The Deutsche Bank report states that global players have committed approximately $35 billion to the Indian solar sector, giving rise to the need to adjust the prediction for solar power in India upwards to 34 GW by 2020.
Solar CAPEX in India could well surpass coal by the fiscal year 2019 and capacity addition could overtake coal in the FY 2020, if not earlier. The report states, "This is on the back of strong commissioning (4.5 GW), even stronger pipeline, under construction (about 5.1 GW) and new projects (about 15 GW). Deutsche Bank predicts that renewables could account for a significant 20% of power capacities in India by then. The private sector interest is shifting to solar from coal and there are numerous opportunities for fund-raising, Yieldco structuring and M&A activity.
Generation peaks are between 9am and 6pm, hence solar power can possibly impact day power rates. This could in turn reduce coal requirement by about 8% by the end of 2020. Savings of $17 billion per annum could be made cutting back on imported coal according to the report.
Pressure on industries
Local IPPs in India have to factor in solar into their expansion plans. Renewable energy obligations have become strictly enforceable and the cost of coal power is set to increase. Only in June, the Indian supreme court sent a powerful message with its ruling dismissing a petition filed by Hindustan Zinc that challenged Rajasthan Electricity Regulatory Commissions (RERC) regulations mandating that certain consumers derive a portion of their energy from renewable sources. Hence industries in India cannot turn a blind eye to renewables any longer.
Renewable energy can reach 20% of capacity. Nevertheless Deutsche Bank sees hurdles in terms of transmission constraints and integration of diurnal power into the grid without peak load management capability. Solar in Rajasthan for one could face issues given the policy target if 25 GW solar versus the peak-demand of 11 GW.
The enforcement of the Renewable Energy Purchase Obligations (RPOs) is seen as a further risk, given the weak finances of state distribution companies. The ability of distribution companies to pay for costly RE and hence large-scale absorption of solar is hereby seen as a concern. Financing, land acquisition, limited domestic manufacturing and returns/reliability of baseline data are also seen as possible hurdles.
Solar value chain
Local IPPs have got their own game plan for solar growth, given competitive pricing that can possibly restrict conventional power growth. The possibility of further taxes/levies to fund RE subsidies cannot be ruled out, which can put cost competitiveness at risk. Utilities like NTPC, Reliance and Adani have made early adoption and committed themselves on a large-scale.
Domestic players are not likely to see benefit as majority of PV cells will likely be imported given the size of the local industry at 1.2 GW per annum. There will be a lack of cost competitiveness.
The Indian governments push has attracted investors like Japanese multinational SoftBank, Bharti Enterprises and Taiwans technology manufacturer Foxconn Technology who have announced a $20 billion joint venture to develop solar energy plants across the country. SunEdison intends to invest $15 billion by 2022 according to the report. The company will invest $2 billion into a joint venture with Adani Group to manufacture PV modules. Chinas Trina Solar has also unveiled plans to invest $500 million in a plant to make panels with Welspun Energy.
This headline and subhead of this article was amended to clearly reflect that the DB report was addressing the Indian PV market.