The government is planning to grow the country’s module-making capacity to 90 gigawatts. The financial assistance being part of the Prime Minister Narendra Modi’s plan to make the nation a manufacturing powerhouse, create jobs and reduce imports
India seeks takers for 2.4 billion in government aid. It is offering to stimulate domestic manufacturing of solar power equipment.
The state-run Solar Energy Corporation of India is looking for bids from solar manufacturers covering financial incentives worth 195 billion rupees, as per the documents published on the agency’s website.
The government is planning to grow the country’s module-making capacity to 90 gigawatts. This will be enough to meet its own requirements and serve export markets.
The multi-billionaire business tycoon Mukesh Ambani and Gautam Adani of Reliance Industries and Adani Group respectively, were the winners during previous round of solar manufacturing incentives. They are eligible to apply again for building additional capacity, revealed the bid documents show.
The financial assistance being part of the Prime Minister Narendra Modi’s plan to make the nation a manufacturing powerhouse, create jobs and reduce imports.
The aim on to produce locally also helps the country position itself as an alternative to China amid a global push in order to diversify supply chains in the rise of the pandemic.
With over 441 gigawatts of module capacity globally, Chinese companies hold control. Meanwhile Indian firms operate around 15 gigawatts, according to a media report.
The firms that commit to setting up fully integrated manufacturing units will be given priority from polysilicon to modules.
The latest grants follow an earlier 45 billion rupee offering for making modules. Shirdi Sai Electricals too won the assistance in that round, in addition to Reliance and Adani.
Solar is a crucial segment that will contribute significantly to this national target
India had announced an ambitious goal of achieving net-zero emissions by 2070 at the 2021 UN Climate Change Conference (COP26) in Glasgow. As a step towards this goal, the Indian government updated the country’s nationally determined contribution (NDC) – a climate action plan – in August 2022. As per the NDC, India targets to achieve 50% of the cumulative power capacity from non-fossil fuel-based energy resources by 2030.
Solar is a crucial segment that will contribute significantly to this national target. The solar segment in India can be primarily categorised based on the scale and location of the system implemented. There are two types of systems: large-scale (or utility-scale systems) and small-scale (or rooftop solar). Utility-scale systems are offsite systems, whereas rooftop solar systems are installed on-site.
With the Jawaharlal Nehru National Solar Mission’s launch in 2010, India targeted generating 100 gigawatts (GW) of solar power by 2022. Of this total capacity, 60GW was to come from the utility-scale segment and the remaining 40GW from the rooftop solar segment.
Of this 40GW rooftop solar target, JMK Research estimates that only 11.8 GW is in place as of 31 March 2022. Of this, the residential sub-segment accounts for merely a 17% (2,010 MW) share, which is minuscule given India has more than 300 million households.
This is mainly because of a lack of consumer awareness, implementation and administrative issues in net metering approval, lack of timely disbursement of central and state subsidies, lack of availability of attractive financing options, etc. There is also a need to enhance the quality of residential solar installations and provide robust after-sales service to build consumer confidence in the Indian context.
We expect the growth of residential rooftop solar installations to accelerate in the near term across India because of the strong policy push and resurgent market demand. By FY2023, JMK Research estimates that the residential rooftop solar market will most likely achieve 3,214MW of cumulative installed capacity. To accelerate the pace of rooftop solar installations in the residential segment, the central government has introduced many incentive schemes in the last decade. These mainly comprise financial assistance or subsidies, which various state electricity distribution companies (DISCOMs) have transferred to rooftop system installers. In addition, some states, beyond facilitating the provision of central subsidies, also provide subsidies from their own budgets.
Further, the World Bank’s latest approval of a US$165 million credit line for the Indian residential solar segment is likely to help this segment become more affordable for end consumers. In another significant development, in July 2022, the central government launched a single national digital portal to simplify the process of rooftop solar installation for residential consumers. The centre has also formalised a direct benefit transfer (DBT) mechanism for rooftop solar subsidies. Thus, residential consumers (those registered on the solar rooftop installation portal) can now ‘directly’ avail of the central subsidy.
