Indian solar market: 2015 year in review and key issues ahead

2015 was the first year in which the announcement of the 100GW target by 2022 started having an impact. While this announcement was made in 2014, the target was only formally passed by the cabinet in June last year.  As a first step towards achieving this target, close to 7GW of state and central policy projects were allocated just in 2015. Of this 7GW, a capacity of 1.2GW was allocated under National Solar Mission (NSM), while 5.9GW was allocated by states such as Telangana and Tamil Nadu who tendered 2GW each.

In terms of annual installations, the solar market in India almost doubled to 2GW in 2015 as compared to 0.8GW in 2014. In 2015, the southern states of Tamil Nadu, Telangana and Andhra Pradesh emerged as the fastest growing sub-markets, removing the western states of Gujarat and Rajasthan from their mantle.

Another important trend emerging is the sub INR 5/kWh tariffs, which is the new normal for solar in 2015. In the first two rounds of NSM phase II bids in Nov-Dec 2015, projects were won at INR 4.63/kWh. It will be interesting to see how tariffs will evolve in 2016 and whether project developers can get sufficient returns with levels between INR 4.60-5.00/kWh.

A similar pace of activity is also expected in 2016, however, there are hurdles that will rise with increasing solar capacities in India.

Some of the key issues are:

Incompetent grid and transmission infrastructure

In 2016, it is expected that another 4.8GW of new capacity will be added. However, Indian grids and transmission infrastructure is incompetent to absorb such bulk solar capacities. Furthermore, 80% of this new capacity will be added by southern states (Tamil Nadu, Andhra Pradesh, Telangana and Karnataka) where grid curtailment is already very high, reaching up to 15% in select locations.

It is also important to note that in other developed countries like Germany, which meets almost 7.5% of its power from solar in a year, there is a robust grid infrastructure and its gas based generation assets help in balancing the grid. India, on the other hand, does not have a robust grid and also has a very limited ability to balance it with other continuous sources of power generation. Clearly India’s ambitious solar plan would require upgrades of transmission networks at a massive scale.

Project delays

Another important concern is the rising number of project delays in the solar sector. Out of a total 1,485MW of capacity allotted under state tenders from October 2011 till September 2014 (whose expected commissioning time is by December 2015), nearly 50% (680 MW) has been delayed or partially lost for various reasons. Out of this 680MW, it is expected that almost 10% of the projects are completely stalled. Clearly 50% is a big number and if this trend continues then the government will surely fall short of its targets. 

Project financing

Banks in India are not actively supporting solar PV projects, and the interest rates charged by them are also very high because they already have a high exposure to power sector debt, which is underperforming. So it is still not clear how these winning bids at INR 4.63/kWh will be financed. If it will be mainly from private investors then what about the IRR expectation from such projects? It will be interesting to see how tariffs will evolve and whether project developers can get sufficient returns with levels between INR 4.60-5.00/kWh.

 

OriginalPost: Jyoti Gulia

India agrees to modify solar programme to allay US concerns

India has agreed to modify its solar power programme and sent a proposal to the US in a bid to strike a bilateral deal ahead of the World Trade Organization’s (WTO) final ruling on their dispute on Friday. India lost the preliminary case at the WTO in August last year.

According to the proposal worked out jointly by the commerce ministry and the ministry of new and renewable energy, India will now use the domestic content requirement for buying solar panels for its own consumption—such as by the railways and defence—and will not sell the power generated from such subsidized panels for commercial use. “We hope the US will accept the proposal and withdraw the case from the WTO. This is also in the interest of the US as China has taken over the solar panel production and the US is no longer a large player in this business,” a commerce ministry official said on condition of anonymity.

In February 2013, the US requested consultations with India concerning certain measures relating to domestic content requirements under the Jawaharlal Nehru National Solar Mission (NSM) for solar cells and solar modules. In May 2014, the WTO set up a dispute settlement panel to examine the complaint. China accounted for 66% of Indian imports of solar power panels during April-June of 2015, power minister Piyush Goyal informed the Lok Sabha in December. More than 29 million of the 44 million imported solar power panels came from China during the period. Other countries on which India depends heavily for the import of solar panels include Taiwan and Malaysia.

In August last year, Goyal informed the Lok Sabha that the total annual installed domestic manufacturing capacity of solar cells and modules is 1,328MW and 2,523MW, respectively.India has an ambitious solar power programme under the NSM, which is aimed at adding 100,000MW of solar power by 2022. However, the local content requirement is only for 5,000MW each for rooftop and land-based projects where the government provides a subsidy.The government has offered financial support of up to Rs.1 crore per MW to the implementing agency for setting up large solar capacities by placing orders with domestic manufacturers.

Sambitosh Mohapatra, who oversees the power and utilities practice at consulting firm PricewaterhouseCoopers, said that with renewed interest in manufacturing solar panels in India by companies such as contract manufacturing giant Foxconn and Chinese solar-panel maker Hareon Solar Technology Co., India will be able deal with any adverse judgement by the WTO.

