Sun setting on states' solar projects

No mega tenders in pipeline by major states, demand for solar to be hit

Solar tariffs touched a historic low last week but the celebrations are unlikely to last, as upcoming projects face a bleak future.

After the bidding for the Rewa solar power park in Madhya Pradesh, where tariff spiralled down to Rs 2.97 a unit, the pipeline for mega solar power projects from the states is nearly empty.

Some states have postponed tenders and others have downsized, to not burden their respective power distribution companies (discoms) with too much renewable energy. Solar power projects are seeing a bleak future in larger states such Madhya Pradesh, Uttar Pradesh, Maharashtra, Rajasthan and Andhra Pradesh.

In 2015, 4.5 gigawatt (Gw) of solar project capacity was allocated in India. Of this, three quarters (3.5 Gw) were under state tenders. The share of state allocations reduced to 34 per cent (2.4 Gw of 7 Gw) in 2016. This trend might continue in 2017, said an analysis by Bridge to India. A total of 10,000 megawatt (Mw) of solar power projects were put for bidding during this financial year, of which 30 per cent were by the states and the rest by the Centre and NTPC.

The industry is not expecting any projects to come from the states.

“Only the committed capacity of 10,000 Mw to be built by NTPC would be on offer in several tranches till 2019,” said a senior government official. “So also projects by the central government through the SECI (Solar Energy Corporation of India). Even SECI projects would need the approval of the state governments, who are reluctant to purchase or install any further solar power projects.”

The pipeline is packed till 2018. There are enough under-construction projects for the states to handle, said the chief executive officer of a leading solar power company. “If the larger states do not come forward to procure more solar power via the bidding route, there are hardly any mega projects in sight,” he added.

Rajasthan recently downsized two solar power tenders — 750 Mw to 500 Mw and a 250-Mw project to 150 Mw. The project bidding has also been postponed. A mega project in Kadapa in Andhra Pradesh has been postponed indefinitely.

“Maharashtra and Uttar Pradesh have a decent pipeline of new projects,” said a Delhi-based sector expert. “There may be an overall slump in new allocations, if Maharashtra or Uttar Pradesh doesn’t come forward to buy more solar power. It just makes sense for states to meet any requirement for solar power through SECI or NTPC tenders.”

Maharashtra has still not signed previous power purchase agreements with renewable energy project developers. Uttar Pradesh, Bihar, Rajasthan, Haryana and Punjab are not planning any further projects due to lack of funds at the distribution level, said senior officials. The lack of demand would hamper the growth of the sector.

The states are facing issues around evacuation and land resources. Most of the states are meeting their optimum demand for solar, which is in sync with transmission planning. At the same time, financially beleaguered discoms have limited capacity to buy renewable energy.

“So to meet the renewable purchase obligation, the states meet the shortfall by buying renewable energy certificates (RECs) or purchasing from renewable energy-rich states,” said a power sector executive.

The sale of REC has increased sharply of late. During January 2017, close to 1.25 million RECs were traded — setting an all-time high record, predominantly on purchase by discoms, followed by open-access consumers and captive consumers.

“It is a seasonal phenomenon to increase purchase of REC at the close of the financial year. But the states are soon realising that purchasing RECs saves the hassle of infrastructure creation, evacuation and the sale of power,” said the executive quoted earlier.

Sources: Industry, Bridge to India & Ministry of New and Renewable Energy