Considering the availability and disbursal of subsidies in different states along with other factors, such as net metering approvals, the three most favourable states for residential rooftop solar installations are Gujarat, Haryana and Maharashtra. Gujarat’s SURYA scheme, which saw 1.1GW installed in the state in the last 18 months, is one of the shining examples for other regional markets to emulate. Gujarat showcased how proactive support from state agencies, streamlining relevant procedures and effective implementation of incentives to end consumers can lead to the successful adoption of rooftop solar.
For other states as well, the prospect of rooftop solar adoption grows more attractive due to the growing need for cost savings and rising awareness among residential consumers. Concerted efforts in streamlining/expediting net metering and subsidy-related procedures for consumers are imperative. This would include reducing DISCOMs’ intervention in the entire process of residential rooftop solar installation.
Gujarat’s SURYA scheme demonstrates that digitalisation (i.e., communication of relevant and simplified information through digital media) of the entire value chain infrastructure is critical. In addition to overall consumer awareness, digitalisation warrants reliable digital tools for financial institutions (FIs) for market assessment and pre- and post-installation monitoring of solar plants, etc.
Also, lately, several residential consumers are shifting towards high-end rooftop solar offerings. These include utilising high-wattage modules and integrating battery energy storage with rooftop solar. We expect these trends to become mainstream in the near term. And going forward, establishing a robust value chain infrastructure will be vital to develop an adequate number and variety of high-quality rooftop solar offerings.
Hybrid plants comes with capacity to reduce intermittency of renewable energy power and help the country in adequate utilisation of transmission network. The project consists of 600 MW solar and 150 MW wind plants.
Adani Green Energy Ltd (AGEL) said it has commissioned 600 MW capacity wind-solar power plant of in Jaisalmer, Rajasthan, on 29 September. It is the world’s largest wind-solar power plant, said the official of AGEL.
As per a company statement, the said plant has a power purchase agreement with Solar Energy Corporation of India (SECI) at Rs 2.69/kwh for 25 years.
With the capacity to reduce intermittency of renewable energy power it will also help the country in adequate utilisation of transmission network. The project consists of 600 MW solar and 150 MW wind plants, the statement added. AGEL functionalised first hybrid power plant in India with a capacity of 390 MW, this year in May 2022 at Jaisalmer.
The company now has total operational generation capacity of 6.7 GW along with operational hybrid power generation capacity of 1 GW making it the largest in the world, it said. AGEL’s total renewable portfolio of 20.4 GW seems well on track to reach its vision of 45 GW capacity by 2030 with this move.
AGEL’s two subsidiaries namely Adani Hybrid Energy Jaisalmer Two Ltd (AHEJ2L) and Adani Hybrid Energy Jaisalmer Three Ltd (AHEJ3L) covers the 600 MW hybrid plant.
The programme will strengthen the Atamnirbhar Bharat initiative and generate employment
The Union Cabinet on Wednesday has approved implementation of ‘national programme on high efficiency solar PV modules’.
The production linked incentive scheme (tranche II) was proposed by the Ministry of New and Renewable Energy’s with an outlay of Rs 19,500 crore for achieving manufacturing capacity of iga watt (GW) scale in high efficiency solar PV modules.
The national programme on high efficiency solar PV modules aims to build an ecosystem for manufacturing of high efficiency solar PV modules in India, and thus reduce import dependence in the area of renewable energy. It will strengthen the Atamnirbhar Bharat initiative and generate employment.
Under this programme, solar PV manufacturers will be selected through a transparent selection process. PLI will be disbursed for 5 years post commissioning of solar PV manufacturing plants on sales of high efficiency solar PV modules from the domestic market will be incentivised.
It is estimated that about 65,000 MW per annum manufacturing capacity of fully and partially integrated, solar PV modules would be installed. Also, the scheme will bring direct investment of around Rs 94,000 crore.
It is believed that the scheme will bring direct employment of about 1,95,000 and indirect employment of around 7,80,000 persons. Along with this, import substitution will be approximately Rs 1.37 lakh crore.
