The renewable energy producer that quoted India’s lowest solar tariff is worried that a 70 percent safeguard duty suggested on Chinese solar panel imports will increase prices to a level where states may not want to buy in a surplus market.
“Today, states are used to buying affordable power at Rs 2.5 per unit and suddenly with a 70 percent safeguard duty on panels, it will go up to Rs 3.7-3.9 per unit,” Sunil Jain, chief executive officer at Hero Future Energies, told BloombergQuint in an interview. “It is a huge jump. I don’t know why states would buy because today we have surplus energy.”
The Directorate General of Safeguards Duty suggested a 70 percent safeguards duty on solar panel imports from China and Malaysia to protect the domestic industry. CRISIL estimated that a duty at that rate will increase project costs by about 25 percent. That’s because solar modules contribute about half the costs and developers meet 84 percent of the demand through imports.
Lower panel costs allowed power producers to quote cheaper tariffs to win bids as India targets to increase renewable energy capacity threefold to 175 gigawatts by 2022. In December, Hero Future Energies, part of the Hero Group, won Solar Energy Corporation of India’s tender for 300 megawatts of the 500-MW Bhadla Solar Park Phase III-Rajasthan, quoting Rs 2.47 a unit—the lowest price.
The company has 436 MW of commissioned wind projects with an additional pipeline of 500 MW, and 203 MW of commissioned solar farm with an additional 500 MW under construction. It plans to reach 1,250 MW in renewable energy capacity by March-end.
“Project costs will go up and so will the tariffs after the safeguard duty. How will they sell power?” Jain said. “Will states be convinced by the government to buy power? I don’t think that the Ministry (of New and Renewable Energy) will jeopardise the Prime Minister’s vision of 175 GW of renewable by 2022.”
A “fine balancing act” is needed, Jain said. “A 10 percent safeguard duty is better as it will increase the tariff by 10-15 paise which is affordable.” Solar power developers met Power Minister RK Singh, who assured that the projects awarded before the proposed safeguard duty will be exempted.
Pitches For Sops In Budget
Jain pitched for more incentives for solar power developers in the budget. The government should allocate more capital for solar parks. It also needs to give incentives to distribution companies to buy more renewable power, including wind energy.
“It is going to be one of the worst years for the wind sector. I don’t think we will cross 1,000 MW (in new capacity) and that is also a spillover of some previous projects,” he said. “Otherwise, it will be a washout, compared to 5,000 MW previous year. I am not seeing a great future in the coming year as well.”
Total auctions by state and central governments have hardly touched 2,500 MW this year. “Only 1000 MW will come up from those (central) projects, and you may get another 500 MW from states.” For the industry to sustain, they need a consistent pipeline of 6,000-8,000 MW a year. “That is why we need to incentivise state discoms to encourage them to come out with tenders.”
Source: BloombergQuint
