India may not reach 100 GW solar power target by 2022: Crisil report

• India will not be able to achieve its ambitious target of generating 100 GW solar power by 2022, ratings agency Crisil said. In a report, Crisil’s industry research arm said that in the best-case scenario, the country will touch 78-80 GW, against the current capacity of 21.65 GW.

• Crisil expects an additional 56-58GW of solar capacity addition between fiscals 2019 and 2023. While this is a vast improvement from the 20GW added during 2014-18, it still falls short of the National Solar Mission target by a fifth. (See chart) A safeguard duty on solar modules from China and Malaysia, which took effect this month and will continue for two years, is expected to slow capacity addition.

• Individual states have also set aggressive targets under their respective solar policies. While 7.3 GW is under construction, based on already allocated schemes, another 1.7 GW is expected to be tendered and allocated over fiscal 2019 based on upcoming tenders under various state policies as on July, the report shared exclusively with Mint said.

• However, state government projects are not as well-funded and they have less access to cheap financing.

• A key area of concern is the rooftop solar segment. The solar mission’s target for the rooftop segment—using the rooftops of commercial and industrial units to generate their own power and depend less on the grid—is 40 GW by 2022.

• Crisil expects this figure to be not more than 8 GW by 2023, because the cost of power here is expected to be far higher than from the grid.

• Unless the rooftop solar segment is supported with a firm battery market and the legal enforcement of contracts because developers run the risk of the host establishment not honouring a contract when tariffs change, the rooftop market will struggle.

• Industry experts believe that the safeguard duty will raise capital costs by 15-20%, adding 30-40 paise per unit to bid tariffs so developers can maintain the same rates of return on their investments.

• India achieved a record low solar power tariff of Rs 2.44 per unit in May 2017. In July, tariffs again touched ₹ 2.44 per unit in an auction conducted by SECI.

• However, uncertainty regarding the duty is making developers wary. Acme Solar, which had quoted the lowest tariff of ₹ 2.44 a unit, has about 2000 MW of projects where construction is either underway or yet to begin. On 7 August, Acme told that it would pull out of these projects if it has to bear the additional burden of the safeguard duty.

• States are also seeing tariffs rise. At a July auction by Uttar Pradesh for 1,000MW, the lowest bid came in at ₹ 3.48 a unit. The state cancelled these auctions. SECI also cancelled 950 MW of solar tenders in July, unhappy with the tariffs that developers were bidding.

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