JSW Energy is one of India’s largest private power producers and is part of the Jindal owned JSW conglomerate. The company has been fortunate not to get into the problems being faced by the rest of the Indian power industry, as it did not build gas power plants or bid for large thermal power plants. This has allowed the company to buy power assets on the cheap from other distressed power producers. However, the company’s recent statement about thermal and solar power may make its investors think twice about investing in the company. Even as the whole world including India make a major shift towards renewable energy, the company is still banking on building new thermal power plants.

It is to be noted that solar prices in India are starting to converge with thermal power and may go lower than all other energy sources in the near future, given the big advancements being made continuously in solar panel technology.

The recent statement by its CEO – “Every developed nation in the world has developed on the basis of thermal power so it’s unfair for them to expect that India should try and develop on the basis of green power” makes no sense.

Stone age did not end because of a lack of stones and the thermal age will not end, just because coal is finished. It will end due to the availability of better substitutes and technology (read solar energy). Technology has changed almost every industry rapidly and you can’t expect a template of the past to create a success in the future. It is like saying that communication in the developed nations developed because of telephone landlines, so India also built landlines instead of focusing on mobile communication. Besides being competitive on costs, solar energy is non polluting and non killing like thermal power.

Though thermal power will be needed by poor nations like India for some more time, it does not make thermal power good. Every power producer needs a renewable energy strategy, as thermal and other polluting power sources are being phased out by public pressure and government taxes. Just banking on thermal power is one of the most foolish things you can do today, given the huge risks of running a thermal power plant for 20-25 years.

The CEO of JSW says that solar energy tariffs are not viable. Though I would say that some of the bidding has been a bit irrational in India, saying it is not viable is nonsensical. In various parts of the world, solar is being bid for ½ the prices what they are being bid in India. Abu Dhabi saw a price of around 2 cents/ unit, while Mexico saw 3.5 cents/ unit, so how come the Indian price of around 6-7 cent per unit is not viable?

I would be very careful of putting my money in this stock where the CEO does not have the facts of his industry right and is even going public with these facts.

State of Indian Solar Manufacturing

The Indian solar manufacturing industry is a heavily fragmented and uncompetitive one. Its costs and price are typically 15-20% more than the imported Chinese solar panels. The only reason why producers are afloat is because of the DCR (domestic content requirement) in some of the government tenders. While the cell capacity also exists, there are onlye 2-3 producers of those and they also run due to the government’s protectionist policies. The Indian government and industry has failed to create a vibrant industry, despite strong dometic demand and a long history of solar manufacturing in the country (Webel, Tata BP Solar etc.).

While MNRE shows that the current capacity of solar panels is 5000 MW and a leader of an industry group claims that it will increase to 10000 MW, what will be the use of these panels. A recent report shows that India imported 75% of solar panels last year from China alone. Another 10-15% would be imported from countries such as Malaysia, Taiwan, USA which would mean that Indian players would be making around 500 MW of solar panels, which implies a factory utilization for the overall sector at just around 10%.

Also read Is India’s Solar Industry moving to a Fixed Tariff model from Reverse Auction tenders?

Increasing the capacity to 10000 MW would not make sense, given that most of the capacity is lying unutilized. I would suspect that a large portion of the current 5000 MW capacity is junk and obsolete. Creating more capacity does not make sense unless the Indian players can be cost and technologically competitive. While the new plant made by Adani of around 1.2 GW makes sense from the scale perspective, most of the other Indian solar power plants are just 50-100 MW in size which makes them completely useless in being sustainable over the long term.

Mr. Saluja from SEEMAT has boldly said that capacity would double. Yes it could but what is the value addition to the Indian economy or the players themselves. Yes the demand in the Indian market is there, but can the Indian players even hope to be compettivie to serve the Indian demand. The Chinese companies are already selling solar panels at 40 cents/watt and might go lower, if the overcapacity persists.The  Indian companies do not have a snowball’s chance in hell of selling these panels at those prices. Even Mr Saluja’s company makes a pathetic 100 MW of solar panels and 50 MW of cells. This makes no sense from a scale perspective. Large Chinese companies have a capacity of around 4000-5000 MW and are still fighting to make decent margins.

