A consistent and stable policy environment is the need of the hour to stabilize and nurture the solar industry back to health was the consensus arrived at the panel discussion moderated by Mercom India at the recently concluded Renewable Energy India (REI) Expo 2019 conference.

Mercom’s managing director, Priyadarshini Sanjay, moderated a session held at the Renewable Energy India (REI) Expo 2019 titled India’s Solar Sector: A Multi-Billion Dollar Market Opportunity Amid Testing Times. The panelists of this session were leaders from various stakeholders in the country’s renewable energy space such as NTPC, L&T Finance, Solis Inverters, Cleantech Solar, LONGi, CleanMax, and Adani Solar.

The discussion emphasized the challenges faced by the solar industry. Most panelists acknowledged the fact that the solar industry in India had come a long way over the last five years, though it is now suffering from a slowdown due to numerous reasons such as the lack of financing, payment delays, tariff caps in tenders, land acquisition, and the broader economic downturn. The consensus call taken by the panel was that the government needs to treat the solar sector with care and avoid policy flip flops.

On the issue of tariff caps, Manish Karna, general manager, Adani Green Energy, said, “Tariff caps have not helped the solar industry, we have come from a feed-in-tariff of ₹17 (~$0.23)/kWh to less than ₹3 (~$0.04)/kWh through competitive bidding without any tariff caps. However, since tariff caps have become a mandate in most tenders, we are looking at a decrease in participation. This is giving a signal to developers not to participate, which is wrong.”

SS Mishra, general manager, NTPC, commented, “Land, connectivity, and policy stability are key for the growth of the utility-scale solar sector. If the government works on these, we will see the faster deployment of solar”.

On tariff caps, Mishra said, “I am not in favor of tariff caps in tenders and would rather leave it up to free markets to discover tariffs. We will see huge interest from developers if we remove these tariff caps which will ultimately lead to competitive bids, but this is not up to NTPC since it is only an implementing agency of the government.”

It was clear that overall sentiment is down among industry stakeholders, partly due to the shock move of a state government initiating renegotiation talks for signed power purchase agreements (PPA). Also, constant policy changes concerning bidding/PPA guidelines, deviation settlement mechanism (DSM), net metering, and open access are discouraging investors from deploying funds in the solar sector. The government needs to formulate consistent policy measures for a period of at least three to five years to create an environment that would enable steady growth of the utility, and the rooftop solar sector was a common sentiment.

Manish Karna, on the DSM guidelines, commented, “We, as developers, are being asked to predict solar power in 15-minute time blocks. This is very difficult as weather can be highly unpredictable and to expect developers to make accurate forecasts such as these can be unreasonable.”

The other important issue raised by the panel was the intensely competitive environment that developers had created for themselves by bidding extremely low tariffs in central government tenders which allowed no room for returns from these projects. Therefore, it was also imperative for developers to introspect and act responsibly going forward so that they do not build unreasonable expectations from the government.

Ankur Saboo, regional head, L&T financial services opined, “The largest investors in the world are looking at the Indian renewable energy sector. These players are extremely risk-averse, and they need a consistent policy. One unexpected statement or a negative policy change can scare these investors away, so the government should refrain from this. Further, we should also not expect unreasonably low tariffs from solar developers. Utility-scale solar can be a huge contributor to employment in the country, and therefore, the sector needs to be nourished back to health.”

The panel also discussed the benefits of hybridization of wind and solar projects with storage, which could help tackle the issue of intermittence. The panelists suggested that the government, along with industry stakeholders, take a serious look at this technology as a source of renewable power for the long term.

The panel unanimously agreed that the government’s intent to grow the sector is there, however, it is vital for them to work closely with developers, equipment suppliers, and state DISCOMs to take steps to reinvigorate the investors.