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EQ in Exclusive Conversation With Dr. Amitabh Verma, President – Strategy & Planning At Aditya Birla Renewables Limited

EQ in Exclusive Conversation With Dr. Amitabh Verma, President – Strategy & Planning At Aditya Birla Renewables Limited

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1. What are the biggest challenges in India’s goal of 175 GW by 2022 and 450 GW … How much can we really achieve by 2022, 2025 and 2030
• Land Acquisition
• Evacuation infra
• Energy demand
• PPA signing within reasonable time
• 65-70 GW Solar and 43-44 GW wind by 2022; 100 GW Solar by 2025 and 48-50 GW wind; 200 GW solar by 2030 and 65-70 GW wind by 2030.

2. How can India Achieve its RE Target?
• Enforcement of RE targets
• FIT
• Continuity of policies in long-term
• Early closure of PPAs and PSAs.

3. How much Solar and Wind can possibly be installed in FY 21-22 and FY 22-23
The current pipeline of solar, wind and hybrid projects is 60 GW which is to be built over next 3-4 years. The total renewable SCoD for FY22 is 18-19 GW. For FY23 it is 10 GW. Total renewable capacity addition may be 13-14 GW in FY22. The split may be 10-11 GW solar and 3 GW wind. Of course, a lot will depend on the module and commodities price in H2 of FY22. 1.5-2 GW of rooftop may be added. 628 MW of open access solar projects were installed in H1. UP, Chhattisgarh and Rajasthan have conducive open access policies. Wind has about 10 GW allotted in state and central projects until 2023 and hence it is expected that about 4-5 GW wind will be installed in FY23.

4. When will Module Prices stabilise .. What will be likely the pricing and tech roadmap
It is a difficult question to answer but my guess is in Q2 next year. The Mono-PERC module prices shall drop to 20-21 USC/Wp. At least for next 2-3 years Mono-PERC will be the work horse for the Indian solar industry followed by TOPCon as the capex requirement for TOPCon is incremental. The HJT technology will slowly kick-in after TOPcon. 182 mm wafer and 530-540 Wp modules may become the industry standard. In the long-run (next 4-5 years) the module prices may drop to 12-14 USC/Wp.

5. What will be the impact of BCD, ALMM, BIS … Its 25% on Cells and 40% on Modules…Will it protect the indian manufacturing….as it is just a difference of net 15%.

In the short-term it will create stress for the developers and capacity addition may suffer. At present, the supply chain is not well balanced. The cell capacity is far less than module capacity and hence India will remain dependent on China and other countries for the import of cells in the short-term and it will give undue leverage to overseas suppliers despite BCD barrier. It is hard to predict how overseas cell and wafer suppliers will react to the BCD. As far as ALMM and BIS are concerned, the size of Indian market will determine the interest of overseas manufacturers: Till now the response has been lukewarm.

6. BCD is not yet gazetted…..So is there a possibility that it might not be applicable from April 2022?
Government gave a zero duty window from August, 2021 to March, 2022. It is beside the point that this was not much of benefit because of high cell and module price volatility along with many uncertainties. The situation is further exacerbated because of recent increase of GST. Any relaxation in date of implementation will be welcomed by developers but it is hard to foretell. There are indications that its applicability may be postponed.

7. There is also rumour that some projects are given grandfathering from BCD as due to PSA’s not signing up, they are being delayed……Is this true?

None in my knowledge so far.

8. What will be the impact of PLI Scheme for Solar PV Manufacturing in India.
It will definitely give a shot in the arm to manufacturing in India. Much will be dependent on the eco system going to be developed in future. Sustained support by govt. over a decade is required going by the history of Chinese solar industry development.

9. How the pending PSA is going to affect the Indian Solar Industry….we believe there are PSA worth 20 GW pending and still SECI is issuing new tenders and getting good response from developers.

This is an area of concern having wider ramifications. Based on past experience SECI is now coming out with tenders backed by PSAs. Needless to say, many developers are flush with equity and under pressure to deploy it and hence the overwhelming response seen for the tenders. In a situation where large equity is chasing limited capacity there will be a pressure on returns and discovery of low tariffs.

10. India Made Target of 40GW RoofTop Solar by 2022 and Not even achieved 15-20% of it … What is the main reason…How much can India Realistically achieve?

There are a variety of reasons for it:
A Recent restriction of 500 kW for net metering
B Non-uniformity of policies across states. Some states do not encourage Opex model. C Funding of small rooftops is challenging.
I think, 1-1.5 GW per year is the realistic run rate provided a few market and policy changes undergo qualitative changes such as drop in price of storage based solutions, increase in tariff and removal of capacity restrictions for net-metering.

11. Which state is most favourable and which is worst for Solar / RE in terms of Policy, Grid Availability, PPA Honouring, Payment Timeliness etc…

The situation keeps on changing dynamically and ranking of the states change over time. All states which have high solar insolation are good and have very similar policies. Lately, MNRE has also tried to bring about homogeneity. Within states too different discoms have different payment track record as some discoms are more financially stressed due to limited revenue sources. Barring one or two isolated instances which are because of interpretation of clauses, PPA terms have been honoured too.

12. In upcoming tenders, what will be the ratio of Plain Vanilla Solar/Wind, Hybrid Tenders, RTC

I think, plain vanilla solar will continue to remain the dominant offering to the extent of 60- 70%. Solar/wind hybrid will constitute 20-25% and balance RTC.

13. What will be the role of Energy Storage – Technology and price curves and Preparedness of Make in India and role of PLI Scheme for Battery Mfg.

