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Insights into Editorial: No wind, no sun: green projects in limbo


Insights into Editorial: No wind, no sun: green projects in limbo


Introduction: India targets of Renewable Energy:

The Government had set a target of installing 100 GW of solar capacity by 2022 in the country.  A target of installing 175 GW of renewable energy capacity by the year 2022 has been set, which includes 100 GW from solar, 60 GW from wind, 10 GW from bio-power and 5 GW from small hydro power.

However, Wind and Solar power capacity additions have been far less than satisfactory and hardly on the path to meeting the targets.

Sub-categories such as solar heating, solar powered agriculture or off-shore wind plants which have a lot potential for meeting solar target is not being fully utilised due to lack policy & its implementation.

 

Presently, India Cuts Solar Capacity Addition Target By 23% For 2019–2020:

  • The Ministry of New and Renewable Energy (MNRE) recently announced the capacity addition target for solar power in the financial year 2019-20.
  • In the face of lingering issues of land acquisition, uncertainty over taxes and import duties and slowdown in overall economic growth India has reduced its solar power capacity addition target to the lowest level in four years.
  • India aims to add 8.5 gigawatts of solar power capacity between April 2019 and March 2020, including 1 gigawatt of rooftop solar power capacity.
  • The target is 23% lower than that set for the previous financial year, 2018-19.
  • The sharp decline in target for 2019-20 seems to indicate that the government, too, has recognized the challenges faced by project developers, even in those cases where projects have already been auctioned and allocated.

 

Major issues to deal with Renewable Energy:

  • Land ownership is major issue that slows the implementation process and brings in corruption.
  • Looking beyond conventional wind and solar plants, too, the MNRE has little to show.
  • For instance, the adoption of solar-powered agricultural pumps (KUSUM scheme) is way below the potential. It was not until February 2019 that the government came out with a scheme to get farmers use such pumps.
  • And there are other areas where one would expect the government to display long term vision.
  • Last year, the government imposed a safeguard duty of 25% on all imported cells/modules. This was done in order to promote domestic manufacturing of the solar cells/modules. This has led to increase in the capital costs of the solar energy projects by 10-15%.

 

Decreased Tariff benefits not passing to customer:

Main focus of MNRE has been to bring down tariffs of wind and solar power that is sold to the electricity distribution companies.

However, this decrease in tariff is not being passed onto the consumer. Lower tariffs are making the construction of smaller projects unviable for energy companies.

 

GST resulted in Increase in Capital Costs:

The imposition of the GST on various solar components has also led to increase in the capital costs of the solar power projects.

For instance, prior to GST regime, the solar modules were exempted from additional customs duties and VAT in several states.

However, GST imposition now implies an additional IGST component on imports (along with existing basic customs duty) + SGST for modules procured domestically (replacing VAT/CST). This has led to increase in the tax incidence by 8-9%.

 

Issue with Polarisation of Wind energy Investments:

For wind energy, most energy companies intend to invest in Gujarat which has the highest potential.

However, Gujarat has raised concerns that most of these projects which take large land in Gujarat will have the power going to other States.

Therefore, Gujarat has formed various conditionalities on such projects which is not in favour of RE developers.

RE Industry has been asking the government to bring in State-wise or even sub-station-wise tenders, so that the setting up projects could be more spread out, but to no avail.

Industry has requested that there could be just a closed tender, where the bidder who offers the best price bags the project, as opposed to the current method of holding auctions, in which bidders try to outbid each other thereby leafing to unviable tariffs quoted.

 

Conclusion:

After a December 2014 study by CRISIL and IIT-Madras, which recommended kick-start support by the government, there has been absolute silence.

India has set a goal to have an operational solar power capacity of 100 gigawatts by March 2022.

With just 34 months left to achieve that target, India must add over 71 gigawatts, at an extremely aggressive monthly average of 2 gigawatts.

Ocean energy (from waves, tides and currents), for instance, shows great promise, can provide steady, 24×7 power.

With the return of the present government in recently concluded general elections, project developers could expect some relief with regards to the uncertainty and slow pace of project execution due to external factors.

With the elections over SECI is expected to issue a large number of solar power tenders and also work with state governments to hasten process of land acquisition.

Innovative Financing measures such as clean energy fund, generation-based incentive linked loan repayment and green bonds could be one solution to overcome the financial needs of this sector.

Thus, one can expect the targets for 2020-21 and 2021-22 to be significantly higher than previous years.