India is struggling to attract renewable energy companies to set up new projects. Multiple factors, like delays in setting up transmission support infrastructure, delays in payment by off-takers, threats of retrospective changes to power purchase agreements, and delays in regulatory approvals have pushed developers away from recent tenders.
The Ministry of New and Renewable Energy, parent to India’s federal tendering agency (Solar Energy Corporation of India), is reportedly planning to provide a crucial relief to solar and wind energy developers. According to media reports, the Ministry is planning to remove maximum threshold tariff requirements for future solar and wind energy tenders. The would be a sharp reversal in policy from the Ministry which, just one year back, had rejected repeated pleas of developers to remove ceiling tariffs.
The Solar Energy Corporation of India (SECI) has been gradually reducing tariff thresholds for a few years now. The move reaped splendid results, pushing down the solar and wind energy tariffs to as low as Rs 2.43/kWh (US¢3.39/kWh). However, soon after developers quoted this record-low tariff, the government levied safeguard duties on imported solar cells and modules from China, the most dominant supplier in Indian market.
Unrelated to levy of this duty was the delay in transmission network expansion in states like Gujarat. This directly impacted participation of companies in wind energy tenders. A number of them were undersubscribed.
Delayed payments by power retailers made the financial condition of developers worse, as it remains at present. According to government data, retailers owe power generating companies Rs 880 billion (US$12.3 billion) with some payments delayed by several years.
Despite several measures by the government to push for timely payment by retailers to generators, nothing has changed on the ground, with developers struggling for liquidity. The reported initiative the Ministry is not only aimed at providing much-needed relief to developers but also salvaging the diminishing prospects of India achieving the ambitious capacity target of 175 gigawatts of renewable energy by December 2022.