Vinay Rustagi, MD, Bridge to India, a solar sector think-tank which keeps a tab on micro-trends presents a statistical perspective. According to him, driven primarily by surge in solar energy capacity, 2018 had turned out to be peak for Indian renewable sector with 13 GW annual capacity addition. In 2019, the capacity addition nosedived to around 7 GW followed by 10 GW in 2020. “Not only in India but elsewhere too we are noticing a slowdown in the solar sector with massive disruption in module production (primarily controlled by China) and firming of steel and fabrication prices. And the trend may remain so, for another one year. A market like India is waiting for the second phase of solar surge momentum,” he underlines. 

In the wind sector, the downturn has been more acute. With decisive base in India’s western coastal states built over a decade prior to 2014, wind was the leader of the Indian renewable basket with around 25 GW capacity in 2014. But now it has ceded that leadership position to solar and the annual growth setbacks to the sector has been more massive.

“In 16-17, the segment had seen a major addition of 5,500 MW alone. But after that competitive bidding and reverse auctions were introduced which made the game less attractive for small investors. About 17,000 MW of wind energy has been auctioned since 2016-17 but 10,000 MW is still in the pipeline,” points out Manish Singh, Secretary General of Indian Wind Energy Association who adds that owing to the slowing demand, the volume of active turbine manufacturers in the country has come down to nearly half dozen from a peak of over 20. Furthermore, the fresh initiatives in the wind segment are mostly coming in the form of cash rich solar players also trying to have a supplementary diversified base with modest wind capacity going ahead. 

Mission 450 GW 

Considering the trends in the recent past, analysts are unanimous in their view that the government would fall short of meeting the 175 GW target by 2022 by a substantial margin. “I think, in the best case scenario it would be close to 120 GW,” says Rustagi. But this has clearly not dampened the spirits of the government which has now set a more ambitious target of 450 GW by 2030. Interestingly, the MNRE hasn’t provided any precise break-up of this target. 

There is a larger feeling among the stakeholders that a fresh wave of momentum has begun taking a shape though on a low key basis. And this is somewhat visible in terms of pipeline and also in the form of some fresh regulatory push. Credit rating agency ICRA, in its report on the renewable sector released in August, had maintained stable outlook mentioning continued policy support from government, strong project pipeline and superior tariff competitiveness offered by wind and solar power projects – both in the utility and the open access segments. 

It underlined tariff competitiveness offered by the solar and wind power projects in utility auction route continued to remain superior, with tariffs remaining below Rs3 per unit, despite the upward pressure arising from the imposition of customs duty on imported cells and modules from April this year.

“The investment prospects in the RE sector thus are expected to remain strong, given the policy impetus with a target to reach 450 GW by FY30 and competitive tariffs. The capacity addition in the power sector over the medium term will be driven by the RE segment, led by a strong project pipeline of close to 40 GW as on date,” Girishkumar Kadam, Senior VP and Co-Group Head, ICRA ratings had commented. However, on the execution front, a host of challenges were cited which included land and transmission infrastructure as well as “slow but improving progress in signing of power purchase agreements and power sale agreements by intermediate procurers with state distribution utilities (discoms).”

The Union ministry meanwhile has provided a major relief to players in the game (the common feeling within the industry is: the boys have gone and only men are there on the turf) which is expected to protect them from PPA renegotiation decision of some states like Punjab, Gujarat and Telangana. The ministry has issued a notification which clearly earmarks that the power supply from renewable energy plants to discoms can’t be disrupted over commercial reasons. The notification has also allowed periodic revision of costs by gencos due to changes in taxation or government regulations.

“The investors and other stakeholders in the power sector had been concerned about the timely recovery of the cost due to change in law, curtailment of renewable power and other related matters,” the ministry said in a release on 23 October. The states meanwhile are yet to formally react to this new provision. “Apart from the execution related challenges, the RE developers are facing challenges arising from delays in payments from the state distribution utilities and grid curtailments as observed in few states, especially for the relatively higher tariff projects,” ICRA had maintained in its report released earlier.

The core issue, however, still remains: by choosing to cross 450 MW by 2030, has India excepted Mission Impossible? At least in the context of time limitations! “The target is ambitious, but certainly achievable. Currently, financial health of discoms is a key priority to make business commercially viable. We need a more balanced solution that allows developers, customers and discoms to share benefits as we move from centralized fossil fuel plants to more economical distributed renewable plants,” says Sandip of Enfinity. 

Many observers, however, have serious doubts that there would be demand for the targeted production volume even as government is expecting major offtake escalation following the development of new storage solutions as well as from the electric vehicle segment over the decade. Not to forget the imagination of an epic-scale global grid where India can significantly contribute. But the fact that a substantial chunk of PPAs are in favour of thermal producers is another important reason for doubting Thomases. “I think, in the best case scenario, we will be around 270-280 MW capacity by then,” says Rustagi. 

A key change during the course of the decade, however, would be further strengthening of solar contribution to the Indian renewable kitty. “From the leader of the basket around 2014-15, wind will increasingly take a supplementary role. Solar’s share in the kitty may well rise close to 60 per cent or even more,” points out Singh. So while prospective quantum augmentation remains debatable, change in RE basket composition seems guaranteed on weightage parameter.