EQ’s webinar on ‘New Tenders for Utility Scale Solar Projects by SECI, NTPC and States’ was conducted on May 19, 2021 at 03:00 PM. Experts in the panel shared their insights on the topic discussed related opportunities and challenges in detail.
Pratik Prasun, Manager (Contracts & Procurement), SECI and Pradipta Kumar Roy, Chief Manager, IREDA participated in the webinar as Keynote Speakers. Bimal Jindal, Director, SCM, SB Energy participated as the moderator of the webinar.
Girish Kumar Kadam, Vice President, ICRA Limited, Laxmi Narayanan, DGM business Development, Ayana Renewable Power, Angshuman Rudra, Dy. General Manager, Avaada Energy and Sachhin Patra, Senior Manager Sales, EnKing International were other panellists in the webinar.
Pratik Prasun, Manager (Contracts & Procurement), SECI discussed the ambitious target of 100 GW which needs to be done in 2022 and a massive target of 450 GB overall by 2030.
He informed, “The pandemic has affected almost every aspect of industry and life and general. We have tried to continue our business in the usual mode. We have conducted auctions and tendering activities on a normal course without facing much difficulty because of the digital format allowed by technological advancement.
Our efforts have also been noticed by the UN Secretary General. We are on the right path to the target. We are well on our course to meet the target. The tenders are very much planned without taking into account any delay as such. We have a target of around 20 GW to be issued for this financial year. The usual mix of solar, wind and hybrid will continue.
We are forming up ideas on the special projects related to storage and from RE. DISCOMs are unable to form up their requirement regarding issues of manpower due to COVID 19. By the later half of this year, we will be issuing some specific storage related tenders also.”
He further said, “As far as change in the law is considered, BCD impact will be applicable under the change in the law. Some of the recent PPAs have clearly demarcated how the impact will be calculated so that will ease the calculation process. Relatively older PPAs will have to spend a lot of time in the CRC for necessary calculation.”
Pradipta Kumar Roy, Chief Manager, IREDA was the next speaker. He discussed the changes happening in the industry- ALMM, BCD and Make in India and their impact on projects.
He spoke on the challenges faced by IREDA and the developers due to these changes. He also discussed the module prices and their impact on financers.
He said, “As a lender, we are also perplexed in the sense that in one way the cost is going up and on the other hand tariff prices are going down. These two conundra are sort of very difficult to understand, how the developers are squeezing the cost at their end and trying to get into a tariff that is very competitive. It is a learning thing for us also.
If we compare the projects which came five years back to now, there is a drastic change in the way the lenders are financing. Earlier, we used to finance the tender of 12 or 13 years.
Now, because of this particular tariff and making it viable as far as financials are concerned. They are stretching it to 18-20 years of repayment. That way, the risk is increased as five years down the line it’s very difficult to predict and 20 years is a lot of time. The long term risk is increasing. There is no increase in the risk premium as far as banks and lenders are refunding.”
He stated, “I have observed that developers are trying to come up with new structures. What they will do is probably they will go for a bias credit which was earlier very less prevalent.” He added that because of the competition, the demand of the market, tariff structure that is coming, it is pressure on the lenders to comply with the markets.” He further explained this point and BCD in detail.
He further discussed from a financing perspective how the big companies are doing. He said, “Probably, past three years, we have been very active in this segment- Group Captive as well as a third party open access.
We have funded a lot of projects, not big scale, probably in the range of 25 MW to 40 MW. I feel group captive and open access should be smaller below 50 MW so that you are able to manage or garner.
Once, it is 100 MW, we need an offtaker of that range also. Offtaker also will not try to concentrate only on one supplier. They will also structure their requirement to two or three developers. I guess the market as of now is around in the range of 40-50 MW for a two-part and third party.”
Girish Kumar Kadam, Vice President, ICRA Limited spoke next. He discussed his outlook on the RE sector and the overall crediting trends that happened in this last year due to market dynamism.
He said, “Our outlook on the renewable energy sector is stable. Thanks to the few political factors. Number one, the policy support is very strong. The renewable space both from the Government of India and Several State Governments. Given the fact that policy targets are quite ambitious with 175GW cumulative by 2022 and 450 GW by 2030.
So, directionally, the policy focus is quite solid. Number two, the tariff competitiveness both for solar and wind has improved quite significantly over the past four years.” He also spoke about the expectation on tariff prices and the post BCD impact on the tariff in solar and wind space.
