Interview – India needs to put in place strict technical norms for solar auction

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Solar power panels in Punjab

India needs to put in place strict technical norms in an auction for a solar project to realise its ambitious target concerning the renewable power source, head of a US-based clean energy consulting group said.

Prime Minister Narendra Modi-led government has set an ambitious target to install 100 GW capacity of solar power by 2022. To realise this goal, over 21 GW capacity installations are currently under development.

India is running the largest renewable energy expansion in the world with its government revising upward solar energy target by five times from 20,000 megawatts.

Raj Prabhu - CEO, Mercom Capital Group

Raj Prabhu – CEO, Mercom Capital Group

It is set to install over 4 gigawatts of solar power in 2016 to get the fourth slot in the world’s top nations’ list in the renewable power source after China, the United States and Japan, according to a recent study of Mercom Capital Group.

The study listed top three solar markets of European Union to be the United Kingdom, Germany and France.

The Indian government’s thrust on the capacity expansion can be understood with Modi’s statement – India is graduating from Megawatts to Gigawatts in Renewable Energy production.

Power Minister Piyush Goyal is on record that the target for solar power installation could even be achieved by 2017 as evident from the government’s commitment to achieve the target.

The aggressive drive to realise the target of solar power resulted in unrealistic bids in a recent auction.

In India, funding for solar programmes has been an issue. The policy thrust of paper has not been met with the financial backing required and most of the risk in India has been borne by private companies.

In an interview, Raj Prabhu, Chief Executive Officer, Mercom Capital Group, dwelt on key questions confronting the Indian solar sector’s growth.

Does the auction route for solar projects work well?

Auctions have been a mixed bag ever since India adopted them in lieu of feed-in tariffs. The tariffs are being bid lower and lower due to intense competition and pressure from the government to push the cost of subsidies down. This has made investors skittish as they are not seeing sufficient returns compared to the risk.

What is the sentiment that prevails amongst Indian solar developers?

Developers are finding it difficult to raise funds at low tariff levels as a consequence of aggressive bids. The low tariffs have led many solar project developers to sell portfolios.

What are the grey areas in India’s solar ambition?

Since the inception of the National Solar Mission, the technical qualification needs have been fairly lax. The level of expertise needed to bid for a project is low as long as you can show the financials and make the required deposits.

Are there specific suggestions to improve the auction policy in India to award solar projects?

Technical qualification needs to be more stringent to eliminate unqualified bidders to drive tariffs down as the primary motivation of such developers is not to be long-term players.

Secondly, developers failing to execute projects on time need to be held responsible and there need to be consequences when these companies bid again. There should be a mechanism to weed out non-performing companies if norms for technical bids are in place.

Solar2Lastly, the government agencies themselves need to understand that 5 bids in Telangana are not the same as 5 bids in Karnataka. Solar insulation, land, and labour costs vary state-to-state and city–to-city. So, instead of setting up a general tariff rate for the entire country, state-owned Central Electricity Regulatory Commission (CEAC) needs to benchmark tariffs. This will create a more realistic scenario for auctions.

Why does India lag behind China in the solar endeavour?

There has been a sense of urgency in China that is largely absent in India, where bureaucratic delays had been common until last year when Narendra Modi-led government started to push the solar programme aggressively.

Also, solar installations became a serious issue for China largely because of severe air pollution, which brought protesters on the streets as thousands were dying on account of pollution-related health problems.

In 2010, India installed 12 MW of solar and China Installed 520 MW. Fast-forward to 2015, China installed about 15 GW and India installed 2 GW.

 

 

 

 

 

 

 

 

 

 

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