India to introduce a cap on solar tariff and reduces tender size for manufacturing unit

In a major development, the MNRE has directed the Solar Energy Corporation of India(SECI) to fix the upper permissible solar tariff at INR 2.50/kWh and INR 2.68/kWh for developers using domestic cells & modules (without safeguard duties) and imported products (with safeguard duties), respectively. SECI has reduced its solar manufacturing tender size from 5 GW to 3 GW and curtailed minimum bid capacity from 1 GW to 600 MW. However, the size of the PPA remains the same at 10 GW. This comes to post an announcement by the Power  Minister – that all the future renewable energy projects bid would have to cover at least a 50% of a project’s components with domestic manufacturing. Regarding the PPA, it must be executed within a maximum time frame of 90 days from the date of award and a minimum of 40% of commissioned within 21 months from the date of PPA signing. The remaining 60% of the capacity will have to be commissioned within 36 months from the date of the bid award letter. SECI has also revised the time allowed to set up manufacturing capacity to two years from the earlier three-year time period.

  • For silicon-based facilities, the module manufacturing unit has to be set up in India whereas polysilicon can be imported.
  • For non-silicon-based technologies, the primary functional raw material can be imported.

To support this development SECI has announced a 5 MW solar manufacturing tender linked to a 10 GW PPA, also in June. It was the first solar tender where developers were required to locally produce equipment in order to win projects.

Solar installations in India drop down in the second quarter : Report

According to a report, solar installations have gone down by 52% in the second quarter of 2018, primarily due to the uncertainties related to trade duty & module price fluctuations. The Q2 installations were at the lowest since Q1 2017 with 1599 MW, compared to 3,344 MW in 2018. The plant installations were also down by approximately 21% year-on-year compared to 2.025 MW installed in Q2, 2017.

The downfall in the installations was an expected one, pertaining to PPA negotiations post the all-time low bids which led to a slowdown in the tender auctions in 2017 resulting in weaker project pipeline in 2018.

The large-scale installations totaled at 1,184 MW compared to 2954 MW in Q1, 2018. In case of rooftop installations, 415 MW was installed (6% higher than 390 MW in the previous year.)

Cumulative solar installed capacity summed to be at 24.6 MW at the end of the second quarter of 2018 with large-scale projects accounting for 90% & rooftop solar making up the remaining 10%.

It is expected that the installations will be close to 8.3 GW in 2018 if the schedule remains on time.

Government to float 12 GW solar energy scheme which may help domestic manufacturers

Amidst the US-India WTO dispute a new 12 GW energy scheme which has been deftly crafted to mandate local manufacturing without violating WTO’s trade rules, is in the final stage of approval and will help local industry in India sustain the blow of cheap imports.

The scheme worth INR-8,000 cr will be a significant boost for Indian manufacturers who are also waiting for the imposition of a safeguard duty on solar components. The scheme has already been cleared by the Expenditure Finance Committee which is a part of the Department of Expenditure in the finance industry.

The government can mandate the use of locally manufactured components as a part of the scheme since the power is for the government’s own consumption. The scheme will have an implementation period of four years by 2022, with a minimum manufacturing capacity of 3 GW of solar cells per year which is the current size of the domestic solar cell market in India.

In the recent developments of the safeguard case, the Directorate General of Trade Restrictions recently recommended up to 25% safeguard duty on imports from China and Malaysia for a period of two years.

Initially, in February 2013 the United States requested conversations with India concerning certain measures of India relating to domestic content requirements under National Solar Mission for solar cells and solar modules. The appellate body post listening to both parties plea gave the verdict that DCR measures were inconsistent with WTO non-discrimination obligations.

Madrid-based developer in talks to sell India projects

According to recent news, a Madrid-based developer of large-scale solar plants ‘Fotowatio Renewable Ventures (FRV) is in talks to sell its 100 MW power project in India in a deal of approximately INR 500-600 crore.

The company is in talks with various investors like Macquarie Infrastructure and Real Assets (MIRA), green infra JV between PE fund Everstone Group & UK-based Lightsource BP’s Eversource Capital and Edelweiss Infrastructure Yield Plus Fund for the deal.

The project up for sale was awarded to FRV by SECI in a PPA for 100 MW in 2016. This is FRVs first project in India, situated in Ananathpuram solar park in Andhra Pradesh.

Recently in April PE firm Everstone Group joined hands with Lightsource BP, the UK-based leader in renewable energy development, to form a JV platform name ‘Eversource Capital’ to fund the green energy businesses in India. The platform has also launched a Green Growth Equity Fund (GGEF) with a target of $700 million where the UK government and India’s National Investment and Infrastructure Fund (NIIF) will be co-anchors with a commitment of $160 million each.

Another participant, Edelweiss Infrastructure Yield Plus Fund, is a new set up the infrastructure-focused fund by Edelweiss Alternative Asset Advisors. The fund has already raised Rs 2,000 crore till last month and plans to raise $1 billion in total.

Australia’s Macquarie Infrastructure and Real Assets (MIRA) has been an active investor in Indian energy sector and have previously invested in Adhunik Power & Natural Resources, Soham Renewable Energy India and Ind-Barath Energy Utkal.

If we look at the past years’ trend of global investment in India, the Compound Annual Growth Rate (CAGR)  of the investments from 2004-2017 is about 11.33%. The graph depicts many ups and down over the years, with the highest investment in 2011.  2017 also shows decent investment scenario. 

                                                                              Source: Indian Environment Portal Report – Global Trends 2018

Several other foreign entities are also in the process of bringing their businesses to India, with the Indian market picking up speed and shining globally.

 

REC Trading Results – April 2018

 

April saw trading resume for Solar RECs after a gap of one year, after the ApTel pronounced judgment in the case of REC pricing. Also, after record sale of Non-solar RECs in the last 5 months, there was almost no inventory left of Non-solar RECs. In both Solar and Non-solar RECs, demand was robust, considering that this is the first month of the new financial year.

 

Analysis of Trading:

 

Non Solar – Clearing ratio in exchange stood at 72.6% and 77.2% in IEX and PXIL respectively for Non Solar REC’s.  A total of 187,543 RECswere traded, despite demand being at 1,099,426 (as compared to 538,371 RECs traded April 2017; an increase of 104%). RECs traded at the floor price of Rs 1,000/ REC at PXIL, but increased by a minuscule fraction to Rs 1,001/ REC at IEX. However, this increase in the traded price above the floor price has come after a gap of almost 6 years (last trading above the floor price was in August 2012).
Solar – Demand was robust at 8.75 lakh RECs (3.2X demand of April 2017). Clearing ratio stood good at 23.8% and 10.4% in IEX and PXIL respectively.
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