A Year Gone By: Trends & Milestones Of Indian Solar Auctions in 2020

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The ongoing pandemic has spread and affected countries across the globe and brought economies to a halt. The solar industry at large and in India is not insulated from the pandemic’s impact and its uncertain future is causing concern for many businesses. The COVID-19 outbreak came at a time when India’s solar project execution was at its peak in the last quarter of the financial year. India has targets of achieving 100GW solar energy target by 2022, which are nothing less than ambitious. As of January 2020, India had installed approximately 35GW of solar energy projects. 

India’s new solar capacity addition was severely affected due to the ongoing pandemic. The nation installed a mere 2.32 GW for the first 9 months of the year. However, there was a positive aspect too. Despite the numerous setbacks, the industry achieved many historical milestones. 

KEY TRENDS AND MILESTONES IN THE LAST YEAR

Renewable energy auctions have repeatedly proven to be the best practice for procuring least-cost energy. This competitive, as well as transparent process, helps nations meet their energy goals and attract investments from all around the world on their journey to self-reliance.

One such auction, the 1070 MW solar auction for Rajasthan yielded an all-time record-breaking low tariff of INR 2.0/kWh, lower than the previous low of INR 2.36/kWh. Numerous international organizations’ participated in this auction, displaying their confidence in the Indian renewable energy industry.

National Solar Energy Federation of India (NSEFI), the umbrella organization for solar energy stakeholders in India, welcomed the all-time low tariff of INR 2.0/kWh. “This auction and the tariff discovered will script a new history in our solar energy Journey. NSEFI was founded with the objective of cost reduction and making solar energy affordable for all, and we are delighted that the dream has come true,” said NSEFI Chairman Pranav Mehta.

The minimum solar tariffs discovered have fallen by 131.5% over the last five years, with an 18% drop achieved in the last five months alone.

Rajasthan has prevailed as the top destination and preferred choice for Indian renewable energy developers. Factors that contribute to this preference are higher irradiance, land availability, and evacuation infrastructure, These factors have always favoured developers to bid for lower tariffs in Rajasthan. 

The basic customs duty (BCD) and the Approved List of Models and Manufacturers (ALMM) regime has not officially begun. Additionally, the market anticipates a steady fall in the module prices. Therefore, the quoted tariff of INR 2/kWh in Rajasthan PV auction doesn’t come as a surprise.  Another contributing factor is that developers have freedom in opting for tracking and use of high-efficiency modules. Apart from this, the much-contested Rajasthan Renewable Energy Development Fund (RREDF) contribution of INR 2 lakh/MW has been waived off for this particular tender. 

Access to cheap capital has always been one of the most critical factors in the renewable energy industry. The increasing participation of foreign investors with access to affordable capital is one of the primary factors that has led to a steady fall in the tariffs quoted. This can be considered a testament to India’s growing reputation as a renewable energy investment destination. 

Apart from market forces working in favour, the auction was held at a time when the government, amidst the COVID pandemic, has reemphasized its commitment to Green energy by introducing numerous policies, triggering a positive response from the community. 

DISCOM bailout under Aatmanirbhar Bharat Scheme, condensed performance bank guarantee (PBG) and earnest money deposit (EMD) requirements, and Government’s intent to address accountability in curtailment and expedite Change-in-Law claims through a streamlined mechanism have been reassuring and have re-instated confidence among investors in the recent bids.

After the nationwide lockdown was imposed in March, activity in the solar industry halted. Solar installations fell 81% from 1.1 GW installed in the first quarter of 2020 to a mere 205 MW in the second. The rooftop solar market, which has already been struggling for a while, crashed completely in Q2, with installations lowest since the second quarter of 2016.

However, the worst may be over for the rooftop segment as installations picked up in the second half of the year. According to Mercom India’s Q3 2020 India Solar Market Update, the rooftop solar installations stood at 155 MW in Q3 of 2020, an increase of 82% compared to 85 MW installed in the second quarter of the year.

Despite the increase in rooftop additions in Q3 2020, the installations in the first nine months (9M) of 2020 stood at 434 MW, a 46% decline compared to the 800 MW installed in 9M 2019.

CONCLUSION

The pandemic has made commercial and industrial customers all around the world, as well as India, realize that going solar is one of the best ways to cut down operational costs. Overall, in a year when every business vertical struggles, the Indian solar industry had a surprisingly positive year with four big auctions, all of them equally record-breaking. This gives a much-needed push to the industry with less than 24 months to achieve the nation’s ambitious target.  

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