“The government’s M-SIPS scheme through which it provides capital and revenue subsidy is attracting solar panel producers to manufacture in India. Even most government tenders do not have a local content requirement. The context for the WTO judgement case has changed a lot since it was filed in 2013,” he added, M-SIP stands for modified special incentive package scheme, which was extended for another five years last year.

WTO members are not supposed to insist on national content requirements that discriminate against foreign products. Governments are also required to provide sellers “national” treatment, under which imports must be treated on a par with domestically manufactured products.

In a confidential report issued to the US and India in August, a three-member dispute settlement panel headed by former New Zealand envoy David Walker ruled that New Delhi had violated global trade rules by imposing local content requirements for solar cells and solar modules under the NSM, Mint reported on 27 August 2015.

The panel also struck down the Indian government’s incentive policies, especially subsidies provided for domestic solar companies for manufacturing solar cells and solar modules.

After the US dragged India to the WTO in 2013, it blocked the first request by the US to set up a dispute settlement panel after negotiations failed between the two countries.

Under WTO rules, the trade body was obliged to set up the panel after the US made a request for the second time.

The US charged India with violating provisions in what are called the trade-related investment measures (TRIMS) by imposing local content requirements that discriminate against foreign products.

Washington claimed that the Indian government’s measures to impose national content provisions and deny “national” treatment have impaired benefits accruing to US companies. Environmental groups criticized the preliminary ruling, saying it threatens the clean energy economy and undermines action to tackle climate change.

“Today, we have more evidence of how free trade rules threaten the clean energy economy and undermine action to tackle the climate crisis,” said Ilana Solomon, director of Sierra Club’s Responsible Trade Program, on the preliminary ruling when it was issued in August last year.

India’s national solar programme, said Solomon, “has driven dramatic growth of India’s solar capacity that will help reduce its reliance on dirty coal and spur the development of new clear energy jobs”.

“The US should be applauding India’s efforts to scale up solar energy—not turning to the WTO to strike the programme down,” she added.

OriginalPost: LiveMINT

Modi, Hollande dedicate International Solar Alliance to the world

Calling it a landmark initiative to save the world from global warming, and to push solar energy as a viable alternative across the world, Prime Minister Narendra Modi and French President Francois Hollande jointly inaugurated the Interim Secretariat of the International Solar Alliance (ISA) in Gurgaon on Monday. They also laid the foundation stone of the ISA secretariat, which will be hosted by India at the National Institute of Solar Energy (NISE) campus in Gurgaon.

NISE, Gurgaon will provide 5 acres of land for the construction of the ISA secretariat, and during the interim period three floors of the Surya Kiran building at the campus will be allotted to run the alliance. The Alliance comprises more than 100 solar-resource-rich countries working together with the objective of globally increasing the use of solar energy. Both PM Modi , and the French president Hollande travelled in Delhi Metro till Arjangarh Metro station, and reached NISE by road which is 11 km from the station. A DMRC spokesperson said that a special train was arranged for the two heads of the state to travel to Gurgaon, and scheduled in such a manner that movement of other trains was not disturbed.

In his address, Prime Minister Narendra Modi said that that it launch of Solar alliance in Haryana was a historic occasion as it was happening in the land which has given the message of Geeta. “The people of India are dedicated to life, and respect all forms of energy particularly the Sun. This alliance which aims to harness solar energy is part of our belief system, and would be taken to logical conclusion”, he assured. The PM described the solar alliance as one of the two landmark initiatives, apart from innovation, that emerged during the two-week Climate Change Conference held in Paris last year, in which key roles were played by India and France. “We realised that if oil producing countries can unite, then 122 nations in the world who get more than 300 days of Sun can also unite, and the idea of solar alliance was born out of this thought. I assure you that this idea will impact generations as world would generate more green power”, said Modi. He appreciated the role played by French President in the formation of Alliance, and brining all nations together.

The French Development Agency will allocate 300 million Euros to developing solar energy over the next five years in order to finance the initial projects to be undertaken by the International Solar Alliance (ISA). Speaking on the occasion, the President of France, Francois Hollande, described the Alliance as India’s gift to the world for combating climate change. He said that the Prime Minister had approached him last year with the idea of an international coalition aiming at development of solar energy, particularly in countries with the greatest potential for it, and making this energy accessible to all. Following this, he and Narendra Modi had together launched the International Solar Alliance at the opening of the Paris Climate Conference on November 30, 2015.

Hollande said that the Alliance was faced with the challenge of raising global investment to the tune of 1,200 billion Euros required to develop solar energy by 2030.

The French President said that several French-Indian projects would be launched in order to contribute to the success of the Alliance, and a number of agreements have been signed for this purpose. Haryana Governor Kaptan Singh Solanki, Haryana chief minister Manohar Lal Khattar, Union minister of state for power, coal and renewable energy, Piyush Goyal were present on the occasion along with several dignitaries.

Original News: HT