Solar chaos in India

India wants to increase its solar capacity by 33x times in the next 7 years and is pushing its state owned companies to increase their investments. NTPC which is India’s largest utility is taking the lead and has already announced a number of tenders for contractors to build plants at AP, MP and Rajasthan. These are a mix of DCR and non-DCR tenders. SECI which is owned by the Ministry of new and renewable energy is also getting into the solar development space. It has put out a tender for EPC players to build plants. NTPC is also planning to bid out 15000 MW of solar power for MNRE, besides building 10000 MW of solar power on its own. MNRE has also changed its targets and made 3 tranches out of the Phase 2. There is a huge mish mash of targets and policies and tenders. The state governments are also on their own trajectory to build large number of solar power plants. Rajasthan wants to build 25000 MW on its own. Others such as Telangana, AP and Maharashtra want to build 5000-7500 MW each. No one really knows whether this will be a part of the national target or not.

The government also wants to build 40 GW of rooftop solar out of the 100 GW, but nobody is putting out tenders for rooftop solar. The intentions of the Indian government are good but the implementation is chaotic. I think the targets and implementation timelines are not known and understood even by the policy makers themselves. There is no coherent large picture which will allow the smooth implementation, as nobody can plan where and how much transmission capacity is to be built. The fund requirements are also hazy, as to where the $100-150 billion will come from. Ad hoc measures like NTPC raising $500 million while IREDA, Yes Bank and EXIM Bank going for green bonds are going on, but I don’t know if there is an integrated strategy on raising the money. The government is also planning to give dollar linked tariffs for solar projects in order to reduce the hedging costs for developers, who are borrowing dollars. Their costs will come down drastically but someone will have to pay for the dollar costs. I don’t know how the government will manage the forex volatility risks on its own.