To begin with, the role of storage will be to meet peak demand for 3-4 hours in a day having at least one charge/discharge cycle per day. It will also be used to improve reliability of despatch in the solar/wind hybrid plants. Gradually, it will penetrate in the C&I segment for the peak shaving application. It will allow flattening of the generation curve and hence help mitigate grid capacity limitation. The horizon will shift depending upon the experience curve of battery. Higher EV penetration and PLI schemes may reduce the time constant further.

14. Wind – Solar Hybrid, Dispatchable power on demand, RTC – Need, Reasons, Present scope and Future Scope

Dispatchable power is the holy grail of renewables and solar-wind combined with storage is a step towards it. The environment benefits of renewables can be fully realized only when renewables can substitute for the thermal power plants which provide dispatchable power. In case the energy demand does not keep pace with the renewable and thermal capacity add then thermal plants will continue to run at a lower PLF and hence lower efficiencies.
Only when the renewable plants can successively make some of the thermal plants redundant which are about to reach end of life, full environmental benefits of renewable plants will not be achieved. This will also help in greater adoption by the C&I segment and growth of industry.

15. How much capacity you currently have in operation, in construction, in development phase, and what is the plan in a realistic scenario.

650 MW is operational and 205 MW is under construction. About 200 MW is in the development phase. We plan to reach 4 GW operational capacity by 2025.

16. What challenges will the Grid face in upscaling RE Capacities and what are the solutions to it.

Grid instability and constraints in power evacuation will be faced as more capacity is added. The positive aspect is that solar potential and penetration is more than wind, and solar energy is available during the day time when the demand is also significant. On the positive sides renewable percentage compared to total installed capacity in states like Karnataka, Rajasthan, Gujarat and Tamil Nadu is already in excess of 30-40% without any distress situation. Some states have overcome the problem by Taluka based bidding and others have separated the rural feeder from industrial feeder and so on. Since renewables have CUF in the range of 20-30% there is still plenty of headroom for adding renewables before the situation becomes alarming. 15 mins. day ahead scheduling and charges for consumption of reactive power, etc. will further help in supply-demand management before smart grid concepts start taking their roots.

17. Can India achieve its dream of one sun one world one grid

All dreams are achievable but it will take time. It is not likely to happen in next 10 years.

18. How do you see transformation of India’s Energy Sector

India is a growing economy having large base, and in comparison to developed countries the per capita consumption is very modest. It shows the immense potential for growth. On the positive side, still there is lot of infrastructure which is going to be developed in future and it is not hard-wired. The infrastructure can, therefore, be developed keeping technical needs of future where renewable is the core of energy supply. The consumers will be transformed to prosumers and many consumers may become independent of grid. There will be greater penetration of renewables in the total energy mix and perhaps long-term PPAs will be a passe’.

19. Globally tariffs in India are high…Like recently in Saudi it touched 1 USD Cents per kWh and in India its around 3 USD Cents…That is a whopping difference of 3 times…What’s the top reasons

There are 3 major reasons:
I. The cost of capital in India is higher than Saudi Arab. The interest rate in Saudi Arab is 50% that of India. Accordingly, the equity cost is also low and so is the return expectation.
II. The level of irradiation is at least 9-10% higher in Saudi Arab sunny regions compared to our sunny states like Rajasthan and Gujarat.
III. The tax rates in Saudi Arab are softer than India, be it Corporate tax, or VAT/GST.

20. The equity investors generally we have seen MNA’S, asset sell and acquisition model for exiting as an equity investor but we haven’t seen lot of IPO’S in India or abroad so, why not the green energy companies can go through the IPO route and lead successfully in India or other markets?

My understanding is that the depth and appetite in the Indian markets is not there relative to foreign markets for RE. There are several listed entities abroad – NextEra, yieldCos/funds in the UK such as Foresight, Next Energy, Bluefield, TRIG, Greencoat. IPO investors in this sector are excited by growth returns via dividends or capital appreciation, while the RE business model actually lends itself to stable but unspectacular growth looking at the pure fundamentals i.e. P/B ratios should only be so high based on fundamentals.

21. What are the major requirements or expectation of renewable energy sector: One is to achieve dispatchable power on demand through combination of solar + Wind + Energy storage? How can we achieve this technologically what will be the price implications etc.?

The key expectation is dispatchable power at the lowest tariff. Solar and wind are quite established in terms of technology and complementary in nature in the daily generation cycle. The selection of site is quite critical from the extent of complementarity and minimize the need of storage. The storage options are also varied and suitable choice can have a large impact on the tariff. There is no silver bullet for arriving at the lowest tariff but it is a global optimization of solar, wind and storage capacity along with the site selection.

22. Your views on Policies and Regulations such as Discom Privatisation, ISTS charges, Amendment to EA Act, Tariff policy reforms etc….

Discom privatisation is a step in right direction and shall help in reduction of losses by bringing about operational efficiency. Extension of waiver in ISTS charges will also give fillip to deployment of large scale capacities at single location.

23. What will be the impact of these ultra low bids of 2rs and 1.9rs in recent to 2 tenders on the entire solar market?

It will set a new expectation in the market. However, it is not new as whenever a new low tariff is discovered it creates ripples in the market and becomes a benchmark for others and impacts closure of PPAs won at higher tariffs. It allows developers to have innovative solutions be it technical or financial.

24. The wish list from Government of India to make RE Sector really grow to its max potential

Traditionally, large PV capacities have been deployed in countries which announce FIT and a formula based tariff decrement yoy in advance which gives long term visibility to the developers and adequate time for planning.

25. If we see any recent government tenders, there is a criterion for ALMM listed modules to be used, but not many companies are listed under ALMM, your comment?

This restriction is only for the government tenders. Also, the list is updated periodically and I believe the factory inspection process was retarded because of the Pandemic and will pick up momentum soon.

Anand Gupta Editor - EQ Int'l Media Network