Recent time witnessed Solar Energy Corporation of India (SECI) rising the upper tariff ceiling for its 10 GW of interstate transmission system (ISTS) connected solar photovoltaic power projects. This can be considered as a move towards the right path, factoring in lack of developer interest in recent solar projects. Although, Indian solar initiatives have earned commendation for making incredible growth trajectories (5 GW solar capacity in 2015, 10 GW in 2016 and ~24 GW in 2018), policy interventions are needed to protect and prioritize the solar industry for continued success.
Deviations from Priority
SECI’s raising upper tariff ceiling is due to lack of developer interest in its latest project auctions. Indian solar tariff has fallen from ₹ 12.76 to ₹ 10.95 per kWh in 2010-11 to ₹ 2.44/per unit in 2018 (near about 90 per cent fall). And to maintain a consistent fall of tariff, GUVNL, UPNEDA, SECI have cancelled 3.9 GW (cumulative capacity) solar projects in recent months.
- SECI cancelled 2.4 GW out of a 3 GW Interstate Transmission System (ISTS) connected solar auction held in July 2018.
- The Uttar Pradesh New and Renewable Energy Development Agency (UPNEDA) also cancelled 1 GW auction for grid-connected solar projects across the state held in July 2018.
- The Gujarat Urja Vikas Nigam Limited (GUVNL) also cancelled the auction for the development of 500 MW of grid-connected solar photovoltaic (PV) projects in March 2018.
Also, recent demands like asking developers to set up a manufacturing plant to win solar projects (e.g- SECI’s 10 GW solar project) have negative effects and produced hesitant developers.
Government of India’s recent decision to impose caps on solar tariff has also created a stir among solar developers, urging them to caution the Government against this move, citing the possibility of it leading to project unviability. The developers also highlighted the fact that capping maximum permissible tariffs at ₹2.5 (~$0.036)/kWh by upholding a project in Rajasthan (which has one of the highest solar generations) is not fair.
Besides issues conjured by tariff fall, recent 25% safeguard duty on SEZ based solar manufacturing units, which by the way amount to 40% of Solar panel Manufacturing Units and 60% of Solar Cells Manufacturing Units in India seems to be another major damaging blow to the industry. It is suspected that imposition of Safeguard duty will increase solar tariff by raising the equipment cost, thus defeating Government of India’s target to reduce the solar tariff, while pushing out domestic solar manufacturers out of the market.
Lack of focus on domestic solar manufacturing is the biggest deviations of all in Government of India’s solar mission which was expected to make good use of initiatives like- Make in India. Investment and support to domestic manufacturing could have created jobs, given control on solar equipment quality, and led to claim the export market. However, continued import and other deviations from core solar mission priority does the complete opposite and as result, solar demand in Q1 2019 is suspected to go lower than 3.5 GW.
Need For Policy Intervention to Favour Manufacturing
Priority for the Government of India in solar sector has to be manufacturing. It is the only way to improve upon India’s energy and economy. Stabilizing tariff and bringing flexible financing options can build investor and developer interest.
A larger policy framework is required to support manufacturing growth. New policies should be developed and implemented immediately that can address issue revolving around infrastructure, transport, taxation, power outages and labor laws. Indian solar industry has performed very well in recent years and with more investment, it can grow to support the country. However, imposing taxes and duties is not the way to go. More focus is needed in building R&D institutions, which our country clearly lacks.
India still has a chance to turn around and use the great solar opportunity to transform the country. But the time is now, and right decisions that prioritize solar can help the country reach targets and become solar super power in near future.