• Power demand falls, but installed solar capacity up

    Solar power installations in the country have reached 8,643MW, driven by four states crossing the 1gw solar installation mark on the back of the Modi government constantly pushing renewable energy as part of its climate management policy.

    Some 500MW solar capacity was added in a month through September, indicating solar installations continue to grow in spite of a slowdown in power demand, declining capacity utilisation of thermal projects and availability of cheaper power on the electricity exchanges.

    Green energy market tracker Mercom Capital has projected a total capacity of 4.8GW for calendar year 2016. Installations have already reached a capacity of 3.8GW.

    According to the latest Mercom report, Tamil Nadu, Rajasthan, Gujarat and Andhra have crossed the 1GW solar installation mark. These states displayed significant activity in the sector and together accounted for 59% of the 8.6GW installed so far. Cumulative solar installations in the country had topped 7.5GW in May. India has 14GW of solar projects in various stages of development and another 7GW waiting to be auctioned. “The challenge is going to come next year when approximately 9GW of solar power is forecast to be installed.

    Unless the ‘must run’ status for solar projects is strictly enforced, we are going to see some challenges,” Mercom CEO Raj Prabhu said.

    Low bidding tariffs in an immature energy — especially power — market and infrastructure failing to keep pace with the rapid rise in solar capacity have heightened apprehensions over future funding and viability of projects. At the end of 2015-16, solar accounted for 2.5% of the net installed capacity in the country, up from 1.4% a year ago, and was the fastest-growing new energy source. Solar accounted for 17.4% of all renewable energy generation in 2015-16 against 10.5% in 2014-15. “The Indian solar market is growing in size but infrastructure and systems have not kept pace with auction announcements.

    For the sector to move from 2GW to a 10GWa-year market, work still needs to be done,” Mercom’s quarterly report in May had quoted Prabhu as saying. Low bidding levels through reverse auctions have been a concern at a time when the Indian banking sector is going through its own challenges, which could make borrowing much more difficult.

    But according to Prabhu, there is no set rule which says tariffs below Rs 5 per unit cannot be financed. Some banks are seriously looking at projects in the Rs 4.5-5 tariff range, but financing depends on sound project economics, borrower credibility, a strong balance sheet and the developer’s ability to service debt.

    According to the Mercom report, creating a ‘reserve backstop fund’ against nonpayments or delayed payments by discoms using NCEF funds could take care of late tariff payment problems, rooftop subsidy delays and have a positive impact by eliminating offtaker risk, reducing interest rates and increasing lending. Tedric Thompson Jersey

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