India added around 20GW during 2014-18, it still falls short of the National Solar Mission target by a huge margin. We expect an additional 45-50 GW of solar capacity addition between fiscals 2019 mid and 2022 December.  Which makes the total capacity to around 70-75 GW. Well short of Prime Ministers set target.

Things are not easy even for reaching 70 - 75 GW. A safeguard duty on solar modules from China and Malaysia, which took effect  and will continue for two years, is expected to slow capacity additionally.

And more importantly the PPP negotiated with various Governments should redo and allow higher PPP. The rates such as Rs 2.44 per unit as these will never allow the 500 MW plant to recover its  money in  and 15 years time leave alone profits, by that time maintenance and reduced yield will become focus area.

India will not be able to achieve its ambitious target of generating 100 GW Solar Power by 2022. In a report, Softdisk research wing said that in the best-case scenario, the country will touch 65-70 GW, against the current capacity of 25.21 GW.

"We are more confident that projects with the Solar Energy Corp. of India (SECI) will be executed faster; their projects are better able to deal with evacuation concerns (i.e. connection to the national grid),"said Salil Chatterjee, head, Softdisk Research. 

Individual states have also set aggressive targets under their respective solar policies. While 7.3 GW is under construction, based on already allocated schemes, another 2.41 GW is expected to be tendered and allocated over fiscal 2019 based on upcoming tenders under various state policies as on September, the report shared exclusively with us  said. "However, state government projects are not as well-funded and they have less access to cheap financing.

A key area of concern is the rooftop solar segment. The solar mission's target for the rooftop segment - using the rooftops of commercial and industrial units to generate their own power and depend less on the grid is 40 GW by 2022. We expect this figure to be not more than 10 to 15 GW by 2022, because the cost of power here is expected to be far higher than from the grid.

"There are execution and counter-party risks to the rooftop segment, and that's why we're expecting the big shortfall here," Salil said. "Unless the rooftop solar segment is supported with a firm battery market and the legal enforcement of contracts because developers run the risk of the host establishment not honoring a contract when tariffs change, the rooftop market will struggle."

Industry experts believe that the safeguard duty will raise capital costs by 15-20%, adding 30-40 paise per unit to bid tariffs so developers can maintain the same rates of return on their investments. India achieved a record low solar power tariff of Rs. 2.44 per unit in May 2017. In July, tariffs again touched Rs. 2.44 per unit in an auction conducted by SECI.

However, uncertainty regarding the duty is making developers wary. ACME Solar, which had quoted the lowest tariff of 2.44 a unit, has about 2000 MW of projects where construction is either underway or yet to begin. On 7 August 2018, ACME said that it would pull out of these projects if it has to bear the additional burden of the safeguard duty.

States are also seeing tariffs rise. At a July auction by Uttar Pradesh for 1,000MW, the lowest bid came in at 3.48 a unit. The state cancelled these auctions. SECI also cancelled 950 MW of solar tenders in July, unhappy with the tariffs that developers were bidding.

"The government must be live with the outcome of bid price; it should go ahead with these projects even if tariffs are higher than what they like,"Salil said. "It's hard to say which tariff is unreasonable; it's hard to predict whether module prices will go up or down in the future. If bids are scrapped, you'll further delay the overall program."India is the world's third-largest energy consumer after the US and China. Its renewable energy program is ambitious where as it stands now.

India's 25% safeguard duty will threaten ongoing solar PV projects. The two-year period of the recommended safeguard duty is very short, discouraging any investment in setting up new solar manufacturing capacity, say analysts and companies Sofdisk spoke to. At the same time, for solar project developers, the duty will impact tariffs to the tune of 12-15%, posing an immediate threat to viability of projects under execution, they add.

Avaada Power, formerly Welspun Energy, solar power plant in India. The company has almost 1 GW solar portfolio in India, nothing in UP until now.

