After Rajasthan and Gujarat, Ladakh to Become the Next Major Hub for Renewables in India

Representatives from the government discussed a range of issues affecting the India solar sector amid the ongoing pandemic

Mercom India held a webinar on September 1, 2020, to discuss and analyze the latest developments in India’s solar sector over the quarter. The webinar put the spotlight on the future of solar energy amid a struggling economy during a raging pandemic. Mercom’s newly-released Q2 2020 India Solar Market Update offered valuable perspective and background for the discussion.

The panelists included Dilip Nigam, advisor to the Ministry of New and Renewable Energy (MNRE), and Shailesh Kumar Mishra, Director, Solar Energy Corporation of India (SECI). The webinar was presented by Raj Prabhu, CEO, Mercom Capital Group, and Mercom India’s Managing Director, Priya Sanjay.

Important takeaways from the discussion:

Challenges in the Solar Sector

Speaking at the webinar, SECI’s Director, Shailesh Kumar Mishra, said that earlier there were two significant challenges – high tariff and grid stability. The former has been addressed in the last ten years as tariffs have significantly dropped.

“One of the biggest challenges now is to maintain grid stability. We are now working on renewable energy penetration, and MNRE is promoting solar-wind hybrid projects. There were a couple of tenders for round-the-clock renewable power. We are also working on solar projects bundled with thermal. However, intermittency is a problem, but we are constantly trying to evolve.”

Another significant issue is land acquisition and power transmission.  Mishra said, “As far as land goes, MNRE has come up with a new mode under solar power program, wherein state governments are made partners, and public sector units will take the lead role. They can develop projects independently or as a joint venture with the state governments. The main role of the state government will be to provide land clearances for easy acquisition of the land.”

Low Installations

COVID-19 has severely impacted the solar sector in India, with a sharp decline in installations, primarily due to supply chain disruptions and lack of labor for project development. The second half of the year remains challenging as projects are likely to be moved to the next year, while the industry tries to recuperate from the disruptions.

According to Dilip Nigam, advisor to MNRE, “Due to COVID-19, labor migrated, and as a result, the work has not just slowed down; it has completely stopped. Keeping the situation in mind, MNRE has ordered that all projects will be extended by five months from the scheduled date of commissioning. This isn’t related to just solar projects but also transmission and all other related activities.  By the time the situation eases, we expect a better Q3 and Q4 than what we anticipated.”

Basic Customs and Safeguard Duty

Nigam noted that Basic Customs Duty and Safeguard Duty are tools to curb imports and encourage self-reliance among Indian players.

“Now that safeguard duty has been extended by another year; it will help to curb imports to a certain extent. We have also suggested the imposition of phased basic customs duty, which is yet to be announced as it is under the consideration of the Ministry of Finance and Ministry of Commerce. Once implemented, it will also encourage domestic manufacturing,” he added.

He further stated, “We had proposed 25% basic customs duty – higher duty for modules and lower duty for solar cells. It was to be imposed immediately after the completion of the safeguard duty period, which was July 29, 2020. However, for various reasons, it has neither been announced nor withdrawn. We are providing necessary inputs to the Ministry of Finance in this regard.”

Self-Reliance During COVID-19

During the lockdown phase in India, the Prime Minister stressed on being self-reliant. Nigam explained that partly, this falls under the purview of MNRE in terms of self-reliance in manufacturing solar modules and cells.

Nigam said, “In 2010, India was heavily importing almost 90% of all components, particularly from one country, which we actively tried to avoid. In the last ten years, we have worked on various efforts to change the status quo.”

Nigam added that various initiatives such as the Central Public Sector Unit (CPSU) program and the Pradhan Mantri Kisan Urja Suraksha evem Utthan Mahabhiyan (PM KUSUM) program had mandated domestically manufactured solar cells and panels.

“We are also considering offering some capital incentive to manufacturing units in India,” Nigam said.

Nigam believes that COVID-19 has also helped the Indian renewable energy sector, “Since there is a change in global political perceptions, investors are more interested in establishing their manufacturing base in India than going to one particular country. Many Indian private companies are working on a joint venture with foreign players with plans to set up their units in India. These will help the Atmanirbhar plan.”

DISCOMS Refusing Approvals for Open Access Projects

Andhra Pradesh government’s decision to renegotiate power purchase agreements had created a massive uproar among the stakeholders in the state. The surprise announcement came on July 1, 2019, and has set a bad precedent for other states.

In Haryana as well, open access solar projects are stranded. The state distribution companies are denying the signing of the connection agreement and granting long-term open access (LTOA) to solar power parks and projects. Developers who have invested in the state have sought the help of the ministry in resolving this issue.

Nigam made it clear that the MNRE is not in the driver’s seat when it comes to addressing this issue head-on.

“MNRE had tried at the highest level, all the way to Prime Minister, who spoke with the Andhra government. However, states still have the power to take decisions in this regard. The Andhra issue is different from Haryana. We were apprehensive that the Andhra Pradesh issue might have a cascading effect, but in the case of Haryana, we are communicating with them, and we will take up the problem in the next meeting scheduled with them.

Delays in Approved List of Models and Manufacturers (ALMM)

Nigam said, “ALMM has been consciously delayed due to travel restrictions on account of COVID-19. It will not be effective until October. Manufacturers have shared their apprehensions and difficulties with us. A committee has been formed with the ministry under the additional secretary to look into the issues.”

Nigam added, “It has been decided that ALMM order will only apply to those bids, which are held 30 days after the ALMM announcement is made. Projects in the pipeline before the announcement will not be affected, and 30 days will be enough for the bidding parties to take into account the cost of ALMM into their bidding.”

The 7.5 GW of solar projects in Leh-Kargil

The tender was initially announced with the clause that the solar project developers also had to set up the transmission infrastructure. But after receiving extensive feedback, Mishra said that now the government has decided to separate the tender for transmission and project development and set up the transmission infrastructure ahead of the project development. This is expected to bring in competitive tariffs. He added that the government has been working on this program with renewed focus. After Rajasthan and Gujarat, Ladakh is expected to be the next major hub for renewables in India.

The 90-minute webinar discussed various other topics, including the takeaways from Mercom’s Q2 Market Update, policy updates, and forecast scenarios. You can watch the webinar here.