"Statkraft Plans To Build 2 GW Of Solar Projects Globally In Next Few Years”

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In Conversation With Mr. Pratyush Thakur, Managing Director, Statkraft Solar Solutions Pivate Limited

What has given you the most satisfaction in your current position?

Statkraft, started its operations in solar space in India with a small JV in sept 2015. We had a modest target of developing about 10 MW of solar in the distributed space testing different technical and commercial business models. We are very happy that we could achieve that by commissioning 5 projects across India with 7 customers. We developed on- site rooftop as well as open access based ground mount projects. The biggest satisfaction came from the fact that despite having challenging environments all our projects were completed without any major safety incidents. in fact, our 5MWp project in Chennai was adjudged the best in-campus project testifying the great execution and operational capability of the team.

What are your thoughts on present currency fluctuations, rising interest rates, location where the projects are to be built and the evacuation infrastructure?

Currency fluctuations do create additional risk for project developers. In an extremely competitive market it is imperative to cover this risk and developers hedge the currency risk using the products available in the market.

Interest rates are depending on the liquidity in the debt capital markets. Due to certain recent events, it is observed that the liquidity is stressed. Banks are also facing high nPas and want to reduce asset liability Mismatch. This impacts the availability of long term debt finance for projects. Access to capital is one of the important factors for renewable project developers and rising interest rates are not comforting. However, we do not see much impact of that translating into discovered power prices.

Solar projects will continue to be concentrated in high irradiance zones like Rajasthan, Gujarat, Andhra Pradesh, Karnataka and Tamil Nadu. However, availability of evacuation infrastructure is going to be quite crucial. We observe that Karnataka and Tamil Nadu which have large solar and wind installed capacity are struggling with lack of adequate infrastructure in some pockets. This results in curtailment of generation from projects resulting in lower realization and hence impacting the financial viability of such projects.

Forecasting and scheduling of generation from solar and wind project can significantly assist seamless integration of these technologies with the grid. It also helps the grid operator in managing the grid and reducing curtailment. We believe that use of technology and smarter forecasting and scheduling will also help reducing the curtailment. Statkraft Markets, our sister concern, is one of the largest Qualified Coordinating agencies and manages more than 4GW of portfolio in forecasting and scheduling.

The tariffs for solar are already very low, considering some of the latest bidding, how sustainable is it?

in large-scale solar, government has done a good job in taking care of the highest risk areas – two of them being land and transmission risks. Credit risk has not been fully mitigated but with the intermediation of seCi and nTPC, the risk perception has decreased for the investor. This means there are many types of capital providers looking at that risk space, leading to cut throat competition. all these companies have put their acts together and are pricing the risks in. We believe that the price discovered is quite low, however not unsustainable. The biggest help for the winners in the tenders has been the reduction in solar module prices. The developer gets a few months to set up the project. Module prices have fallen between 5-20% in a matter of few quarters in the past leading to lowering of project construction costs.

Will we see more M&A’s in the solar sector?

Solar sector is in the growth phase and has found interest from multiple investor types. From local conglomerates, to international utilities are looking to have a share of this growth. Many entrepreneurs have raised capital and got great beginning. However, this has resulted in intense competition and very low-price realization for most of the market participants. We believe that for sustainable growth some consolidation is bound to happen. This will provide stability to the market. In Statkraft we are looking at certain targets to help us achieve our growth ambitions in an inorganic way. However, that is not our only strategy and in-house project development is our core business activity. Statkraft plans to build 2 GW of solar (and 4 GW of wind) in next few years and with its highly growing solar sector India certainly presents itself as a major candidate for growth in Statkraft.

Has Safeguard duty affected your plans for this year and do you find it as a hurdle for Indian Solar industry to achieve its 2020 target?

There was a slight slowdown in the project implementation and new project announcement due to unclarity on the sGd for some time in 2018. However, there is no major setback to the industry as such, as the module prices have come down mitigating the impact of the sGd to some extent. It is also good if the sGd really helps the Indian players to come out of the difficulties and start competing with global players in quality, cost and performance. The beauty of this sGd is that it is time bound and we feel that after two years Indian project developers will have option of buying locally or internationally in a level playing field.

Coming to the State level do you think that the State governments and the utilities should take a more proactive role in promoting renewables?

Yes, renewable energy is distributed and any measures put in place to develop re in India, has to be done by Centre and states together. State utilities have already been quite proactive by participating in the tenders for purchase of power large scale solar development. However, rooftop and open access solar face challenges in form of unpredictable policy implementation and implementation of charges and losses. Net metering policies have been put in place but have restrictions which limit the growth of rooftop solar.

What have been some of the biggest challenges of maintaining high standards of social and environmental responsibility?

Statkraft maintains highest standards on corporate responsibility with respect to conducting our business ethically, making sure impact on environment is minimal/negligible. While we have found very positive intent to do business with responsibility, the awareness among the supplier community needs to improve. With our experience in multiple projects now, we have been able to train our installation and supply chain partners in the best practices. We are quite optimistic that we will be able to build a lot of projects in a responsible way, albeit it may take a bit more time as we will have to keep informing and training our partners and other stakeholders in the course.

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