The success in this sector is now confined to the big players who can rustle up financing at competitive rates
by Urvi Shrivastav
Prime Minister Narendra Modi reinforced the ambitious One Sun, One World, One Grid (OSOWOG) project proposed by the International Solar Alliance (ISA) on 15th August last year. To kickstart the same, the power transfer between India, Bangladesh, Nepal, and Bhutan will be boosted in the first phase of the $1 trillion ‘Solar Investment Roadmap’ for 2030. While this project is ambitious and welcome in an era of renewable energy promotion, it may require some homework and corrections before we can execute it.
Funding is one of the key aspects for any project execution, and renewables, including solar, are no different. In a time when the private sector has a share in almost all government projects, realising the government’s ambitious aim cannot be achieved without matching investment in rapidly scaling up the solar development. Fortunately, indications are in the right direction. A report by clean energy consultancy, Mercom Capital, said that financing activity in the solar grid was up across the board, including venture capital, equity, debt, and public market finance.
Given the fact that solar panels are 60% of the project cost, these statistics look hopeful. However, we should not celebrate yet, as India does not produce its own solar hardware but imports from China, which is one of the key reasons why corporate funding in solar is needed. This is a necessity given that we need 10 to 15 GW of installed capacity per year. The domestic cost of panels is higher than imported Chinese panels. This is despite the fact that importation includes shipping cost, containerisation, insurance, and inland transport. Chinese panels delivered at the site are still turning out to be cheaper than locally produced panels by the leading manufacturers in India such as Waaree, Vikram Solar, Tata, etc. India imports wafers in a big way, wafers require silicon that is practically a monopoly of China. Some production of silicon wafers takes place in Europe and US, but it is expensive compared to Chinese supplies. On the other hand, solar Tariffs have dramatically dropped, and return on investment has also dropped, making solar projects unattractive to several corporates at the project level. The success in this sector is now confined to the big players who can rustle up financing at competitive rates.
Further, distribution companies, which we popularly call Discoms, often delay payments for projects from which they receive solar energy. This leads to uncertainty and discourages corporates to invest in solar business. The risks from government policies also impact solar projects in India. “There is hesitation due to imposition of customs duties and other taxes which can push up the cost of the projects. Or sometimes, the Discoms are trying to renegotiate the Purchase Power Agreements (PPAs) after they are in place for several years. There is also a concern around policy and offtake risk in the renewable sector, due to which debt financing can be challenging.” says, Vinay Rustagi, Managing Director, Bridge to India Energy Private Limited.
Several developers in the past have had to reach out to appellate tribunals, compelling Discoms to pay. While large corporates may have the capacity to sustain themselves and still succeed to generate profits, it is not of any help to small and medium-sized companies. “For large consumers, financing solar projects makes a lot of sense. For many people even if they know it is profitable, they are not able to invest given the financial constraints and are subsequently dependent on banks. This problem applies typically to companies which have stressed balance sheets, are poorly rated or are small companies.”. adds Rustagi. These technologies also do not get cheaper due to the lack of research, development, and innovation done in this sector. Even if the government is introducing a 40% import duty on solar panels by 2022, it does not address issues back home which corporates face while funding.
Another key issue is the lack of demand in investing in battery storage, even though the government is making a hard push to promote solar manufacturing capacity and energy storage in the country. The corporate funding will be useful only when there is remuneration for the products they have funded. Energy storage to date has no remuneration prescribed by the Electricity Regulators in the country. Contrast this with the solar projects that have PPAs signed up for 10-15 years at least.
What About Production Linked Incentive Schemes?
In November 2020, the Indian Government announced PLI schemes for 10 key sectors to scale up domestic manufacturing, employment generation, and the like. Presently, the government is encouraging panel production by Birla, Adani, Waaree, and Vikram Solar. However, how successful is it? The government has proposed PLI for two sectors, the first is manufacturing, second is battery storage. India is not very competitive in manufacturing as we know due to productivity challenges of labor especially when compared to China, Vietnam, etc., in addition to experiencing difficulties in permits and approvals from state and central governments. The objective of the scheme is to create a germinate and nourish complete logistics value chain in India, from manufacturing to deployment, and operations, etc. However, unless the Achilles heel of solar, that is, domestic manufacturing of silicon and wafers are not addressed, no amount of PLI, even those backed by corporates can be of help. Adding to this is the dismal size of the PLI scheme. The government has itself said it will finance 10,000 MW solar capacity while the needs of the country are much larger at 35,000 MW. One may keep in view that Reliance has announced big plans to build factories for the production of silicon and wafers in India. The questions are, will it be accessible to other solar players in India, and by when?
