Many Indian states have become slightly crazy with their solar power commitments going overboard without having the capacity or real need to do so. The Indian central government target of building 100 GW of solar power up from just 8 GW now has pushed many state governments to go a bit bonkers. Jharkhand which is a piss poor state in the middle of India with a large mineral base, but with little industry and agriculture is one of them. The state government had come out with a 1200 MW solar tender which was one of the largest at that time. It made little sense considering the fact that the state’s overall capacity is just 3000 MW and it has tons and tons of cheap coal lying beneath its soil. A smaller tender to meet  its Renewable Energy Obligation of 200 MW would have been enough, but the state for whatever crazy reason went in for a 1200 MW solar tender.

Also read Can Jharkhand move from 16 MW to 18 GW – A step forward!

It is also to be remembered that the state’s power policy is a mess with its main distribution utilities owning hundreds of millions in debt and being ranked as the worst utilities in entire India for their dismal financial condition. The state loses around $150 million every year due to electricity theft and inefficiency besides pricing power below the cost of production. It is a classically mismanaged state which has failed to develop despite having rich resources. The state failed to develop a large hydro and a thermal power plant despite almost 20 years of trying, due to issues in land acquisition and plain sloth and corruption. Now it looks like it will miss the solar boat as well.

The state had one a power auction of solar power capacity and had got bids in the range of between 7 cents to 11 cents a unit. However, despite most companies winning the bids fair and square, the state has refused to sign a PPA with them. This is same as the situation with Telangana state which had dome something similar. The state wants the winner to lower their prices as new bids in other states are being priced between 6 to 7 cents. However, Jharkhand got higher prices as the developers like Hero and Renew do not have faith in the state government or discom them paying them on time if at all. So they priced the power higher factoring in the higher risk.

Also read why India’s tribal state of Jharkhand receives high solar tariff bids.

Also it makes little sense of the state to buy 1200 MW of solar power when it does not need to do so as per its green commitments. It can buy much cheaper power form other sources or generate from its billions of tons of coal reserves. A check of awarded projects shows 1200 MW of solar capacity of ReNew Power, Adani Power and ACME Solar and about 600 MW of wind capacity is stuck for the lack of PPAs in Jharkhand.

The biggest risk cited by developers and investors in India’s renewable energy industry is the ability of the distribution utilities to pay them for the power generated from the solar and wind power plants. While transmission capacity is another big risk, it is still manageable and a one time risk. On the other hand the 15-25 year PPA signed with discoms which have billions of dollars in accumulated losses is a giant risk.

Read about PRAYAS.

With many Indian states turning power surplus, there is little incentive to buy solar and wind power which is still expensive compared to the dirt cheap power available on the Indian power exchanges. Recently, India’s state of Punjab said it could not sell power form its thermal power plant despite selling it at just 3-4 cents a unit. Large Indian states such as Maharashtra have reportedly not paid developers for 12 months, causing the working capacity for developers to increase. Developers are also reluctant to build new RE capacity given the state of their existing RE capacity which is not getting payment on time. Lenders who generally provide 80% of the funding for these plants in the form of debt have also become reluctant to lend to this sector given the woes.

The Indian central government and its renewable energy ministry have little power to change things. The energy minister Piyush Goel had said that he would punish those states which are curtailing solar and wind power, but as we have said earlier he can’t do much. He can’t even act against states that are ruled by his party the BJP forget states which are ruled by the opposition parties. The biggest guilty parties are Rajasthan, MP and Maharashtra utilities. All the 3 states are directly ruled by the BJP but the Minister is mostly all sound and no action.

Accionia which is one of the biggest power developers in the world has reportedly said that it would need invest any more money into new wind power plants as almost 150 MW of its plants are either not getting any money from the utilities or do not have any PPAs signed with the state government.

“These discoms are paying conventional generators, but they haven’t paid wind from July 2015 onwards and are actively discriminating against wind generators,” said Sumant Sinha, founder of ReNew Power Ventures Pvt.

ReNew Power said 360 megawatts of wind power in Maharashtra, 150 megawatts in Rajasthan and 100 megawatts in Madhya Pradesh are affected by payment delays, impacting 35 percent of the company’s revenue.

The company with 86 megawatts of wind power in India and another 78 megawatts under development is the latest investor to complain that some Indian power distributors, known as discoms, are stifling investment and undermining Prime Minister Narendra Modi’s green-power ambitions.

Acciona had considered work in Maharashtra and Madhya Pradesh then decided to shelve its plans because discoms weren’t signing power purchase agreements for completed projects. Reccani said Tamil Nadu state has strong enough wind to support wind farms but also the same risk that payments would be curtailed at peak times.

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Will India achieve it Solar target?

India is going all gung-ho about solar power in the country. After its decision to install an aggressive 100 GW of solar energy by 2022, the country has been working in all directions. Various states in India like Rajasthan, Gujarat and Tamil Nadu have already installed more than 1 GW of solar power till date. Many states like Andhra Pradesh have policies favouring solar energy. Though the country has been making all possible efforts to go solar, it still faces many challenges in its way and it has now become an interesting topic to debtae if Indis will touch the finish line of the solar race!

In a recent conference on energy and mining, the Indian Power minister Piyush Goyal vocalized the importance of using renewable energy in India. He urged the power generators to stop importing coal and start looking at employing a healthy energy mix to help India attain its goal of “One Nation, One Grid, One Price”. This program will help deliver grid connected power that will be affordable for the nation at large. He also stressed that it is still not the time when India could totally do away with fossil fuel generated power, but didn’t stop laying emphasis on the usage of renewable sources of energy.

The prices of solar in the country has already gone down by 40% in just one and a half years’ time. Price below INR 5/kWh (6 cents/kWh) has become the standard price for solar in reverse auctions in India and is no longer considered a low price. In another recent news, state run power company NLC India has abandoned its plan of setting up solar project in Rajasthan. The state’s DISCOM has refused to buy power at the estimated rates. The company had invited global tenders to set up four 65 MW solar projects in TN and Rajasthan and had estimated to finish commissioning by 2016 end. India faces a lot of challenges when it comes to the successful implementation and installation of solar power across the country.

Solar power is getting popular owing to its green and cheap credentials and a solar project coms up in just 12 months’ time. However Infrastructure and transmission hurdles, absence of land at affordable rates, reliance on thermal power and DISCOM reluctance to buy power are amongst the major problems that solar development in India face. It is still expected that most of the new power development from 2019-2020 onwards should be solar power, given its vast advantages.

The country still has hundreds of millions of people still leaving in darkness and faces huge pollution problems. It is now the need of hour to turn to solar power. A move in this direction was the country ratifying the Paris Climate change deal. The DISCOMs are facing additional challenges in India, with the country turning power surplus. Even though the Indian PM is turning no stone unturned and is coming up with innovative ways to spark the Indian energy mix, India still has a long long way to go when it comes to solar installations.