IN THIS ISSUE 16 18 Cover COVER Andhra Pradesh Dholera’s smart to achieve role in helping 18,000MW RE India meet its by 2021-22 target Gujarat has taken lead in India’s The state has 38.4 GW solar first and Asia’s largest solar park at power potential with huge Charanka in Patan district extent of barren lands which can be effectively utilised for setting up large scale solar power projects 20 COver Glimpse 2018 As 2018 comes to an end, people across the industry share their achievements and their expectations for the year ahead J P Chalasani D.V.Giri Rajendra Kumar Andrew Hines Victor Thamburaj Group CEO, Suzlon Secretary General, Parakh Co-Founder, founder, iPLON Group IWTMA Chief Financial Officer, CleanMax Solar Vikram Solar Simarpreet Singh Rakesh Zutshi Rahul Neeraj Kumar Singal Rishi Mohan Bhatnagar Founder-Director, Managing Director, Walawalkar Director, Semco Group President, Aeris Hartek Solar Halonix Technologies Executive Director, Communications IESA 32 ENERGY EFFICIENCY 36 ICRA 2018: The transformative year Strong bidding for India’s energy volume augers well landscape for the future of This year was particularly enriching renewables and exciting for the energy sector – Viability of bid tariffs for wind & solar IPPs especially in the renewable and energy remains critically dependent upon the efficiency segments capital cost, long tenure debt availability at competitive cost and PLF level 4 | Energy Next | December 2018 RENEWABLE Strong bidding volume augers well for the future of renewables Viability of bid tariffs for wind and solar IPPs remains critically dependent upon the capital cost, long tenure debt availability at competitive cost and PLF level, writes Sabyasachi Majumdar, Group Head & Senior Vice President - Corporate Ratings, ICRA and is expected to touch 9.0 percent in FY2019. agencies and state distribution utilities in This is owing to the large sized capacity addition CY2017 and CY2018 (YTD) provide a witnessed in the wind and solar power segments reasonably healthy visibility for renewable during this period, driven by policy support energy capacity addition in FY2019 and from central and state governments as well as FY2020 with expected addition of about 8.5-9 the significantly improved tariff competitiveness GW in FY2019 and about 10 GW in FY2020. of wind and solar power vis-a-vis conventional This is expected to increase the share of power sources. The renewable segment added renewable energy in the all India generation to about 3.0 GW in the first six months of FY2019 10 percent by FY2020 and further to 13 percent and remained the primary driver of capacity by FY2022 based on capacity addition forecasts, addition in the power sector. Furthermore, in as per ICRA’s estimate. the first seven months of FY2019, the generation However, the renewable energy sector he share of renewable energy-based from renewable energy sources increased by especially wind and solar segments remain generation in the overall generation 28.2 percent driven by the capacity addition in exposed to near term challenges arising due mix at the all India level is rising, wind and solar segments and an improved wind to cost impact of safeguard duty on imported as seen from an increase from 5.6 season in the current fiscal. PV modules, rising interest rates and financing Tpercent in FY2015 to 7.8 percent in FY2018 The project awards by the central nodal challenges, coupled with inadequacy of the 36 | Energy Next | December 2018 SCENARIO transmission network. The average bid tariffs critically dependent upon the capital cost, long percent against the RPO target of 14.25 percent discovered in the auctions for wind and solar tenure debt availability at competitive cost and suggested by the Ministry of Power for FY2018. power projects in CY2018 have witnessed a PLF level. As per ICRA estimates for solar PV If the renewable energy certificates (RECs) slight uptrend from the low of Rs. 2.4 per unit. project with tariff of Rs. 2.7 per unit, cumulative cleared in FY2018 are considered towards the This uptrend in bid tariffs was partly driven average DSCR is estimated at about 1.16 time RPO target for FY2018, the compliance level by factors such as cost headwinds arising based on prevailing PV module price level would be higher at around 70 percent. While the from rising interest rates, increase in capital (around 26 cents per watt) with likely imposition significant improvement in cost competitiveness costs due to imposition of taxes/duties, rupee of applicable safeguard duty, debt and equity of wind and solar is expected to improve the depreciation against the dollar for imported ratio of 70:30, rupee dollar exchange rate of 73, RPO compliance level, going forward, the equipment and rising equipment costs. Also, cost of debt at 9.75 percent post commissioning