Solar power companies in India no longer enjoy the benevolent macro conditions that prevailed four years ago when they set sail in good hope in the wake of the government setting a target of achieving a clean energy generation capacity of 175 gigawatt (GW) by 2022.
However, companies in the renewable power sector in India should be heartened to see how things are panning out. The government has revised its green power installation target for 2022 to 227 GW from 175 GW and has announced its intention of auctioning 40 GW of renewable capacity every year till 2028.
But solar power firms are in wait-and-watch mode. Rising interest rates, a depreciating rupee and the regulatory uncertainty over the prices of imported photovoltaic (PV) modules needed for solar power generation have made them assume a cautious approach.
Also, renewable energy tariffs in the country have fallen to a record low of under Rs 3 per unit—a result of aggressive competition in the sector as well as improving technology.
Intense competition has seen tariffs fall to “incredibly low levels”, resulting in possible failure of project completion. “This may cause distress to bidders who have bid aggressively assuming further fall in PV prices and stable dollar/rupee rates. The tariffs in the industry are almost down to the cost of raw materials.”
The renewable energy sector in India has had a good run due to a benign interest rate regime in the last two-three years, coupled with the rupee staying firm.
However all this has changed in the year gone by with rupee falling against dollar and the industry’s grappling with the disruption arising from the imposition of the goods and services tax (GST) on solar modules; delays in creation of transmission infrastructure; and the uncertainty around imposition of duties on solar PV modules imported from China to boost domestic production.
Today Clean Energy Segment is a mixed bag of things, there are those who see the slowdown as a passing phase and believe that things are likely to get better next year with the “government planning large number of tenders in the renewable energy sector.”
Reference- Fortune India, GST website, Quartz India