Not a sunny scenario for renewables

Babubhai Patel, a farmer living in Vahelal village of Gandhinagar district, was pleasantly surprised when he calculated his earnings from the solar installations under the Gujarat Government’s pilot project — Suryashakti Kisan Yojana (SKY).

Promise of solar Farmer Babubhai Patel benefited from the SKY scheme which has been replaced by KUSUM Rutam Vora

“It has been exactly a year since we installed 71.5 kW of solar panels in about eight guntha (roughly 800 sq mt). It was surprising for all in our family, when we got our first instalment of payment for the first four months of power generation. After deducting all costs and interest payments, net earning stood at ₹85,000. We are yet to receive payment for the remaining eight months. This means our annual earnings from this small set-up will fetch us multiple times more than what we normally earn from farming” he exclaims, with a sparkle in his eyes.

Eleven other farmers also followed him to look for “Solar earnings” using the State government’s novel idea of solar installations on agricultural land. Babubhai recorded peak generation of 427 units per day during last winter, while the average stood at 302 units since installation in December last year.

Launched in 2018, the scheme was a feather in the Solar cap for the State.

The momentum, however, couldn’t last long. After the pilot got over, no new installations came up under the SKY Scheme. Meanwhile, in February 2019, the Centre came out with a similar scheme of ‘Kisan Urja Suraksha evam Utthaan Mahabhiyan (KUSUM)’ aiming to set up grid-connected solar power plants each with capacity of up to 2 MW in the rural areas.

The devil lay in the details. Unlike SKY Scheme, which allowed farmers to bear just 5 per cent of the project cost and provided 35 per cent loan with the State utility as its guarantor besides 60 per cent subsidy, KUSUM Scheme couldn’t catch the fancy of the farmer community.

“The farmer contribution was increased to 35 per cent in KUSUM, from 5 per cent in SKY Scheme. This will benefit only the wealthy farmers or those with bank loan facility. The soul of SKY was in its minimum contribution from farmers, which KUSUM doesn’t have, so it is not so popular among farmers at present,” says Harshad Patel, another farmer from Vahelal.

Solar sunset?

Gujarat has had a glorious solar experience under its 2009 Solar Policy. Soon after that, the then UPA government at the Centre brought in the Jawaharlal Nehru National Solar Mission in 2010, ushering in the “solar era”. Gujarat has shown the way in sustainable energy solutions over the years.

But the present appears full of challenges, which weighs on the future of investments in the sector and benefits to the end users. Since the launch of the new Solar Power Policy in 2015, Gujarat has been grappling with implementation bottlenecks, disconnect between the policies and on-ground reality besides land acquisition and issues of right of way (ROW) challenges.

Pranav Mehta, Chair of the Global Solar Council, feels the key to a sustainable renewable sector lies in the policy implementation. “The State agencies aren’t using practical solutions. Despite recommendations from Central agencies and Ministry of New and Renewable Energy (MNRE) to push for third party sale of power and allowing open access, Gujarat is not encouraging the same, thereby giving advantage to the other States,” he says.

“The 2009 policy was implemented very well with close cooperation of all concerned government agencies and private sector and collectively we could achieve success. But now we have an ambitious target of 30,000 MW for Gujarat and while everything appears to be optimistic, there are certain implementation bottlenecks in the existing scheme, including penalties, which pose a challenge,” Mehta told BusinessLine .

Showcasing a policy direction on renewables in Gujarat, State Energy Minister Saurabh Patel announced a 30,000-MW hybrid park in Kutch, the Central nod for which is awaited. The Government has identified about 60,000 hectares of land on which all the projects will come up. However, the idea doesn’t seem to have gone well with the developers, who stand to lose the liberty to choose a land suitable to their project economics. This, according to a section of developers, may push up the cost, thereby the tariff bidding as well.

There are also concerns from a practical viability point of view, such as the policy insistence of having locally manufactured cells to be used for solar rooftop projects; the country doesn’t have sufficient indigenous cell making capacity. As per an industry estimate, as against solar module generation capacity of about 9 Gigawatt (GW), cell capacity is only at 3 GW.

Too many players

Heavy penalties in cases of unavoidable, genuine delays of implementation have resulted in financial loss, impacting the spirit of investors. Another challenge is threatening the sector in the form of emergence of non-serious players in the engineering, procurement and construction (EPC) segment.

An EPC contractor and leading solar project consultant, Kunj Shah, CMD of Zodiac Energy Ltd, believes that government’s lenient approach in opening up the tendering process to even inexperienced players unsettles the market. "Unlike wind generation, solar project installations do not require specialised knowhow. Additionally, the start-up buzz has caught the fancy of the government as well, which has opened the tendering process even to the novice players. We have seen cases where inexperienced players quote completely unrealistic prices in government tender for solar installations under given schemes, and they emerge as L1 bidder. This absurd price doesn’t just distort the price but impacts the businesses of the serious players.”

These EPC players are appointed for installation and maintenance of the projects under government schemes for a specified period. However, the kitty of this EPC segment — which is largely dominated by unorganised SME players — has grown bigger multi-fold in the past few years, making the market crowded and leaving less room for profitable business.

“On one side we have fierce competition in this wafer-thin margin, and on the other there are delays in subsidy payments from the government. This is blocking a good amount of cash for the players. If this is a short-term phenomenon, we can handle, but can’t be sure about the future if this continues for long,” states Shah, who is also Senior Associate at National Solar Energy Foundation of India.

Some smooth sailing

However, developers who entered into long-term renewable PPAs with State discoms have fared better.

Leading independent power producer (IPP), Torrent Power Ltd, which has total renewable installed capacities of over 650 MW in the State (including 138 MW in solar and 520 MW in wind), has had a smooth experience in Gujarat. “So far as solar projects are concerned, our experience has been pleasant. We have installed 50-MW project at Charanka Solar Park and we are very happy with the full support received from government. We installed another 88-MW project near Surat on our own land and have received full support from government authorities as regards evacuation and other aspects of this project,” says a Torrent Power spokesperson via email.

But of late, corporate investors, especially the large developers having capacities of 5 MW and more, have underlined availability of land and right of way as the major issues. Also, to a limited extent, the transmission corridors also involve RoW issues. “The problem is for the new projects, which are coming up in the State under the new policy. The biggest of the problems is the land acquisition for the project," says an industry source not willing to be quoted. Amid all this, the tariff has gone down below ₹3/kWh (or unit), which means at the prevailing rate, repayment period for the investment has got extended.

In sum, Gujarat has lost its numero uno position to other States.

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