While the ministry of new and renewable energy (MNRE) is not just confident about meeting the target but also exceeding it; investors are suspicious. In the last fiscal alone, a quarter of the 64 GW of projects auctioned received no or lukewarm bids and another 31 per cent faced delays in allocation after being tendered. Policy uncertainty, tariff glitches and lack of regulatory uniformity is making investors jittery. That is before factoring in payment delays to developers, which in some cases is more than a year.
In a statement issued a day before the two day power ministers' summit at Tent City, Narmada in Gujarat, the MNRE spokesperson said, as of end-September, India has an installed renewable energy capacity of 82,580 MW and another 31,150 MW is at various stages of installation. By the first quarter of 2021, India would have installed more than 113 GW of renewable power capacity. It further stated that 39 GW of renewable power capacity is at various stages of bidding which would be installed by September 2021. With only 23 GW of renewable power capacity left to bid, India is confident that the target of installing 175 GW of renewable power capacity will be met.
The situation on the ground is not that exciting. In end-September, UP's electricity regulator pulled up SECI for not seeking approvals, such as ratification of conformity certificate in time. This has put installed solar capacity of 1200 MW in jeopardy. The projects were allocated in September 2017. In July 2019, after the political change in Andhra Pradesh, distribution companies entered into disputes with renewable energy generators on delayed payments and tariffs. Subsequently, projects were canceled and generators went to court. The new government in Rajasthan brought in draft solar and hybrid policy with provisions of annual levy of Rs 2.5 lakh to Rs 5 lakh per MW for all projects selling power to entities outside the state. The 175 GW plan has nearly 60 GW coming in from the desert state alone.
At the Gujarat summit, Anand Kumar, secretary MNRE, said power purchase agreements are sacrosanct and state governments should not open agreements once signed. Officials stated, MNRE has decided to review price capping mechanism for bids related to solar and wind energy based projects. For last two years, MNRE was unable to resolve tariff capping and developers lost interest. Central and state power procurers are gradually lowering tariff caps, which developers believe constrains project viability. The May 2017 bid for the Bhadla Solar Park in Rajasthan at Rs 2.44 per unit, is still the benchmark for the tariff bids. The solar cap fell to Rs 2.65 per unit in June 2019 from Rs 2.93 in December 2018, while wind dropped to Rs 2.83 per unit in May 2019 from Rs 2.93 in April 2018. Debt institutions don't find capping comfortable, and pushes higher equity participation in this. Moreover, most of the bids lead renegotiation of tenders and disagreement lead to cancelation of the tenders.
CRISIL in its recent report pointed out that despite increase in tendering volume, not only has allocation of projects slowed down, but both under subscriptions and cancellations of awarded tenders have also increased. "The ratio of auctioned or awarded projects to tendered projects plunged to 34 per cent in FY 2019 from 77 per cent in FY2016," the report stated.