KS Popli, Chairman and Managing Director, India Renewable Energy Development Agency (IREDA) maintains his calm even when he encounters tough questions. With a $100 million fund tie-up for the solar sector, he is awaiting the right, financially-viable projects to fund.
With the solar tariff witnessing its newest low, how can one establish financial viability?
Yes, I agree that the solar sector in India has witnessed low tariffs in the recent times; however, we have achieved grid parity and it is a good sign. There is rising concern from industry experts and private players over financial viability of projects with low tariffs and increasing module prices. However, this [module prices] is a short-term phenomenon and I think by December-end, there will be a drop in the prices. Now, to answer your question on how these projects are funded, I believe there are various options available for developers. If a project is viable and has all the necessary permissions in place, we will be happy to fund it.
Meanwhile, if you look at the players who participated in the recently concluded bids, they have an appetite that we, as an authority, need to fulfill. The players are hungry and we need to feed them with projects. That is why the Ministry of New and Renewable Energy (MNRE), along with the state governments, would lay out bids for ground-mounted solar parks for 20 GW in 2017û18, out of which 3.6 GW has already been bid, 3 GW will be offered in December 2017, 3 GW in January 2018, 5 GW in February 2018 and 6 GW in March 2018. Around 30 GW will be bid out in 2018û19 and 30 GW in 2019û20.
Is there any dearth of funds?
No, I do not think there is any dearth of funds in this sector. We recently signed an MoU with the World Bank for $100 million to help the country develop large-scale solar parks in an effort to increase power generation capacity through renewable energy sources. The first two large-scale solar parks to be supported under the 'Shared Infrastructure for Solar Parks Project', which will be financed by the Indian Renewable Energy Development Agency (IREDA), are in the Rewa and Mandsaur districts of Madhya Pradesh, and will have expected installed capacities of 750 MW and 250 MW respectively.
You must understand that this is a long-range plan. Short-sighted players will automatically be marginalised and those with strong cash balance and capital with deep roots in equity markets will emerge winners.
But don't you think that the authorities must put some cap on tariffs?
Otherwise, India will witness another low, considering 30 GW to be added by 2019.
No, we cannot put a cap or ceiling on the pricing mechanism at all. A policy needs to be formulated for this and at this point when solar is booming in India, it is not in the best interest. Since it is the government that has been instrumental in reducing the prices, why would it put a cap on it? The government gives a three-tier security mechanism for solar power projects so that the capital cost witnesses a reduction. Earlier, we thought about placing a ceiling, but so far we have been successful in awarding projects at low tariffs.
We are on the right track because internationally module prices are likely to see a decline, coupled with project capital cost, which has already come down from 8 to 9 per cent to around 3 per cent. We just need to see how players are going to leverage the current trend in their favour.
In economics, when you place a floor or ceiling, you are tampering with the market and you do not know which way it would swing. So, the best thing is to leave it to the market to the extent you can manage, and it is unlikely that the market will see any disruption.
Domestic modules capacity has not picked up with reliance on Chinese and Taiwanese modules still high...
China is ruling the solar space with 80 to 90 per cent of the world's total manufacturing capacity. Hence, the cost of manufacturing will be lower. If India wants to compete with China, then some strategies need to be in place. Importantly, how can India compete on the pricing front? The government needs to decide on which side it wants to be. So far it has refrained from implementing the anti-dumping duty which allows the Chinese players to export their products to India. Meanwhile, MNRE will issue an EoI to the industry for establishing domestic manufacturing facilities to the tune of 20 GW in the near future.
- Rahul Kamat