Massive 2000 MW solar auction in India sees huge competition and low prices

18 Aug, 2015 by
India,Solar Energy

India Solar to see new lows

India’s solar auctions are seeing lower and lower prices being bid for solar power sales with each passing year. The latest giant 2000 MW auction by one of the states Telangana saw solar prices being bid in the 8.5-9.5c/kWh range. There were 184 bidders for the 2000 MW auction and it saw stiff competitors between foreign solar developers, Indian solar developers, conglomerates and specialist green energy utilities.

India green energy focused utilities such as Mytrah, Acme saw large wins in the hundreds of megawatts range, while others such as SunEdison, SunPower, Skypower too won big projects by bidding aggressively. Most firms are bidding in the Rs 5.5-6/kWh range, which means that profitability will be severely challenging for most firms given that interest costs in India are in the 12% range. Though equipment prices in India for solar farms have fallen sharply, the interest costs remain quite high. This means that solar prices cannot go down as rapidly as in USA and Middle East, where the interest costs are in the 4-6% range or even lower for the large state owned financial institutions and utilities.

Read more about Indian Solar Installers.

The last tender in MP set a new low benchmark for electricity prices from solar projects and this has continued for the Telangana project as well. Solar auctions are being done dime to the dozen by the central and state government and their companies. NPTC and SECI are also coming out with large project auctions soon.

The main concern is that whether these developers will be able to build these projects given these aggressive prices. The Indian political and regulatory landscape is quite volatile, while the global energy prices are extremely volatile as well due to the commodity massacre taking place. Some of these projects may face issue in financial closure in my views, given that the IRR cannot be too high. I am also not sure whether these developers have done their risks mitigation strategy in place.

USA government slowly but surely increasing support to Solar and Wind power in a big way

10 Aug, 2015 by
Renewable Energy,USA

The US government now promotes Solar & Wind Energy

The USA government has been a laggard in supporting solar and wind power compared to other developed nations such as Germany and Spain. While the 30% investment tax credit has helped fuel solar power growth, there has been no big bang policy of pushing solar energy growth. Falling solar electricity prices have been the biggest factor behind making USA the third largest market for solar power after Japan and China. This is not a big credit to the USA government considering the fact that USA has the largest electricity producing capacity in the world. Other developed nations such as Italy and Spain produce far more solar and wind energy than USA does.

But however things seem to be changing. Obama has increased his support to green energy sources as his term slowly comes to an end. Obama has been trying to become more assertive in key policies such as the Trans Pacific Partnership to improve trade. He is focusing more on his legacy and is willing to take the Republican majority Senate head on. Obama has increased the compliance conditions for the power industry such that it will make thermal power more costly to produce. He has made the reductions from power industry go upto 32% by 2030 up from 30%. It will become increasingly impossible to run thermal power plants let alone build new ones. EPA has been doggedly making fossil fuel power plants cleaner and has been fighting the utilities in courts.

Read about Solar Installers in USA.

Democrat frontrunner Hilary Clinton has also made renewable energy a center piece of her policy by targeting 500 million solar panels to be installed by 2020 implying a target of 140 GW, which is 7 times more than the current USA capacity of 20 GW.

While the Republican candidates are almost all climate skeptics and supporters of Big Oil and Gas, Democrats are becoming more assertive towards climate change issues. They are willing to stake more and more to help solar and wind power become more important industries each year. Solar energy is already becoming one of the most important employment generators for the USA economy. They are getting large constituencies to support them just like Big Oil and Gas. International agreements such as the one signed with China is also making the US government support more renewable energy.

Guardian

On Sunday, Hillary Clinton took a first swing at the many-headed carbon hydra. By the end of her first term, she said, the US would have seven times more solar energy capacity than it does today. And by 2027, renewable energy would supply a third of the nation’s electricity.

Clinton’s announcement, which the campaign said would be the first of many on climate change from the presidential hopeful, extends the carbon-saving ambition in a significant sector of the economy. Burning fossil fuels for electricity accounts for 31% of US greenhouse gas emissions. One estimate found Clinton’s 33% renewable target could slice another 4% off the US’s existing pledge to cut emissions by 26-28% by 2025.

Bloomberg New Energy Finance’s Americas chief, Ethan Zindler, said the ambition was high, but within reach. “It appears to be on the upper end but it’s entirely doable given the rapidly improving economics of renewables generally and solar particularly.”

Has Indian Solar Market returned to Irrational Pricing or is 8c/kWh the new Normal

27 Jul, 2015 by
India,Solar Energy

The Indian solar market has become remarkable over the last one year, with solar bid prices falling in a narrow range and large developers starting to dominate the solar auctions. This was in sharp contrast to JNNSM central solar auctions in earlier years when developers had bid irrationally low prices, as many of them did not have experience in solar energy development and wanted to make a mark in the hot emerging solar market. Though people had bid low, most solar PV projects got completed as solar panel prices crashed allowing developers to build the projects despite very low prices that they had bid. This was in sharp contrast to thermal power, where many of the large giant ultra-mega power projects either did not get built or went into huge losses as coal prices climbed sharply.

