Governmental control freeing them of any state interference.

All Central Government entities NTPC, NHPC, PFC, REC and many more are all “AAA” rated and invariably all DISCOMS are of “junk” standing or if there is grading that is even below that in investment parlance we can apply that too. The State Governments have too much of vested interest to run the DISCOMS with financially sound business practices.

The effect of even the interim relief that safeguard duty would have provided is diminished due to the easy pass-through that international modules enjoy in the country.
Sunil Rathi, Director Sales & Marketing, Waaree Energies Ltd

A growing number of countries are using competitive auctions to achieve cost-effective deployment of renewables.
Neha Maurya, Manager Business Analyst, Bharat Solar Traders and Suppliers

If the problems of constrained bank credit and regulatory hurdles are removed, there will truly be energy security to its industry, commerce and citizens.
Shashikiran N K, Managing Director, Arushi Green Energy (India) Pvt. Ltd.

We should scrap the process of tendering and go back to fixed tariffs approved by the regulators.
J Krishna Sankar, Chairman and Managing Director, Eastern Powers and Systems Pvt Ltd.

Tax credits should be introduced so that we are not left with policies that can only help a certain group of people.
Imaan Javan, Director, Suntuity REI

The cost of rooftop solar installations has gone down significantly in the last couple of years to such an extent that one can expect breakeven in 3-4 years.
Maxson Lewis, MD, Magenta Power