Solar Will Lead All Power Generation in the Coming Decades

Mercom launches the Mercom India Solar Summit 2021


The Mercom India Solar Summit 2021 kicked off on April 8, 2021, with the session ‘Keynote-State of Indian Solar market,’ led by Priya Sanjay, Managing Director, Mercom India, and Raj Prabhu, Co-founder, and Mercom Capital Group.

The session highlighted the critical demand drivers that propel the Indian solar sector, policy interventions, challenges, and possible solutions to overcome the bottlenecks impeding growth.

The Indian Solar Landscape

The session started with Raj Prabhu highlighting the solid numbers that the Indian solar sector has produced.

He said, “India has set a lofty goal to install 100 GW of solar by 2022 and to achieve the same, the central government had introduced Renewable Purchase Obligations (RPO) for each state. Each state must mandatorily purchase renewable energy, which forms a percentage of the total power consumed.”

Priya Sanjay added, “India added around 3.2 GW of solar in 2020, a 56% dip from the previous year due to the Covid-19 pandemic, marking the lowest installations in the last five years. Of the total, 2.5 GW of installations were large-scale. The year-over-year decline was primarily due to the supply chain disruptions caused by the pandemic.”

However, on the brighter side, 48% of the power capacity additions in 2020 came from solar power, and the cumulative solar installations have now crossed 40 GW as of March 2021.

Gujarat saw the most installations with about 264 MW, followed by Andhra Pradesh with 215 MW, while Karnataka ranked top large-scale solar installations with 7.3 GW installed so far.  Uttar Pradesh, Andhra Pradesh, Rajasthan, and Maharashtra experienced double-digit growth in large-scale solar installations year-over-year. At the end of 2020, nine states had solar installations over 1 GW.

Raj noted, “Karnataka has the highest renewable energy penetration with around 64%, followed by Tamil Nadu with just over 50% of the power mix comprising renewable energy sources. However, only four states in the country – Karnataka, Rajasthan, Andhra, and Telangana – have complied with their renewable purchase obligations.”

Regulations and challenges

The Ministry of Power had announced draft amendments to the Electricity Act 2003, proposing some important and even revolutionary changes in the power sector and specifically renewables.

However, the primary regulation affecting the market is the penalty on the RPO, which has been raised over ten times in case of non-compliance.

There is a proposal to enforce all the contracts to avoid the situation that was seen in Andhra Pradesh, where the government tried to renegotiate the tariffs retroactively. The center is launching new policies to help push renewable energy development, but several states are not fully complying with the policies to protect the DISCOMs.

Other factors affecting the solar sector including Direct benefit transfers. There is a lot of opposition against DISCOM privatization from the states.

Priya said, “Recently, the Ministry of Power issued new regulations regarding the late payment surcharge. A DISCOM with a late payment surcharge outstanding against a bill after the expiry of seven months from the due date will be debarred from procuring power from a power exchange (spot market) or grant of short-term open access until such bill is paid.”

Incidentally, most DISCOMS are overdue by over seven months.

The rooftop solar segment will come under net metering for loads up to 10 kW and gross metering for loads greater than 10 kW. The whole industry is unanimous in saying that this will be disastrous if implemented, and the government has paid some heed to the sector’s woes. Now, the ministry has assured that it will amend this rule, and the industry is anxious to know the outcome.

Supply Chain

The government has been strongly pushing for self-reliance and manufacturing in India with the latest performance-linked incentive scheme of ₹45 billion (~$603 million)  announced for solar modules, announced only yesterday

To protect the local manufacturers from low-priced imports, there is a safeguard duty of 15% until July 2021 is in place, which could be extended. Meanwhile, DCR (Domestic Content Requirement) tenders have been on the rise since 2017, with around 25 GW of tenders announced. This will push developers to go for domestically manufactured modules.

The government has also announced the basic customs duty (BCD) on imported solar cells and modules starting April 1, 2022. A BCD of 40% on solar modules and 25% on solar cells has been announced. All future bids have to factor in BCD.

The solar sector has already seen Gujarat’s 500 MW auction concluding with a winning tariff of ₹2.20/kWh after the BCD was announced. However, the developers who won the auction and whom Mercom spoke to are confident of procuring the modules before the April deadline and hence haven’t factored in BCD. The future auctions will be interesting to watch

The MNRE also said it would enlist the eligible models and manufacturers of solar PV cells and modules complying with the Bureau of Indian Standards (BIS) and publish it as a list named “Approved List of Models and Manufacturers (ALMM).”

Besides, the industry is going through some major supply chain issues.

Prabhu said, “The freight charges had gone up 5 to 8 times due to a shortage of shipping containers; however, Chinese companies have reported charges dropping in the past month. The U.S. forecast predicts that container conundrums will continue as people who are in lockdown turn towards consumer goods that are making up the bulk of freight container loads.”

Meanwhile, Indian developers need to be cautious about bidding and need to factor in these freight charges, among other things.

Prabhu wound up the keynote session on an optimistic note. “We are looking at two big years ahead for solar, with over 20 GW of solar predicted to be installed in 2021 and 2022.”

Rahul is a staff reporter at Mercom India. Before entering the world of renewables, Rahul was head of the Gujarat bureau for The Quint. He has also worked for DNA Ahmedabad and Ahmedabad Mirror. Hailing from a banking and finance background, Rahul has also worked for JP Morgan Chase and State Bank of India. More articles from Rahul Nair.