Solar PV industry analysts and project developers in India feel that imposing 25% safeguard duty on solar cells and modules from China and Malaysia will be a negative step in the overall goal for de-carbonizing the energy sector in India, where tremendous progress has been made in the last four years.

Levying such duties will drastically affect solar power developers and capacity addition targets set by the government of India.

Solar cell/module manufacturing : Exempting SEZ

Softdisk feels that since the duty period (two years) is very short, it will not encourage any new investment in setting up new solar capacity. By the time a manufacturer comes online, it will not be able to reap the benefits under safeguard duties.

Under present recommendations, it is completely unclear as to how domestic solar PV cells and module manufacturers are going to be protected. "Almost 70% of manufacturers are located in the special economic zone (SEZ) and the present findings have clearly mentioned that decision of applicability of safeguard duty on domestic SEZ units is out of their investigation purview and needs to be dealt by concerned authorities,"adds Shekhar Dutt, director general, Solar Power Developers Association. 

Gyanesh Chaudhary, Vikram Solar MD and CEO, says, "If safeguard duty is imposed without exempting SEZ to domestic tariff area (DTA) removal, it will affect the domestic manufacturing industry adversely, as 3,825 MW out of 8,898 MW installed capacity for solar modules is based in SEZ and 2,000 MW out of 3,164 MW installed capacity for solar cells is based in SEZ."

Solar project development

The duty will impact tariffs to the tune of 12-15%, which will be harmful for solar PV developers who have projects under execution, as they will face an immediate risk to the viability of their projects. Even cases where a specific change in law protection is available to developers, getting DISCOMs to negotiate and agree pass-through on extra cost will be an uphill battle. 

Mr Sohan Jain, MD, Microsun Solar, feels 50 paise/kWh increase in electricity tariffs would deter utilities to adopt renewable energy. Eventually, 

Imports from other countries

Imports from other countries are bound to happen to some extent, particularly as Chinese manufacturers have been setting up plants in different countries around the world to overcome such challenges. But manufacturing capacity in developing countries other than China and Malaysia is still very small and here may shift in source of input. But Safeguard duty and  American  Chinese  trade war has resulted in depreciation of Chinese currency has its own repercussions. 

Suggestions 

Softdisk emphasizes that tariff barriers, such as safeguard duties have never helped any country in attracting investments into solar PV manufacturing. Rather, he suggests, the Indian government should consider a fresh look at the solar PV manufacturing policy, and implement policies to improve the competitiveness of the Indian manufacturing - by way of tax breaks and lower cost of capital - which can then attract new investments in this sector. The  immediate concerns are about thousands of MW whose import contracts for want of completion and commissioning of projects are already tied up and deliveries are expected any time now. The same should be excluded from impositions of any such duties, we strongly believe. 

Feeling that the imposition of safeguard duties in the current manner will make SEZ units uncompetitive and force them to shut their operations, Gyanesh Chaudhary recommends the government to exempt SEZ to DTA clearance of solar cells and modules from the ambit of safeguard duty. 

Otherwise, it will lead to counterproductive results and destroy the domestic manufacturing industry, which is already in bad shape. The government should come out with a specific exemption by restricting safeguard duties imposition to input costs (which is subject to duties of safeguard) for all SEZ to DTA clearance, in order to accord equal protection to units in SEZ and DTA. 

Government Efforts : 

The Ministry of New and Renewable Energy (MNRE) has taken several steps to fructify Prime Minister Shri Narendra Modi's dream of clean energy. The largest renewable capacity expansion program in the world is being taken up by India. The government is aiming to increase share of clean energy through massive thrust in renewable. Core drivers for development and deployment of new and renewable energy in India have been Energy security, Electricity shortages, Energy Access, Climate change etc. 

