Source: LiveMint.com, Nov 25, 2019
MUMBAI : In September, while speaking at the United Nations Climate Action Summit in New York, Prime Minister Narendra Modi committed to setting up 450 gigawatts (GW) of non-fossil fuel power by 2022. With this, he more than doubled the initial target of 175GW of green energy that his own government had set in 2018. “We must accept that if we have to overcome a serious challenge like climate change, then what we are doing at the moment is just not enough,” Modi told the audience of gathered world leaders in New York.
Back home, however, the renewable energy industry that Modi is resting his hopes on is flailing. India’s installed green energy capacity stands at about 65GW today. It was expected to cross 100GW by December 2022, definitely short of the government’s 175GW target and far behind 450GW. But even that expected 2022 projection now seems a bit too optimistic.
For the last few years, as thermal power slowly fell out of favour due to rising coal costs and natural gas disappeared from the domestic market, everybody wanted to get in on the green energy game. And a big bulk of the new investments in green energy went into silicon panels, which were powered by the sun. However, that breakneck pace of the last few years is now flagging and the solar/wind party is on the verge of a shutdown.
Solar energy tariffs in India are among the lowest in the world, but state governments are keen to push them down further. These dangerously low tariffs are turning unsustainable for some developers, who in turn cut corners on quality. Some state power distribution companies (discoms) are also over a year late on paying their power bills.
Developers in Andhra Pradesh are facing an existential crisis as the state holds them hostage with two equally unpleasant options: either lowering the tariffs agreed to by the previous government or stopping generation altogether. And where there was once a steady stream of investment into the sector, that tap is now turned off.
Independent power developers (IPPs) are wary of admitting to a slowdown, but the signs are everywhere. Of the 64GW that was auctioned by the Centre and states in FY19, 26% received no or lukewarm bids and another 10% got cancelled.
Tariffs that states are willing to pay are capped at ₹2.50-2.80 per unit, limiting the room for IPPs to improve profit margins and disincentivising quality projects.Read the rest of this entry »