The ‘key take away’ from the recently released India Solar Market Update report for the first quarter of 2020 by Mercom India are-
IREDA has plans to lend around ₹100 billion (~$1.3 billion) to the solar and wind sectors. These funds were mainly meant for power generators. Of this amount, the IREDA said it had disbursed only about ₹12 billion ($159 million), citing challenges due to the ongoing coronavirus crisis.
Renewable project development has also been hit hard by the ongoing crisis. The nationwide lockdown to curb the spread of the Coronavirus has disrupted supply chains, operations, and construction activity.
The government could help by making a provision to adjust tariffs which would help lenders to continue supporting these projects. If projects are delayed for too long, they become unviable, and lenders will also block the flow of funds, further delaying them.
On the Indian rooftop solar sector front, a viable model that developers could adopt would be to pool smaller rooftops projects together to increase the overall cumulative capacity of the projects.
Lenders would be much more confident funding larger projects with higher guaranteed returns. Alternatively, they could open up a medium-term line of credit and get costs reimbursed after project completion.
Another major challenge finance agencies face while funding rooftop projects is the lack of long-term weather data and monitoring solutions for these projects throughout the duration of the loan tenure so by focusing on setting up more data assessment stations, lenders would also be able to gauge the generation potential of projects, making them more open to disburse funds.
Government is also planning to introduce the Direct Benefit Transfer (DBT) facility this would allow generators to directly receive subsidies, reimbursements, and other benefits directly from the government without having to interface with DISCOMs.
The implementation of DBT would eliminate counterparty risk and would be the best long-term solution as DISCOM bailouts have not worked in the past.
Lastly, the land allotments for the projects should be separated from project development. For example, with solar and wind parks, it would be a good idea to get companies who are good at managing land and have them develop the park, the land, the infrastructure.
These companies can get paid by the developers who are going to set up a project in these parks.
This story is based on Mercom India Report -“India Solar Market Update”