The government is also sitting on its ass not announcing its “integrated solar manufacturing policy” which has been in the works for a long time. Time is of essence, if India needs to become a manufacturing power and dilly dallying on a crucial industry does not inspire confidence

India is also likely to double its module and cells manufacturing capacity to 10,000 MW and 2,000 MW in the next couple of years. However, “lack of easy and cheap funding, expectations of a high GST rate and increasing cheap imports from China and Taiwan is hurting the domestic industry,” said Singh.

Source

100 MW Solar Power Plant by TATA

A 100 MW solar plant have been commissioned by Tata Power Solar in Anantapur, Andhra Pradesh. It is India’s largest solar plant commissioned till date, using solar cells and modules manufactured in India itself. This plant is expected to offset 110,000 tons of Co2 in the first year itself and will produce 160 million units of energy annually thereafter.

Read more about Solar Power plants in India.

Not only has this plant built a record of being the largest plant in India so far and using domestically manufactured components, but also being completed 3 months ahead of its stipulated timeline.

Tata Power Solar has over 25 years of experience in manufacturing and EPC services and have built over 250 MW of utility scale projects across 13 states in India. This plant was built for NTPC and also provided employment opportunities for more than 50 local people in that area. NTPC has a target of adding about 1,000 MW through renewable resources by 2017. Anantapur is the largest district of AP getting the lowest rainfalls in India. The company has already done more than 90 solar installations (including solar water pumps) in this district, generating more than 800 kWh of energy per day.

Also read about the largest solar farms across the globe here.

Some of NTPC’s solar projects already commissioned in India:

A.K. Jha, director technical, NTPC said, “Given our ambitious target for green power, we were aware that our requirement of rigorous timelines and cost-efficiency was a challenging one.”

Source: Economic Times

Tata Solar Power projects in India

Other popular Tata Solar projects in India are:

• 50 MW solar power project for NTPC in Rajgarh, Madhya Pradesh
• 17 MW solar plant in Mithapur, Gujarat
• 10 MW plant in Chitradurga, Karnataka
• 5.75 MW plant in Naini, Uttar Pradesh
• 3 MW plant while maintaining the aesthetics of Mulshi, Maharashtra
• 2 MW solar plant in Saraikela, Jharkhand

The 50 MW NTPC, Rajgarh plant, has shown a performance ratio of 86% in the one year of operation more than 10% higher than the 74% generation target. All of Tata Power Solar’s solar plants maintain an uptime of 99.6% minimum. Given the company’s experience in this field, it has a lot of government and corporate clients. Tata Power Solar has already built more than 250 MW of projects for these clients, with more than 500 MW under construction.

Fixed Tariff model for India’s Solar industry

Indian solar sector has seen a huge amount of success using the reverse auction tender method, which has led to massive competition amongst solar developers and discovery of declining prices for solar power. Unlike other countries, India has not been burdened with high subsidies that need to be paid for green power. However, this method has been criticized by solar developers for having shortcomings.

Some of these are that non-serious bidders have entered the space and bid irrationally low. This might lead to problems later on if these projects are not built, or some of these developers using low quality components might fail going forward. As the sector has matured and prices have become sufficiently low, the government is examining a new method to grow the solar power capacity in the country in a stable and a predictable manner, which will allow the private sector to earn reasonable returns and also let the government meet its ambitious target of putting up 100 GW of solar capacity by 2022.

NTPC which has been used by the government as one of the main procurers of solar power has been mulling a new model to buy solar power for its next phase of 5 GW of solar energy procurement. Earlier NTPC had been buying solar power through reverse auctions and selling it to discoms by bundling non-committed cheap thermal power from the central pool. However, solar power has not become cheap enough for it to sell, without bundling with thermal power. NTPC might now use a new method where it will set a reference price of 7 cents/kWh for buying solar power. Bidders may bid for a discount or a premium and win the tender for selling to NTPC. This is similar to the SECI method which has a VGF instead of a tariff.

This INR 4.5/kWh will set a reference price for the country and many state governments may follow a similar method of procuring solar power going forward. Given a more stable and consistent regulatory regime will allow most solar power developers to bid in a planned manner. This will ensure a greater success rate of tenders.

Currently India has bid out 20 GW of solar tenders, out of which more than 8GW of capacity has signed PPAs in place. This rapid rate of tendering is expected to continue in the future, given the government’s strong focus on increasing the solar capacity. However, as the industry matures alternative models should be examined for selection of solar developers.