Solar set for boom after a gloomy 2019

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India’s solar energy potential is estimated at around 750 GW. Against the near term target of “100 GW by 2022,” the country installed a cumulative 31,696 MW of grid-connected solar power generation capacity as of October 31, 2019.

While annual capacity addition has almost kept doubling every year since 2014-15, year 2018-19 was an exception with annual capacity addition plunging to 6529.20 MW, as against 9362.67 MW in year 2017-18. Capacity addition in 2016-17 was 5525.98 MW, and in 2015-16 3018.88 MW—according to the data furnished by power minister Raj Kumar Singh in the lower house of the Parliament (Lok Sabha) recently.

Speaking about the downtrend, IHS Markit senior analyst Dharmendra Kumar told pv magazine: “PV installations are estimated to have decreased in 2019 compared to 2018 due to political uncertainties, module price increases associated with safeguard duty and a fewer number of awarded tenders.”

Issues like delays in payments by distribution companies in some States, delays in adoption of tariffs by concerned State Electricity Regulatory Commissions and reopening of contracts by State Government of Andhra Pradesh further hurt investor sentiments.

Following a spate of turbulence, year 2020 is however set to see installation pick up significantly and march well past 10 GW.

Year 2020: Reasons to cheer

The safeguard duty on solar cell and module imports—which has already come down to 20%—will further decline to 15% between January 30, 2020 and July 29, 2020. The resulting lower cost of module procurement will see installations picking up in the market which has been held back by high cost of imports.

Dharmendra forecasts 2020 installations to be at least 10 GWac or even higher because of various positive reasons including lower module prices: “Firstly, module prices are expected to be below USD 0.20/W by December 2019 inclusive of safeguard duty, for shipment in Q1 and Q2 2020. Local suppliers are also offering modules on par with Chinese suppliers in terms of pricing. The expected decrease in module prices will boost installations throughout 2020 as solar becomes more price competitive,” he said.

“Secondly, projects that didn’t come online in 2019, will also completed by Q1 2020 because of end of India’s financial year 2019.

“In addition, 7 GW of projects that were awarded in 2019 will be installed in 2020 along with another 5 GW of tenders that are yet to be awarded.”

Government initiatives. Measures taken by the government in year 2019 will further act to boost the investors’ confidence.

To address the issues of delayed payments by State DISCOMs to renewable energy generators, the government has made it mandatory for the distribution licensees to open and maintain adequate letters of credit as payment security mechanism if provided for under power purchase agreements (PPAs) with distribution licensees.

Further, to strengthen the contractual provisions in the power purchase agreement between the solar power generators and the procurers, and to facilitate setting up of renewable energy power projects, the Government, vide Ministry of New and Renewable Energy notification dated October 22, 2019, has made major amendments to the ‘guidelines for tariff-based competitive bidding process for procurement of power from grid-connected solar projects.

As per the amended guidelines, solar power generators can submit documents to establish possession or right to use 100% of the required land for a period not less than the complete term of the PPA, on or before the scheduled commissioning date.

Quantum of compensation for back-down has been increased from 50% to 100% with provision for recognition of only written instructions of back-down.

Trends in modules

PERC monocrystalline modules are seeing strong growth in the Indian market which has so far been dominated by lower-priced multicrystalline PV modules.

Explaining the trend, Kumar said: “As PV module prices continue to be a core consideration for determining project economics for PV developers and EPC contractors, multicrystalline PV modules still retain a significant share of the Indian market because of their lower prices.

“However, although the monocrystalline share is still lower than in other markets, we are witnessing a strong growth of PERC monocrystalline modules in the Indian market, in an alignment with the global demand trend towards higher-efficiency monocrystalline modules. PERC monocrystalline prices have strongly declined in the last two years, making this technology competitive as well in the price-sensitive utility scale Indian market.”

IHS Markit forecasts a significant growth of installations with bifacial modules from 2020 worldwide but India will not be one of the core markets for this technology.

However, while bifacials will not represent a core market, the latest deal of Indian developer Adani Green Energy with Chinese module manufacturer LONGi Solar for procurement of up to 1.2 GW Hi MO4 bifacial modules by 2020 signals the trend catching up over time.

PV storage: Cost still a deterrent

Energy storage systems for PV projects are still not cost-effective in India, constraining their uptake.

“Solar + storage projects are yet to pick up in India because of the relatively high capital cost of stationary energy storage systems and the price sensitivity of customers in India. Customers have been considering more cost-effective solutions such as hybrid combinations of lead-acid and lithium batteries but the prices are still not cost-effective for solar projects in India,” said Kumar.

Sharing cost estimates for 2020, BloombergNEF India expert Atin Jain told pv magazine: “Renewables with battery energy storage in India can cost 3-5 times more in 2020 than standalone renewable projects according to our recent analysis. Also, smaller storage systems (storage backup for 25% of generation capacity) generally offer better economics than larger ones (storage backup for 100% of generation capacity).

Based on the above analysis, BloombergNEF expects the peak hour supply bids in SECI’s 1.2 GW renewable plus storage auction to be at least twice the offered off-peak hour supply rate. “This could test the appetite of SECI and distribution utilities to buy power from these projects,” said Atin Jain.

The SECI tender requires storage to back up at least half of the 1.2 GW renewable energy generation capacity.

“We are closely monitoring the development of this tender, as this could be the most meaningful advancement of energy storage contracts in the country’s history. That said, we are still gauging what the interest from developers will be in this. Indian IPPs have zero to limited experience with energy storage projects, and terms of the tender may be seen as too aggressive by some to participate,” shared Atin.

“Expensive economics of storage, technical complexities of the tender, land acquisition challenges and inability of IPPs to secure competitive debt and equity can impact this tender,” he added.

Going forward, Atin believes the SECI renewables plus storage tender is a first step towards achieving dispatchable renewables in India. In future more renewables + storage tenders can be floated provided the distribution utilities and SECI are comfortable with the tariffs discovered in the auction.