What can be done?
“To encourage small companies to invest in solar, the government can come up with some schemes, subsidies and other favourable mechanisms. Also, the policy risk in this sector needs to be minimised.” adds Rustagi. The government must make sure that the policy landscape is linear, clear, stable, and predictable, the off-take risk is reduced, and Discoms make payments to the project developers on time. This will bring certainty to investors that when they are investing in or executing a project, they will receive their payment on time. If these things can be addressed, some of the major corporate financing issues can be resolved.
Investment in fossil fuels and conventional power sources is declining because concerns around carbon emissions and climate change are heightened. The lending agencies and banks are moving away from this sector, freeing up huge investment capacities worldwide. However, for this sector to fully realise its potential, it should succeed with banks and lenders. Lenders in turn want certainty in investment policies and rules and the ball totally lies in the government court.
Apart from Reliance New Energy Solar Ltd, the other Reliance Group firms which would be persons acting in concert are Reliance Industries Ltd and Reliance Ventures Ltd.
Reliance Group firm Reliance New Energy Solar has offered Rs 375 per share to acquire 4.91 crore shares of Sterling and Wilson Solar for over Rs 1,840 crore. The 4.91 crore shares constitute 25.9 percent equity stake or the entire public holding in Sterling and Wilson Solar Ltd, Sterling and Wilson Solar said in a regulatory filing.
Apart from Reliance New Energy Solar Ltd (RNESL), the other Reliance Group firms which would be persons acting in concert (PAC) are Reliance Industries Ltd and Reliance Ventures Ltd, according to the draft letter of the open offer.
As per the filing, Reliance New Energy Solar Ltd has issued a “draft letter of offer for open offer for acquisition of up to 4,91,37,420 fully paid-up equity shares of face value of Rupee one each representing the entire public shareholding constituting 25.90 per cent of the emerging Voting Capital of Sterling and Wilson Solar Ltd…”
The shares will be acquired from the public shareholders by Reliance New Energy Solar Ltd together with Reliance Industries Ltd (PAC 1) and Reliance Ventures Ltd (PAC 2), the filing added.
On October 10, the company had announced that RNESL had executed definitive agreements with Shapoorji Pallonji and Company Private Ltd (SPCPL), Khurshed Daruvala and Sterling and SWSL to acquire 40 per cent stake post-money in SWSL through a series of transactions.
“MYSUN, India’s leading distributed solar company, has been allocated 140-MW solar projects under the captive/open access mode by the Uttar Pradesh Power Transmission Corporation Ltd (UPPTCL),” the company said in a statement.
Rooftop solar firm MYSUN has bagged 140-megawatt (MW) open-access solar power projects from the Uttar Pradesh Power Transmission Corp Ltd (UPPTCL), according to a company statement.
“MYSUN, India’s leading distributed solar company, has been allocated 140-MW solar projects under the captive/open access mode by the Uttar Pradesh Power Transmission Corporation Ltd (UPPTCL),” the company said in a statement.
The allocation process saw active participation from most of the large solar developers from all over the country, the firm added.
It will promote the use of solar energy in Uttar Pradesh for large industries and corporations.
The latest round of allocation saw connectivity approvals being granted for central, western, and eastern parts of UP. Overall, about 1.5 gigawatts (GW) of grid sub-station capacity was put up for allocation. MYSUN will develop these projects across multiple districts primarily in parts of western Uttar Pradesh.
MYSUN founder and CEO Gagan Vermani said in the statement, “The allocation of this 140 MW is a commitment from our side to provide clean, reliable and affordable solar power to large energy consumers like industries, data centers, corporate parks and builders in Uttar Pradesh..”
Under its recently launched asset vehicle MYSUN+, the company is expanding its presence across states like Uttar Pradesh, Rajasthan, Maharashtra, Gujarat, Madhya Pradesh, Andhra Pradesh, Tamil Nadu and the national capital region
The company is already in early-stage development of more than 220 MW of projects under the captive/ open access mechanisms.