Coronavirus, demand shortfall hit India's renewable energy dreams

The industry would have lauded his insistence on having a green future, but the facts on the ground tell a different story.

Prime Minister Narendra Modi — at two international fora last week — said India would add over 220 gigawatts (Gw) of renewable energy capacity by 2022 and 450 Gw by 2030. The industry would have lauded his insistence on having a green future — both at the G20 Summit and the inauguration of RE-Invest — but the facts on the ground tell a different story.

Tendering has been aggressive with 18 Gw of solar power projects awarded in the past two years by the central agency, Solar Energy Corporation of India, or SECI, but 16 Gw of these projects do not have power purchase agreements (PPAs), revealed a recent report by the Central Electricity Authority (CEA), the technical arm of the Ministry of Power. This includes projects bagged by sector majors like ReNew Power, ACME Solar, Adani Green, SoftBank Energy, etc.

Lack of transmission infra

The report said close to 24 Gw of solar capacity in the country did not have transmission connectivity — for projects awarded by other central and state agencies. Then there are companies, such as ReNew Power, Sprng Energy, and Mytrah Energy, that have requested an extension for their wind projects because of lack of transmission infrastructure — to be built by state-owned Power Grid Corporation of India.

“The transmission mismatch story in thermal power is getting repeated in renewables now. The government is asking developers to build projects where the transmission network exists. But these are, in most cases, not the sites which are renewable-rich,” said a senior sector expert.

When the BJP came to power at the Centre in 2014, it set a target of 175 Gw of renewable capacity by 2022. Of this, 100 Gw would come from solar, 60 Gw from wind and balance from other green sources. India has also committed to source 40 per cent of its energy needs from non-fossil sources at the Paris Climate Change conference in 2015.

Uncertainty abound

Currently, the country’s solar and wind capacity stands at 32 Gw and 38 Gw, respectively, while 13 Gw of solar and 7.3 Gw of wind power capacity is under construction.

“There hasn’t been any ma­jor policy development which has been favourable for the sector. It has just been aggressive bidding and mega tenders. No one is sure how much of it will actually come. Projects with ultra-low tariffs will be the most difficult to execute. The government is positive that renewable tariff will fall further. It might fall but it is not creating any value in the sector,” said a senior executive of a leading energy firm.

Wind power capacity totall­ing 1.4 Gw has been unilaterally cancelled by project developers, including Torrent Power, Inox Wind, and ReNew Wind Energy. Recently, ACME Solar sought the CERC’s nod to cancel its 600-Mw solar power project in Rajasthan, which it won at a record low tariff of Rs 2.44 per unit.

The pandemic has further complicated the issues for the sector with construction getting delayed and states shying away from buying renewable power. This paper recently reported that the lockdown, supply-chain disruption of Chinese solar imports, delay in transmission connections, and reluctance of states to purchase renewable energy have delayed 39.4 Gw of solar and wind projects in the country.

A total of 22 Gw of projects are to be awarded in two to three months. There is, however, not a single standalone wind power project in the planned capacity. There are either solar power projects or solar-wind hybrid power projects.

Economies of scale

Industry watchers are, however, betting on the volume that the government is pushing in the sector. In the latest commentary, Ankit Hakhu, director at CRISIL Ratings, said the sagging economy and a weak financial sector may pose challenges to fund the credit requirement, but the scale being offered with fresh tenders could ease refinancing.

“With growing scale, the sector will churn out around 18 Gw of fresh stabilised portfolio with top developers over the next three years that are amenable to refinancing. That means an aggregate debt capital of Rs 70,000 crore can be freed up to fund greenfield capacities,” he said.