He said, “The tariff competitiveness is not going to be an issue as such. As far as the solar sector and the wind sector is considered and it is fundamentally positive for the RE sector to grow in the long run.”
“Number 3, the regulatory framework is quite well established. Far more supportive for the RE projects. Thanks to Must Run Status, the RPO framework and more clarity that has emerged over the several years.
Despite the lockdown restrictions, thanks to Must Run Status, the operational performance never got impacted for the RE projects,” he added. He also discussed ALMM and said specification is certainly a big positive. He further spoke on the installation of Renewable Energy in India.
Bimal Jindal said, “I believe, one of the major issues in the country, while we are talking about the standard renewable space, is on the infrastructure which is still not up to the pace.
One of the major concern for the developers is the infrastructure which is not available with the timelines which are required and the quality of assets that are required. That also needs to be focused so the execution is also at an equal pace to the tenders. That part is also going to be critical.
Girish Kumar Kadam said that the distribution continues to be the structural pinpoint for the entire power sector. Financial health improvements in the State DISCOMs continues to be monitorable for the power sector and for that we need serious reforms and serious willingness from the DISCOM side to improve on the efficiency aspect, to ensure tariff adequacy and more importantly adequacy of the subsidy support from their respective State Government.
That is certainly required to improve the financials of State DISCOMs that continued to remain in a poor financial state and that is getting deflected from the delays towards the number of IPPs at a PAN India level.”
Angshuman Rudra, Dy. General Manager, Avaada Energy discussed his thoughts from the developer’s perspective on major challenges, concerns and what support can be required from the Government or the agency. “Things have changed a lot. The environment is not the same which has been previously envisaged by the developer.”
He added, “The developers mostly in India are investor driven. Investors have a definite view in terms of the short, medium or long term, how the capacity addition would take place, how the construction would go and how the revenue would come from the project and how ultimately the investors can take an exit or continue with the project. These things matter a lot.”
“As a developer when you are invested into the market for a long term view and you have to continue and not just here to develop and sell the project but to continue the project for the nation-building, renewable energy, clean energy sector and overall development.
Developers are trying their best at this time to continue with the delayed construction. Everybody is taking support from the Government,” he added. “At the same time, we have to retrospect and introspect into the basic.
When we are saying, we have to do a 20-25 GW project so how the tender would come up, who would be the offtaker and does the offtaker have that much latent demand available.
All these things have to be taken into consideration.” The generators, system planners, traders, procurers and the transmission line developers, everyone has to gel in and thus the investor confidence in the market would again come.”
He further discussed in detail the constraints/ restrictions on the grid, challenges he faced and what he thinks could have been better. He said that they have not containment in their projects thanks to the Must Run Status.
Laxmi Narayanan, DGM business Development, Ayana Renewable Power discussed the impact of ALMM, BCD and COVID- 19 on the business. He shared details on major challenges and how they could be mitigated or done better.
“There will be a significant shortage in capacities if we have to keep the momentum for tenders. “In terms of land acquisition is the challenges that we foresee because in most of the states we have to interface with different agencies.
The single window is unfortunately not there for land. We have to run around different agencies and we all know that the state solar policy and the revenue department’s framework sometimes mismatches.
I think the key focus should be that the policy alignment between the various state regulators who are the key stakeholder for the project and the solar policy of the state should give clarity to the developers about the right cost or probable right approach in buying the land. Several states have policies favouring land acquisition for industries but still, there are some challenges.” He also discussed the payment from DISCOMs, how is it helping the developers and what is the business impact on the delays.
Sachhin Patra, Senior Manager Sales, EnKing International discussed the impact and plans to continue the sustainability program. He shared his insight on the topic.
He spoke on the 2012 slump in the carbon market and the rise in the market after 2015 when Paris Agreement was signed and there was significant momentum in the market to control or limit global warming.
He shared details on the carbon market. “Seeing the trend of the carbon market in one and a half year, the rates have almost tripled compared to the rates that were at the beginning of 2019.
Since 2020, the rates have doubled. Seeing that trend, in future, around one or two years, there would be a significant movement in the market and that will become a substantial amount of revenue for any kind of project which is reducing emission not only Renewable Energy but even the companies that are in this platform right now and also exploring the other sectors like waste management project, landfill energy, compressed bio-gas etc.
For these projects, the carbon offset revenue could be one of the substantial streams of revenue in the future because the rates are going to increase.” The webinar ended with an interactive Q and A session.