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Wednesday, 17 July 2019 08:20

“We aim to reach a portfolio size of 2 GW in next 2 years”

In Conversation With, Mr. Sunil Kulkarni, CEO, Shapoorji Pallonji Infrastructure Capital Company Pvt Ltd.

What has been your growth story for the solar sector during FY18 and what are your expansion plans from Asset Developer perspective?
During FY 18-19, we have added 820 MW of solar projects to our portfolio, the majority of which comes from ISTS bids. This includes 50 MW solar floating project under SECI bid and first large scale IPP Solar floating bid from SECI. During the same year, we have successfully divested part of our operational portfolio to raise growth capital.
We are one of the few Indian IPPs active in International markets. In FY 18-19, we commissioned a 50 MW solar project in Egypt and signed PPA for 50 MW solar project in Vietnam. This 50 MW is part of the 150 MW solar development of SP in Vietnam. In addition, we have also been awarded LOI for 100 MW project in Bangladesh last year.

We aim to reach a portfolio size of 2 GW in next 2 years.

We are greatly benefited by the synergies with our group company Sterling & Wilson who has recently been declared as the largest Solar EPC company in the world, as per Solar EPC and O&M Provider Tracker Q1 2019. With their focus on Energy storage, we expect also to follow and bid for those projects along with ground mounted solar PV projects

What is SP Infrastructure total cumulative solar capacity installed as of now? In 2017 your company made a foray in the Egyptian market and does this signal further expansion plans in the emerging international markets?
Our current operational capacity is 298 MW in India and 50 MW in Egypt. (after divestment of 194 MW last financial year).
Apart from Egypt, we have expanded our operations to Vietnam and Bangladesh. Our international project pipeline is 250 MW.
We are also exploring other emerging markets in Africa, CIS and South East Asia.

What further policy interventions are required to accelerate the market in India?
Solar sector in India is current going through many challenges in both phases of the projects i.e. Development and Operation.
Operating projects face the issues of Backing down / curtailment by Discoms. The payment delays are mounting beyond 8-10 months from certain Discoms. The regulatory or administrative interventions are needed to be substantially enhanced to bring receivables to a reasonable level and ensure that the generating companies are able to meet their contractual obligations.
For the projects under development/construction, there are uncertainties on GST. Different state authorities have different interpretations on the services contracts. Funding of Safeguard duty has become an additional burden on the developers. There is a further challenge of possible tariff reduction on the projects won post introduction of Safeguard Duty.
In the aftermath of IL&FS issue, the liquidity in lending to this sector has become tight. With lack of long-term track record of generation performance in the sector, lenders are taking recourse to unrealistic generation numbers in assessment of solar projects. The solar sector needs to be considered separate from Conventional Power sector.
Thankfully, the industry is coming together and MNRE is providing support to resolve the issues at various levels.

Do you think aggressive tariff caps for solar tenders hampers the investors sentiments?
In theory, the aggressive caps on the tariffs should not deter the lowest tariff discovery as long as bids are received. However, prescribing the similar caps for the projects across the country is best avoided. The Solar radiation is different, so is the off-taker risk profile and land costs. We have now solar park vs non solar park and state Discoms vs NTPC/SECI distinctions in the projects which can be clearly seen in the discovered tariffs of such tariffs.

Aggressive tariff caps and subsequent discovered tariffs has set a relatively low benchmark. Going forward, it may be difficult to sustain the same. This may result in off-taker delaying the bids and getting the regulator nod difficult when correction takes place.

The debate FIT vs Competitive bidding has started in the industry. Some stakeholders including lenders are sceptical about competitive bidding especially of the reverse auction kind and rightly so as lot of public money at stake.

What are your views on the recent MNRE guidelines addressing land acquisition and power evacuation issues for Solar Parks and Ultra Mega Solar Parks? Do you think this directive will regain investor confidence in the Solar Sector?
We are hopeful that this will address the major challenge in implementation i.e. land acquisition. However, it may be noted that the tariff discovered in non-solar park bids is considerably lower and there is more geographical spread. In the near future, transmission bottlenecks may become an impediment for the growth in RE targets for ground mounted capacity. What also needs to be done is getting connectivity to STU at 132 KV in the scheme of things. MNRE budget may be used for waiving off the transmission charges of the STUs for the bids under NTPC/SECI. This will accelerate the capacity building.


Has the industry started planning and implementing a recycling policy for solar equipment too?
The answer would be “No”. However, people have started thinking about it. The investors are looking for the provisions in the financial model for the decommissioning and dismantling of the plant. The stock reply to such query from investor is that the plant will have the residual life of 3-5 years and the revenue during this period shall be adequately cover the costs of decommissioning/dismantling/recycling.
As per the report “Managing India’s PV Module Waste” of Bridge to India, the PV waste volume in India is estimated to grow to 200,000 tonnes by 2030 and around 1.8 million tonnes by 2050. MNRE guidelines specifies that the developer shall be responsible for the disposal of the solar panel in accordance with the e waste rules (which incidentally do not cover PV modules).
First Solar, the thin film manufacturer from US has incorporated the take back policy for its modules. However, one can be skeptical about such solution becoming a regulatory norm in the near future. The solar projects in India have started from 2009 and hence there is adequate time for the formulation of policies and implementing mechanisms for the recycling of solar panels.

 

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