HEADLINES:
December 14 2018
Slow policy decisions eclipsing solar projects
04 November 2018

Developer managing uncertainty of State policies rather than the business, says Rays Future Energy CEO Rahul Mishra

A combination of slow decision-making at the Centre, and policy uncertainty by state governments has meant that the solar sector has taken its foot off the accelerator and is now much more cautious about the future, according to Rahul Mishra, CEO of Rays Future Energy.

While some of the Centre’s indecision can be ascribed to the fact that it is distracted by the run-up to the general elections, a large part of it cannot be explained away due to this, Mr. Mishra said.

Poll time

“Regarding the government, we are getting into election zone, and it’s very typical, even if you look earlier, the last few months before an election there is always a flux in decision making and things moving forward,” Mr. Mishra said in an interview. “To that extent, some of the government fatigue is explainable, but despite that there are a lot of things that could have been done that is lacking, especially on renewables. Things that could have easily been done, decision making is delayed.”

Take the example of Solar Energy Corporation of India’s (SECI) recent bid for which the deadline was initially set as June 30, and was then belatedly extended, Mr. Mishra said. “In the case of SECI rooftop tenders, everyone knew June 30 was the last date, and the request for extension was made very early on, around March,” he said. “The final extension which came was on July 20, post the expiry of the commissioning date. And it took a lot of pushing from the industry and SECI to even reach out to the Ministry, and it took even more time to get the decision out.”

This delay, Mr. Mishra said, has probably resulted in only a third of the required volume of capacity actually getting done. “Look at the last six to seven months, there are incidences that are negative on a perspective of investment and managing business,” he added.

“The solar policy in Karnataka said that if you commission your project in the five years of that policy, which expired on March 31, 2018, all the charges under open access would be waived. So, on this basis, 1500-odd MW of capacity came. It’s not as if that capacity came without government approval. A month after the policy’s expiry they came out with an order saying these developers had to pay 25% of the charges.” “The safeguard duty ‘bomb’ then happened three months later,” Mr. Mishra said. “At night you come out with something and say that even today’s day is included. You have to take care of the projects that are already either in construction or the modules that are already ordered.” In addition to this, several cases, such as in the U.P. and Gujarat, where bids were cancelled for solar projects because the bid was too high, further exacerbated the uncertainty in the sector.

“Now the whole concept of keeping a ceiling tariff is coming, where they are talking of setting a ceiling for bid tariffs at about ₹2.5 or ₹2.7,” Mr. Mishra said. “The bids that come have to be below that level. Nobody wants to compare the solar radiation levels of Gujarat or Rajasthan with U.P., how do you offer a tariff of ₹2.5,” he asked.

“At the end of the day, the developer is managing the uncertainty rather than managing the business,” he said.

Looking ahead, Mr. Mishra said that while the target of 60GW of utility scale solar energy capacity might be reached by 2022, reaching even a quarter of the 40GW target for rooftop solar would be a challenge.

“Of the ground projects, including the ones commissioned and already awarded, they have around 34 GW already,” he explained. “And we still have another three years left, so my sense is we should get about 50-60 GW by 2022. In rooftop, we will struggle to even reach 10 GW. Currently, we are at about 2.5 GW and this is after three years and a lot of work. Adding even 1 GW a year is a huge number right now, so even if we do that or 1.5 GW a year of rooftop, that still takes you to 7 GW or so by 2022.”

“We are not in a market where the returns are looking good,” he said. “These are single-digit rates of return. One has to be cautious and opportunistically careful in terms of what business model works. That’s why the real delivery of business in the sector is less.”

 

 

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