A capacity addition of 14.30 GW of renewable energy has been reported during the last two and half years under Grid Connected Renewable Power, which include 5.8 GW from Solar Power, 7.04 GW from Wind Power, 0.53 from Small Hydro Power and 0.93 from Bio-power.   Confident by the growth rate in clean energy sector, the Government of India in its submission to the United Nations Frame Work Convention on Climate Change on Intended Nationally Determined Contribution (INDC) has stated that India will achieve 40% cumulative Electric power capacity from non-fossil fuel based energy resources by 2030 with the help of transfer of technology and low cost International Finance including from Green Climate Fund. 

SOLAR PV MARKET IN INDIA

Solar market too has become highly fragmented both product-wise as well as number of companies jumping into the Solar bandwagon.

Vikram Solar completed 50MW in Tamilnadu in a record time last year. Vikram is working on the technology where by the DC to AC conversion can take place module level itself. These module have been successfully tested and are currently under going burn test at their own setups. 1500 Watt panel, which they say can be used as roof. 

Adani Groups Mundra Solar PV Ltd. with a capacity to manufacture 1.2 GW of Solar PV panels has emerged as a strong player in Solar PV Panel manufacturing arena.

Waaree Energies Ltd., a Mumbai based PV Manufacturer has taken huge projects in Gujarat and have started acquiring smaller solar companies having strong Solar experience.  

Swelect Energy Systems Ltd, formerly Numeric Power Systems Ltd, a BSE listed company sold of its UPS Business Unit for over 850 crores to concentrate on Renewable Energy, space. In just a few months the company has set up and commissioned two solar Power Plants and a Wind Power Plant and has already over 3000 rooftop installations to its credit till now. The company has acquired HHV Solar, a reputed SPV Panel manufacturer and has invested heavily on increasing the plant capacity from 35MW to 150 MW and is looking forward to doubling its capacity. They are first company in India to commission a 100 kw floating Solar Plant in Kolam Kerala. 

Emmvee another panel manufacturer is planning for Solar cell manufacturing of 500Mw, Module expansion plan of 1000 MW & project development and EPC implementation by 1000 MW by 2020. 

Innovative Solar is in the process expansion as it has come up with 300 Watt modules which are very sturdy and have very high yield these modules come up with IEC certifications.

Softdisk by its conservatives estimates, believes that 30 GW opportunity till 2020 is the most likely scenario. The Indian solar market is a key future growth market for PV. 

India's installed capacity as of as on 31st March 2019  was 25.21 GW, which is still negligible as compared to more mature markets such as Germany.  And far below Hon. Prime Ministers target 100 GW of SPV Power by the year 2022.

There are also external factors in India challenging its solar industry, namely high inflation and consequently high interest  rates, slowdown in GDP growth, a severely depreciated rupee and relentless corruption scandals of the previous Govt. Low bids with high interest rates in the range of 13 to 15 per cent make it challenging to borrow in India. Most Indian Banks look at these projects as risky and look into it only after land acquisition and registration & PPA.

Statutory approval are completed & the number of  successfully executed quality project that can last 25 years.  

Softdisk believes that the Govt. & regulators must :

• Develop renewable Energy Laws mandatory.
• Set-up standards for renewable energy.
• Conducting resource assessments.
• Supporting research and development activities thru investments.
• Early timing of policy announcements and ease of implementation.
• Addressing concerns relating to enforce-ability of PPAs.
• Banks to brought in loop for financing Solar projects with renewable energy purchase obligation.

These changes will allow make in India a Roaring Tiger. 

The coming year will see some movement and interest by market players to explore new business models/segments within the solar industry in India. Further, the falling cost of solar will lead to new projects in the captive commercial space as solar tariffs become competitive with commercial and industrial grid prices in various parts of the country.

The rating does not include major EPC players such as BHEL,  WELSPUN, BEL, CEL, TATA  Solar, BOSCH, Solar Semi-conductor & Moser Baer India Limited, LANCO, L&T, INDO SOLAR, Reliance Power, Mahindra Power, Wipro-ECO which have diversified interest  etc.