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Failure of hybrid auction should make India rethink renewable energy policy to realize ambitious target by 2022, says GlobalData

 

November 5, 2018 (Investorideas.com Newswire) Unless India does not make any policy changes, it will not realize the ambitious target of installation of 175 gigawatt (GW) of renewable energy capacity by 2022, says GlobalData, a leading data and analytics company.

Recently, India's effort to accelerate the green energy capacity through auction for 1,200 megawatt (MW) ‘hybrid' projects suffered a major setback as the bidders stayed away from the procedings.

This is the second renewable auction to have failed in October 2018, forcing the state-run Solar Energy Corporation of India (SECI) to extend the deadline for the fifth time. The tender for hybrid projects, which encompasses both wind and solar units at the same site, has now been extended till 14 November 2018.

Mohit Prasad, Power Analyst at GlobalData, says: "In spite of SECI reducing the tender capacity to half of the earlier announced capacity, investors kept away on account of policies associated with it. Policy mandates like tariff ceiling, safeguard duty and mandated manufacturing capacity are responsible for the investors staying away from the auctions."

The government has set a tariff ceiling of $0.035/unit for the hybrid projects. Developers, on the other hand, feel that there should not be any ceiling since the tariff should be driven by the wind density, solar irradiance and the associated competition.

Another deal-breaker is that the tender is forcing developers to enter into the manufacturing sector, which is definitely not their core competence. In order to bid for a project of minimum 2,000 MW of power purchase agreements, the developers are required to set up a 600 MW of manufacturing facility.

In addition, the government has offered a power off-take commitment for two years. Project developers feel that the commitment should be at least for five years so that there is a continuous flow of revenue.

Prasad concludes: "India is currently dependent on 85% of imports of solar products from China. However, the safeguard duty (SGD) of 25% on imports of solar components from China is driving investors away from tenders announced by government bodies. Furthermore, the decision to pass the impact of SGD to consumers while setting a tariff ceiling is also making the investors to channelize their investments in a different direction rather than investing in solar auctions.

"Unless the government does not make any policy changes, the developers would not be participating in auctions, which ultimately can derail India's ambitious target of installing 175 GW of renewable energy by 2022."

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Notes to Editors

Comments provided by Mohit Prasad, Power Analyst at GlobalData,

This report was built using data and information sourced from proprietary databases, primary and secondary research, and in-house analysis conducted by GlobalData's team of industry experts.

About GlobalData

4,000 of the world's largest companies, including over 70% of FTSE 100 and 60% of Fortune 100 companies, make more timely and better business decisions thanks to GlobalData's unique data, expert analysis and innovative solutions, all in one platform. GlobalData's mission is to help our clients decode the future to be more successful and innovative across a range of industries, including the healthcare, consumer, retail, technology, energy, financial and professional services sectors.


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