India Solar Handbook 2016

India is set to become the fourth largest solar market in the world with expected capacity addition of 6 GW in 2016

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BRIDGE TO INDIA is the leading consultancy and knowledge services provider in the Indian renewable market. We work with all industry stakeholders including technology companies and contractors, project developers and investors, government agencies and developmental institutions. We have a unique vantage point on the market dynamics, combining the 360 degree view from our market intelligence capability with the in-depth analysis performed as part of our consulting and transaction advisory businesses. Our goal is to enable innovative cleantech solutions in India.

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Solar Energy Corporation of India (SECI) has released a tender to allocate 30% capital subsidy for 500 MW of residential and institutional rooftop solar projects across India (refer). This is by far the largest rooftop solar subsidy tender in the country till date. According to BRIDGE TO INDIA estimates, residential and institutional segments accounted for rooftop solar capacity addition of around 60 MW in the last year. The SECI tender envisages the entire 500 MW to be commissioned within 12 months of sanction essentially meaning that these market segments will need to grow by more than 8x, making the tender size extremely ambitious. The 500 MW tender capacity is split into 300 MW capacity for EPC installers and 200 MW for project developers. Further, the tender requires state wise bids where all winning bidders in a state would need to match the lowest bid (L1) for that state.

  • The tender will serve to boost rooftop solar demand but design of the tender is very restrictive resulting in likely undersubscription
  • Measures to promote aggressive bidding may be counterproductive particularly because of the very tight 12-month commissioning deadline
  • It is not very clear why the residential segment has been effectively restricted to only 50 MW

FULL STORY

BRIDGE TO INDIA has just released results from its first ever survey of the most influential private sector decision makers in the industry as part of the Indian Solar Handbook 2016 report (download your free copy here). Most of the 27 participating CEOs said that they expect their businesses to grow by an average of 3-5x by 2020 with 37% of them believing that their business will grow by more than 10x by 2020. This optimism is based on the expectation that the market will also grow at an impressive compounded annual growth rate (CAGR) of 45% per annum until 2022.

  • The industry is most concerned about transmission connectivity/ grid failure, debt financing and INR depreciation risk
  • The industry has also rated central government’s policies for the sector as ‘Good/ Very Good’
  • Most CEOs are positive about the prospects of domestic manufacturing

FULL STORY

As part of the memorandum of understanding signed under the UDAY scheme, the Ministry of Power has allowed a roll forward of the Renewable Purchase Obligation (RPO) for Uttar Pradesh by seven years (refer). Meanwhile, state power distribution companies in Odisha have got a stay on enforcement of RPO from the state High Court. These incidents set bad precedents for the country’s solar targets, which are conceptually based on compliance with the RPO mechanism. On the other hand, states such as Telangana, Andhra Pradesh, Karnataka and Jharkhand are rapidly scaling up their solar programs and going way beyond their RPO targets. In fact, there is more solar power capacity planned in Telangana and Jharkhand in the next two years than their respective 2022 targets set by the Ministry of New and Renewable Energy (MNRE).

  • The RPO mechanism has by and large failed because of poor regulatory framework and non-compliance on the pretext of poor financial health of distribution companies
  • Some states are increasingly adopting solar power because of its economic advantages combined with environmental and political credentials
  • Going forward, we expect the RPO mechanism to become more of a measuring stick than an underlying driver for new capacity addition in the country

FULL STORY

India received 263 GW of private sector renewable investment commitments at Re-Invest last year. New developers continue to enter the market on an on-going basis resulting in over-subscription for most bids and dramatic falls in tariffs. On the face of it, with so much interest in the market, shortage of equity investors should not be an issue. But many developers seem to be bidding for projects first and planning to raise capital later. The question is: will they all be able to raise capital at the current tariff levels and in time to meet the stringent deadlines?

  • The market is in uncharted territory as none of the sub-INR 5.00/kWh (US 7.50 cents/kWh) projects have closed financing yet
  • Developers are hoping for a reduction in equipment cost but there is a possibility of prices firming up at least in the 6-9 month horizon; implementation of GST also poses a risk to these projects
  • Over the next one year, we believe that a significant number of projects are likely to get delayed or cancelled and tariffs may either stabilize or even rise marginally from current levels

FULL STORY

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