actual RPO would remain lower than the target the winning developers in the recent bids are with debt repayment tenure of 18 years post prescribed by ministry of power, unless the facing challenges in securing connectivity and CoD and plant load factor (PLF) level of 23 targets are adopted and strictly implemented open access to inter-state transmission network. percent (with DC-AC ratio of 1.3 times and by the SERCs and distribution companies This has resulted in cancellation or capacity degradation factor of 0.5 percent per year). Thus, (discoms). downsizing of some of the bids by the central the PV module price level and exchange rate (in Another key development in 2018, the nodal agencies. Notwithstanding these cost case of imported modules) amongst the factors Government of India has issued the national pressures, wind and solar PV energy projects mentioned remains key sensitivities from the wind solar hybrid policy on May 14 with the are likely to remain cost competitive against viability perspective for solar PV project. If the objective to provide a framework for promotion conventional power sources. safeguard duty cost were to be passed on through of large grid connected wind-solar PV hybrid For the solar IPPs having signed long-term changes in law, the cumulative average DSCR is system for optimal and efficient utilisation of PPAs, which are yet to be commissioned, timely estimated to improve to about 1.27 times. transmission infrastructure and land along with pass-through of cost increase arising from The Ministry of Power on June 14 notified reducing the variability in renewable power imposition of safeguard duty under change in the renewable purchase obligation (RPO) generation and achieving better grid stability. law, by the appropriate regulatory commission trajectory for the three-year period from FY2020 The hybrid projects are likely to be competitive remains critical. The notification issued by the to FY2022. Earlier in June 2016, the ministry in tariffs in relation to individual wind or solar ministry of power in August 2018 directing the notified the RPO trajectory for FY2017 to energy projects, given the benefits associated Central Electricity Regulatory Commission FY2019. The overall RPO target is set to increase with respect to savings in capital cost through (CERC) under section 107 of the Electricity from 17 percent in FY2019 to 21 percent by better utilisation of common resources. However, Act 2003 for allowing pass-through of changes FY2022 comprising non-solar RPO of 10.5 there are challenges associated with these in domestic duties, levies, cess and taxes in a percent and solar RPO of 10.5 percent. However, projects such as selection of sites suitable for time-bound manner, is a positive development the RPO levels prescribed by the state electricity both wind and solar power generation, technical for the affected IPPs. Further, the order issued regulatory commissions (SERCs) continue to challenges in designing the site and integrating by the CERC in October approving the GST vary across the states and remain lower than the two generation sources and adequacy of claims raised by solar power developers is a the RPO recommended under the guidelines transmission infrastructure, especially for positive development for the sector. However, a issued by the ministry, with only seven states converting existing standalone wind or solar time lag in implementation of such pass-through having stipulated RPO norms equal to the target projects into hybrid projects. of cost increases cannot be ruled out, given the specified by ministry of power for FY2019. With With respect to the counter-party credit resistance shown by the end off-takers in such respect to compliance with the RPO norms by challenges, the payment cycle for wind and cases in the past. the obligated entities, the same remains less than solar power projects remains mixed. While From the developer’s perspective, the viability 100 percent in most states. At the all India level, the projects have central nodal agencies and of bid tariffs for wind and solar IPPs remains the compliance level is estimated to be about 61 discoms in states such as Gujarat as off-takers are receiving payments in a timely manner, the projects having discoms in most of the other states as off-takers are facing delays in receiving payments. ICRA however notes that there has been a visible improvement in payment cycle from utilities in the state of Rajasthan post implementation of UDAY and recently by the utility in Maharashtra. The sustainability of these trends, however, remains a challenge given that the progress on improving operating efficiencies and reducing gap between tariff and cost of supply remains slow in most of the states. (Views expressed are personal) December 2018 | Energy Next | 37.