Continued policy uncertainty and tariff caps could hamper renewable energy capacity addition in India as per CRISIL estimates. The solar and wind power capacity could increase by only 40 GW to 104 GW by FY2022 compared to 64.4 GW in FY2019, which would mean that the 175 GW target would be missed significantly. (Source: CRISIL)
- Indian renewable energy target of 175 MW may not be achieved after all as the market goes through unstable policy environment amidst waning developer interest
- According to CRISIL, India may fall short of its 175 GW renewable energy target by the end of fiscal 2022 by 42%
- Continued global interest is a positive according to the CRISIL report which is what the government needs to back up with supportive and stable policies
- Government must look into relaxing tariff caps to ensure project viability from the perspective of the developers
CRISIL Brings Down Cumulative Solar Power Capacity Projection For India To 60 GW By 2022; Cites Incoherent Government Policy As Dampening Developer Sentiment Leading To Slowdown In Capacity Addition Momentum
(13. March 2019)
Renewable Energy Projects Worth 480 Billion INR ($7.5 Billion) In India Face Risk Of Tariff Renegotiation From DISCOMs, According To CRISIL
(29. August 2017)
Under the country’s Jawaharlal Nehru National Solar Mission (JNNSM), sometimes referred to as the National Solar Mission (NSM), India aims to have 175 GW of renewable energy capacity and 100 GW solar capacity by the end of March 2022. Till the end of July 2019, the grid-interactive renewable energy capacity of India had reached 81.3 GW with solar power contributing over 30 GW, as per the Ministry of New and Renewable Energy (MNRE) (see 30 GW: India Installed PV Capacity Till July 2019). That leaves more than half the way to go for renewables and over two thirds for solar.
Industry experts have time and again cautioned the country won’t be able to achieve the 175 GW target by the designated year. However, the Indian Prime Minister Narendra Modi announced at the Paris Climate Action Summit to increase the country’s renewable energy capacity to 450 GW without specifying by when he plans to achieve it. Going by the way things are, another commentary from ratings agency CRISIL claims India would end up with 104 GW renewable capacity by the end of fiscal year 2022 (March 2022), which means it would add only 40 GW between FY2019 and FY2022, leading to a shortfall of 42% from the targeted capacity.
The loss will be due to continued policy uncertainty and tariff glitches which have been leading to ‘material waning of developer interest last fiscal’. In its report REturn to uncertainty, CRISIL points out unstable policy environment is a big risk to the country’s renewable energy targets as there is now a growing incoherence between the policy thrust and the actual action by implementation agencies as the Solar Energy Corporation of India (SECI) and state distribution companies (discoms).
The authors of the report wrote that 26% of 64 GW projects auctioned by the center and the states received no or lukewarm bids while another 31% faced delays in allocation after being tendered. The number of these undersubscriptions and cancellations of awarded tenders have also increased.
All these factors resulted in the ratio of auctioned or awarded to tendered projects declining to 34% in FY2019 from 77% over FY2015-16 and FY2016-17.
The tariff renegotiation issue brought up by the Andhra Pradesh state government coupled with prolonged payment delays to renewable energy generators by state discoms have endangered existing and planned investments while also setting a negative precedent. In Rajasthan, another solar rich state, the government is proposing additional an annual levy for projects that sell power to entities outside the state in its draft solar and hybrid policy, which would be another blow to the market (see Rajasthan Aims For 25 GW Solar Capacity By FY 2022).
Constantly lowering tariff caps for renewable energy tenders is yet another challenge facing the market as it disregards project viability and leads to tender renegotiations that prolong the time period and thereby leads to disinterest among developers.
“The RE sector requires investments of INR 2.6 lakh crore over the next five years as per CRISIL Research’s outlook. With interest from global investors remaining strong, CRISIL Research believes that funding is not a significant risk provided government policy is consistent,” reads the report.
To address these challenges, CRISIL suggests the government look into the twin issues of tariff caps and policy incoherence to restore developer confidence, and relax the caps to provide consistent, stable policy environment by way of also better cooperation between the center and the states. At the same time, it recommends including policies as renewable purchase obligations and penalties for delays in payments under the Electricity Act.