The financial year just gone by was one that India’s renewable energy industry cannot remember without wrinkling its nose. But the year that has begun promises to be better.
The solar side of the story was not so bad. Up till February, the country added 7,295 MW of solar power capacity; the government’s target for the year was 10,000 MW and when March figures come out, it may well turn out that the bat might just touch the crease. After all, in the first week of March, projects of a total capacity of 5,478 MW came under ‘on-going’ category, and it is possible that very many of them could be completed in the dash towards year-end.
Yet, the solar energy companies had to go through the uncertainty of the government bringing in anti-dumping and safeguard duties on imported solar panels, which could have tripped a number of ongoing projects. However, within ‘solar’, the rooftop segment has refused to move and now there is news that half of the target of 40,000 MW, to be achieved by 2022, might be snipped and added to the ‘wind’ target of 60,000 MW.
As for wind, well, the industry couldn’t have faced a worse year in history. As against fresh capacity additions of 5,502 MW for 2016-17, only 597 MW was added in the first 11 months of the following year.
Yet, the year 2017-18 is also likely to be remembered, not without gratitude, for several reasons.
First, it laid the foundation for a paradigm shift in the manner in which wind power tariffs are determined, from regulator-determined fixed tariff, to market-determined tariffs arrived at through competitive bidding. Tariffs (in a Gujarat auction of December 2017) fell to a low of ₹2.43 a kWhr, sparking off the inevitable sceptic mumbles as to how anyone could hope to sell wind power at such low tariffs and survive. Many experts believe tariffs will rise even if not to the levels that prevailed in the fixed tariff regime, when the least was ₹4.16 that the Tamil Nadu regulator had fixed for wind power in the State.
Second, the wind power market has blossomed in volumes, roots firmly fixed in the market-determined low tariffs. Till 2015-16, whenever wind installations kissed the 3,000 MW mark, industry members clanked champagne bottles. The following year saw fresh capacity additions touch 5,502 MW, they smiled because they knew it was a one-off situation, for people rushed to put up wind power plants in time to catch certain dying incentives.
But look at 2017-18. A whopping 8,500 MW of capacity was tendered out — Central government-owned SECI 6,000 MW, Gujarat 1,500 MW and Tamil Nadu and Maharashtra 500 MW each. (The corresponding tendered-out figure for solar was 14,231 MW, till February.) For the SECI 6,000 MW of SECI tenders, ‘letters of award’ have been issued for 4,050 MW. Incidentally, 3,300 MW of this would be put up in Gujarat, and the other 750 MW in Tamil Nadu. Since the government seems keen on bidding out at least 10,000 MW of capacity in the next two years, the wind industry may hum and haw over the low tariffs, but still nod in satisfaction.
As for solar, the year saw cumulative installations touch 20,000 MW in February. (The official figure is 19,584 MW, but the number does not include some rooftop capacities set up privately, without government subsidies.) The 20,000 MW number is a thriller because until mid-2014, it used to be the government’s target to be achieved by 2022 — showing solar has really galloped since the initial days of 2010-11 when the National Mission on Solar was put in place. Solar tariffs too fell to a low of ₹2.44 in a May 2017 tender for projects in Bhadla solar park, Rajasthan.
Battery storage, a hope
Against this backdrop, the new financial year starts off with promise. An aspect to watch keenly are the developments on the ‘storage’ side. Arming the renewable energy sector are the falling costs of battery storage, which can smoothen the off-on nature of wind and solar. The infirm nature of wind and solar put them at a disadvantage vis-à-vis the steady-supply fossil fuels, like coal and gas. Bloomberg New Energy Finance (BNEF) recently “looked closely at” the impact of the 79 per cent decrease in storage costs. Elena Giannakopoulou, head of energy economics at BNEF, says the conclusions of this are “chilling” for the fossil fuel sector.
In India too, the median costs of wind-plus-storage and solar-plus-storage are coming down, says BNEF. The impact of this would begin to show in the current financial year.
The year will also see the first large-scale wind-solar hybrid project, as SECI is rolling out one such project, of 160 MW, in Andhra Pradesh.
Thus, 2018-19 can be flagged as a brisk year for the Indian renewable energy sector and what happens could tell upon whether or not the country would meet its target of 100 GW of solar and 60 GW of wind by 2022. Incidentally, the government has calculated that meeting the target calls for funding of $83 billion. If banks baulk at lending to wind and solar projects (as some reports suggest), it could be an issue.
Two tiny but very important sub-segments that are not doing well are rooftop solar and solar-powered mini grids. Rooftop plants cannot come up until the owners of the plant are allowed to sell their surplus power, something the state government-owned electricity distribution companies are loath to allow.
As for mini grids, the country today has a negligible 63 of them with a total power capacity of 1.9 MW. It is to be seen if social entrepreneurs take this up in the current year.
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