Interview: SunSource Energy says regulatory uncertainty is solar industry’s biggest challenge

Kushagra Nandan and Adarsh Das founded commercial and industrial solar energy and storage solutions provider SunSource Energy in 2010.

The international company’s portfolio of more than 300 MW of distributed solar generation capacity sprawls across 24 Indian states and six nations. SunSource’s project highlights include developing one of India’s first private solar-plus-storage portfolios, with facilities in Himachal Pradesh, Ladakh and Andaman and Nicobar; one of the largest open-access projects in Uttar Pradesh; an innovative floating PV project for Indian Oil; and a 1.8 MW solar project in the Philippines, one of the largest solar rooftops in the country at the time.

The company’s cleantech project for the Sana Foundation helped more than 25,000 people per year across seven tribal villages in Andhra Pradesh by giving access to clean drinking water, bio-toilets and clean electricity, and won the Google Impact Challenge Award.

SunSource Energy is also one of the first energy companies in India to manage its PV waste by working with authorised partners.

In this joint interview, company president Kushagra Nandan, an alumnus of the University of Massachusetts and solar technical expert to the World Bank; and CEO Adarsh Das, who holds an MBA from the University of Michigan Ann Arbor, and a masters degree in solar engineering from the University of Massachusetts, discuss India’s solar scenario, the challenges facing the industry, much-needed policy support and the future.

pv magazine: From 2010 when you started, how much has India’s solar industry changed?

When we started in 2010, the only policy support driving solar was [the] Jawaharlal Nehru National Solar Mission, and to some extent the renewable power obligations [RPOs] being adopted by states. The real adrenaline push in solar capacity addition happened after India’s commitment under nationally appropriate mitigation actions, wherein India committed to replacing prevailing fossil fuel energy dependency with solar up to 15% by 2020.

The government has been proactive in [the] large and medium [solar project] segment – setting up solar parks and conducting increasingly large reverse auctions, mostly through [the] Solar Energy Corporation of India to ensure bankability.

In the past nine years, Swanson’s law has held true – the price of solar photovoltaic modules tends to drop 20% for every doubling of cumulative shipped volume. At present rates, costs go down 75% about every 10 years. This has been a global trend, specially in India which now produces the world’s cheapest solar.

As a developer, what are your biggest challenges?

The biggest challenge is the regulatory uncertainty prevailing across the country, not only in interpretation but also in application of the same by various stakeholders in the value chain. Add to it the problem of financing large scale projects. Tariff-prejudiced decision-making should have lower priority than the quality infrastructure in place. [A] low entry barrier has flooded the sector with developers with myopic perspective and poor quality installations, their only target being meeting the customer’s requirement of low prices.

Is financing the sector’s biggest worry?

Today banks are reluctant to finance projects … rating less than BBB+ in bond credit rating, and [the] non-banking financial companies that used to provide valuable construction and bridge financing support are not active. The government should roll out the red carpet for multilaterals like the World Bank and other climate funds to enter India and support existing financial institutions. A case in point being the World Bank funding for solar rooftops.

Is the chasm between central and state policies a deterrent?

The power sector belongs to the concurrent list in India’s constitution, wherein both the states and center have rights and obligations to nurture and enact policies and regulations. With India’s geographical diversity there cannot be a ‘one-size fits all’ policy. For instance, specifying renewable purchase obligation targets as uniform across country won’t work because of [the] absence of, and non-uniform presence of renewable energy sources.

Being part of the concurrent list also means that none of the policies, regulations and interpretations of statute framed by the states should be in contravention to the policies [and] statutes promulgated by [the] center. However, states often act with [a] vested interest and go beyond the intent of [the] center’s laws and policies. This chasm brews conflict and creates challenges for developers and investors in the sector.

Other challenges stem from short-term and changing policies. This creates an environment of uncertainty, especially when the impact of the changes creates major swings in project returns or contractual obligations such as [the] tariffs of projects.

Of late, a few states are renegotiating or refusing to honor power purchase agreements. How much is that eroding the confidence of solar developers and investors?

Enforcing contracts is one of the critical components contributing towards [the] ease of doing business ranking methodology of [the] World Bank. Sovereign bodies reneging on contracts is unfortunate for the entire sector. Not only is it diminishing investor confidence, it also counters the government’s stated desire to attract [the] foreign direct investment required to meet the country’s renewable energy targets.

That said, we are fortunate that India’s institutions, such as quasi-judicial and judicial forums like state electricity regulatory commissions and [the] Appellate Tribunal for Electricity have always upheld the true interpretation of contracts and statute. This counteracts some of the damage done and restores the confidence for doing business in the sector.

If SunSource Energy were to set an agenda for India’s solar policy, what would be on the to-do list?

Instead of budget-based announcements, monetary and fiscal benefits to the solar industry should have predefined sunset dates set for multi-year timeframes; policy benefits by states should have consistency, and once granted for a project must remain [for the] useful life of the project; regulatory inconsistency must be contained and there should be single-window clearance for [the] installation of solar projects with predefined timelines and specified responsibilities; support from financial institutions is a must, especially for mid-sized and smaller projects; and enforcement of RPOs [should be ensured] as part of regulations by state electricity regulatory commissions.

What are SunSource Energy’s future plans?

As an integrated solar-plus-storage-plus-energy management solution provider with 100-plus clients in six countries, we aim to continue building capacity and play a leading role in the realization of the government’s target of 40 GW [of] rooftop [solar] by 2022. We have stepped into the hybrid solar market and plan to further expand our footprint to other emerging nations.