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MNRE’s new 227 GW plan lacks credibility


25 June 2018 | BRIDGE TO INDIA

MNRE’s new 227 GW plan lacks credibility

There have been some bold announcements coming out of MNRE in the last few weeks. It has claimed that India aims to achieve total RE capacity (excluding large hydro) of 227 GW by March 2022. It has also announced that the government plans to launch a single 100 GW solar manufacturing-cum-storage-cum project development tender to accelerate progress in the sector. Other new initiatives recently announced include 5-10 GW of integrated module manufacturing capacity, 10 GW floating solar capacity, 10 GW hybrid wind-solar capacity, 30 GW offshore wind (by 2030) and a USD 20 billion solar pump scheme.

  • The new plan warrants annual RE capacity addition to go up to a mind-boggling 40 GW and is completely detached from reality;
  • Our balanced case forecast for total RE capacity by Mach 2022 is only 125 GW;
  • By announcing such radical schemes, MNRE may be trying to deflect attention from recent problems and shore up confidence in the sector;

India’s total installed RE capacity as of March 31, 2018 was only 69 GW – the new plan therefore warrants annual capacity addition to go up from 10-12 GW in the last few years to a mind-boggling 40 GW. We believe that the new MNRE plans are completely detached from reality. Amongst other things, India simply doesn’t need so much new power. Power demand growth is fairly benign at about 4.5-5.0%, equivalent to incremental demand of about 8-10 GW per annum. There is excess capacity in the country with more than 75 GW of thermal power plants running at load factors between 20-50%. Moreover, NTPC and other state generators continue to add 5-7 GW of new coal-fired capacity every year.

Second, there are huge challenges in availability of land, transmission and even financing for the revised scale of capacity addition. Many tenders are already being delayed and timelines extended for project implementation because of transmission system constraints. The solar park scheme is facing major delays. DISCOM finances also remain stretched despite UDAY scheme.

Our forecast for total RE capacity, taking into account overall power demand-supply situation as well as various supply side constraints, is only 125 GW by March 2022. This forecast is also consistent with the findings of our recent RE CEO survey.

So what explains the new plans? We believe that upcoming state and central government elections and wider macro-economic challenges are leading the government to announce ever ambitious plans. In particular, MNRE has been under persistent pressure over the last year due to a series of issues including tender slowdown, GST, customs duties and safeguard duties. We can only speculate that the new MNRE administration is trying to deflect attention from these problems to shore up confidence and raise optimism in the sector.


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