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27 August 2020

CEA Report details Indian renewable pipeline’s woes

India’s Central Electricity Authority (CEA) has released a report which showing massive delays in the country’s solar and wind utility-scale pipelines. A combined 39.4 GW of projects have encountered delays, and aside from the inevitable Coronavirus, many other causes are given – ranging from insufficient transmission infrastructure, to land acquisition, to PPAs. Rooftop solar is in an even more moribund state. However, one aspect of the delays is simply the slump in power demand, which can be expected to be a temporary issue from this year’s pandemic. A JMK report expects renewable development to come back to normal levels next year, with solar adding 7.7 GW during 2021.

Figures from the CEA show installed solar capacity going from 33.7 GW to 35.3 GW over the first seven months of the year, an increase of 1.6 GW. In contrast, the first seven months of 2019 saw 4.8 GW installed, meaning that solar installations are currently progressing at one-third of the usual pace.

A recent report by JMK Research predicts that the second half of the year will see between 2.2 GW and 2.5 GW installed for solar, meaning the year as a whole would be well below 5 GW. However, Q4 will see a return to almost normalcy for both wind and solar. JMK sees rooftop solar as being harder hit than utility-scale, falling to just one-quarter of the year’s installed solar capacity.

From SECI’s large-scale utility solar tenders from the past couple years, only 13.9 GW was awarded out of 18.9 GW tendered, and almost all of that is now under construction. The JMK report identifies 27 tenders in Q2, out of whose 5.23 GW offering, 4.49 GW was awarded. Indian tenders had poor uptake for a while, but are getting better traction recently.

The immediate problem was the interruption of Chinese imports as a follow-on effect in the supply chain from Coronavirus. Chinese imports account for at least 80% of the Indian total. As the pandemic was dealt with in China, production came back online promptly. However, demand for modules and components is surprisingly high within China, and a new issue has arisen with the supply of polysilicon, resulting in sharply rising prices. This was triggered by accidents at two factories in Xinjiang a month back, and subsequent output-reducing safety measures affecting all silicon factories there. China’s monthly output fell from a monthly norm of 34,000 tons in the first half of the year to 28,000 in July and 26,600 expected for August.

Prices for polysilicon and monosilicon rose by 80% and 64% respectively within China compared to just a few months ago, and this has begun impacting the rest of the supply chain. In the rest of the world, price rises were more like 30%. This week, silicon continued to rise by between 1% to 2%, due to demand. Such price rises are particularly impactful in India, where solar projects are under especially strong price pressure.

India has a levy of 14.9% on Chinese imports at present, but this is just a brief period before new legislation is brought in. The country wants to establish its own manufacturing base, which would require levies of at least 30% or 40% to keep out Chinese modules; this week the India Solar Industries Association called for a 50% customs duty on solar equipment.

India has a target of 175 GW renewable energy for the end of 2022, which was announced in 2015. Initially, 100 GW of this was to come from solar, 60 GW from wind, 10 GW from Biomass, and 5 GW from small hydropower. Of the solar, 40 GW was to be on rooftops.

While the target was always ambitious or aspirational, it’s now looking like it might be missed by miles, even with a recent decision to save face by including large-scale hydropower in the figure. Right now, India has 88 GW from those sources combined.

India’s peak solar development occurred in 2017, entering a slowdown in mid-2018, so Coronavirus is only part of the story. Although India’s economy has also slowed down in general, two major causes of the renewable slowdown were low tariffs – not only did they often set world records, but state authorities imposed tariff renegotiations on more than one occasion, against the wishes of the federal Modi administration. Distribution companies are in very bad shape financially, and the Modi administration is trying to use bailout money as leverage to impose reforms.