Solar Power Project Auctions Continue To Plummet In Q1 2019, Drastic Changes Needed: Vikram Solar
Indian Solar power industry has shown incredible growth, showing an inspiring trajectory of growing capacities from 5 GW in 2015 to 10 GW in 2016 to ~30 GW growth in 2019. Although there is growth, we should remember that India still has to install more than 20 GW of solar energy capacity each year for the next 3 years to reach its announced 100 GW target. Considering this scenario, we can fairly assume that an aggressive solar power adoption rate is required to make the target come to reality. However, India’s current solar growth is failing to support expectations.
Let us start the inspection by identifying that ~35 GW of solar energy projects were tendered in 2018, and only 13 GW of projects were auctioned in the same year after a lot of projects were cancelled. However, it was expected that in 2019, the scenario will swiftly change, powered by new project erections, introduction of battery storage policy and solar parks coming online. Dominant solar power states like- Rajasthan, Andhra Pradesh, Tamil Nadu and Karnataka were expected to unlock their potential in solar panels installation, contributing nearly 75% of the expected solar capacity addition (expected to be 10-15 GW) in 2019.
However, Q1 2019 failed to walk on the expected path and is showing similar traits as 2018. Solar power project auctions in Q1 2019 started with a record low 135 MW. And although in February the industry picked up speed showing 2.7 GW of project auctioning, the next month showed a decline by ¼ of the previous month in solar power project auctioning. Auction cancellations in 2018 had led to a decline in the solar installation by 30% (Y-o-Y). Therefore, it is clear that mirroring the scenario in respect of reduction in solar auctioning will limit solar panels installation in 219 itself.
Reasons behind the Decline
Although through 2017 to Q1 2019 we have seen successful commissioning of previously tendered capacities, there are challenges that have limited solar auctioning in 2018 and continuing on in 2019. Frequent bid cancellation is one of the primary reasons behind the slowdown of project auctions. It started in 2018 and has continued to 2019; case in point- SECI again floated (smaller capacity, after failure in 10 GW project) manufacturing linked projects (3 GW project linked with 1.5 GW manufacturing capacity) which still failed to attract bids.
Besides, the imposition of safeguard duty has raised the capital costs of solar energy projects by 10-15%. And although solar power equipment (modules) have witnessed consistent fall from US$ 0.30/Wp to US$ 0.24/Wp within 2018-2019, the falling bid tariffs in India have made bidding for projects unviable.
Additionally, states in India trying to renegotiate the PPA after the auction has produced hesitant investors. And as a result, Indian solar power sector is witnessing a rise in tender activities in 2019 but failing in auctioning the projects due to poor bid response. Case in point- 6.5 GW of solar energy capacity was tendered in January 2019, however only 135 MW was auctioned.
Alongside these primary issues, there are challenges like- delays in getting land, lack of grid infrastructure, lack of policy enforcement, delays in subsidy disbursal that are restraining solar power growth in India by scaring off developers and investors.
Indian solar energy industry still has an incredible opportunity to turn around and lead the global solar power revolution, while speeding up solarisation of the country. However, for that to happen, India needs to realize that maintaining investor interest is a must.
Also, it is important for India to understand that importing solar panels is the core of these issues. The influx of imported cheap solar modules within the domestic market has afforded the Government to keep reducing the project-bidding tariff, while shrinking India’s opportunity of building solar manufacturing industry, which would have created jobs, improved industrial infrastructure, and brought revenue through exports. Therefore, reducing solar module importing will save billions of dollars from forex outflow and power industrial and infrastructural growth in the country, attracting investors.
Besides, stabilizing bidding tariffs, offering flexible financing options, enforcing policies, and raising awareness are also important to unleash the potential of the Indian solar power industry.