Renewable Energy in India has traversed a long way over the last decade and the growth trajectory of Solar in the Utility Sector has been phenomenal. It, certainly, has cemented its place from being a fledgling part to becoming a mainstay in the Renewable Energy sector and a key component in the Overall Power sector in India. For the next quantum jump, just as it has to overcome few challenges similarly there are opportunities which shall enable that.
The first set of challenges can be, typically, classified as contractual in nature. It is a logical premise that the signatories to an agreement shall fulfil their Condition Precedents and Subsequents in a time-bound fashion, thereby maintaining sanctity of the contract and creating a win-win situation for everybody. However, while the Solar Power Producers are expected to diligently adhere to their deliverables, challenges like inordinate payment delays and tariff re-negotiation in between the contractual duration severely hamper the investor confidence and diminish the economic attractiveness. Such contradictory messaging cascades negative ripples in the entire ecosystem of stakeholders too. Another similar challenge has been the imposition of backdown of generating plants although they supposedly function under ‘must-run’ status.
While the sector has progressed immensely under the able guidance of Central and State Govts, there still are areas which, when structured up, will result in providing a huge impetus in driving the scale growth as well as further tariff reduction. It is a known fact that free market economics will always put a lower risk premium to projects where there is more information and clarity around the key parameters. Visibility of timebound bidding pipeline and seamless coordination amongst the bidding agencies and the transmission utilities would be the two initial steps to demarcate the broad contours of the overall road-map. The next couple of aspects which require immediate attention of the authorities are streamlining the land acquisition process and refining the payment security mechanism. Enabling solutions to these will allow the Power Producers to operate in a comparatively risk-free environment and that shall trigger a massive scale growth. Another key booster for enhancing access and reducing cost of funds would be to facilitate ‘priority-sector’ status to the clean energy domain specifically and uncouple it from the traditional power sector limits. Financing, being one of the most sensitive and impactful levers, ease will result in better tariff discovery.
We also notice a bunch of opportunities which shall shape the focus of the industry for the times ahead. Graduating from the regular plain-vanilla tenders to Hybrid, Peak-Power and Round-The-Clock bids is absolutely the right directional approach. Success of the initial bids has ensured that such tenders shall be the next growth frontier. The holy grail of firm, schedulable and dispatchable power available at attractive tariffs shall, then, be achieved and Solar shall play a key role in it. Furthermore, merchant power sales could be another avenue which can unleash exponential growth in the Solar Power sector in India.
Collaborative approach amongst all the stakeholders to smoothen the few pending rough edges and streamlining the opportunity areas shall ensure that the Sun continues to shine brighter on the Solar Power Utility Sector in India!
Author: Sourya Choudhary, Head- Utility Business, Amp Energy India