The recent solar power auctions in Madhya Pradesh once again saw the return of the excess competition era, with prices bid as low as Rs 5.05 /kWh ( around USD 8c/kWh) when in the last auction prices were more in the range of Rs 6/kWh. The auction saw around 100 players participating and more than 3000 MW were bid, despite just 300 MW of solar power plants being on offer. There was a large mix of competition with large foreign developers, domestic developers and even small companies participating in the auction. The range of bids was also quite wide with bids between Rs 5-7/kWh. Most of the large developers such as First Solar, SunEdison, Adanis etc. did not get a single MW in the auction. With solar auctions becoming the preferred way of building solar power capacity, large developers have a problem on their hands due to excess competition.

Many companies such as Essel Infra, SunEdison etc. have committed to bid massive capacities but given the trend, they may not reach a fraction. Tamil Nadu government is already facing severe criticism for not awarding the 648 MW solar capacity through solar auctions. Their deal with Adani for Rs 7/kWh is certain to be scrapped. This means that unlike wind power which got fixed feed in tariffs, solar power will keep going the solar auction way.

This means more pain for developers and good times for consumers. While a lot of people have criticized the low bids saying that they will lead to bad quality projects and is not sustainable, I think it is. While some developers may get burnt, the trend of lower prices is here to stay. Solar bid prices in USA, UK and Middle East have ranged from 4c-8c/KWh. While Indian interest rates are higher, the labor cost is cheaper. 8c/kWh has become the new normal for solar prices in India.

Winning Bids

SN Bidder Total Bid Capacity
(MW)		 No of Bids Fin Bid Capacity (MW) 3717 Cumulative MW Fin Bid (INR/kWh) Allocated MW
1 Sky Power South East Asia Holding 2 Company Limited 150 3 50 50 5.051 50
2 Sky Power South East Asia Holding 2 Company Limited 150 3 50 100 5.109 50
3 Sky Power South East Asia Holding 2 Company Limited 150 3 50 150 5.298 50
4 Narbheram Vishram, Kolkata 30 2 20 170 5.380 20
5 Narbheram Vishram, Kolkata 30 2 10 180 5.398 10
6 Narendra Kumar Khanna, New Delhi 2 1 2 182 5.451 2
7 Made Easy Education Private Limited, New Delhi 10 1 10 192 5.452 10
8 Fluid Con Engineers, Jaipur 2 1 2 194 5.456 2
9 Rays Power Expert Private Limited, New Delhi 12 1 12 206 5.457 12
10 Design Co, New Delhi 14 3 5 211 5.610 5
11 Renew Solar Power Private Limited, Gurgaon 300 6 51 262 5.630 51
12 Hero Solar Energy Private Limited, Okhla 75 2 50 312 5.641 38

 

India’s Solar Power sector sees another major controversy/scam with Adani – Tamil Nadu deal of Rs 7/unit considered usurious

21 Jul, 2015 by
India,Solar Energy

India into another Solar scam

We have really come a very long way in India’s solar industry with a recent deal between India’s southern state of Tamil Nadu and the Adani Group for buying power from 648 MW of solar plants at Rs 7/kWh ( (~11c/kWh) considered too high. A lot of the opposition parties are calling it a scam, since a recent tender in another Indian state of Madhya Pradesh saw the lowest bids for solar power coming at just Rs 5/kWh which is around 30% lower than the Adani bid. Note the Indian government has mostly procured solar power through reverse auctions. The results have been quite good with successive auctions seeing lower rates for solar energy with high competition. In fact the recent 300 MW solar power auction saw over 100 large and small companies putting in their bids. This led to the price falling so low. Though some people are contesting the lower prices in the bids as irrational and not sustainable, the Rs 7/kWh is clearly too high as Indian CERC declared Rs 6.49/kWh as the reference price last year. The prices have only come down since then and Rs 6/kWh is considered as a decent price by both developers and governments.

The Adani Group has been aggressively expanding into the solar power area singing MOUs worth billions of dollars with state governments in TN and Rajasthan. It also signed a MOU with SunEdison to build a $4 billion solar manufacturing plant in Gujarat. Considered extremely close to the new BJP government in the center, Adanis have been buying and building plants like there is no tomorrow. They have already bought a number of thermal power plants from distressed owners, despite the Group straining under a massive debt burden. Even as other infrastructure groups like JP Associate, GMR, GVK, Lanco etc. face the prospect of bankruptcy and asset sales, Adani Group has been expanding at a ferocious rate.

The recent deal with TN does not make much sense for the government there, as they could easily get a lower rate through competitive bidding. Even the Adanis have bid only Rs 6/kWh in MP which makes the recent deal even more controversial. Now I don’t think this project of the Adanis will come to fruition, given the huge hue and cry and the simple math which makes this deal seem tainted. The Rs 7/kWh rate was formulated by the government a couple of years ago but given the rapid change in the solar sector, it has already become obsolete.

The solar sector in India has not been left untouched by corruption and unethical practices which is prevalent in all walks of Indian life. The first solar scam was the one by Lanco group which was said to have bid for multiple projects during JNNSM Phase 1 using dummy companies, to circumvent group limits on the capacity allocation. The court ultimately did not think it was a scam as everything was right in a legal sense, though it may not have been completely ethical.

The second big scam was in Kerala where people closely associated with the Chief Minister’s office defrauded investors of crores of rupees through solar investment schemes. Now the Adani Group has become the controversy. Please note there is no evidence of a scam in this case, though it smacks of incompetence by the government officials.

Gamesa looks to aggressively enter into different solar energy segments (panels, inverters, EPC) in India

9 Jul, 2015 by
India

Gamesa enters the Indian Solar Market

Gamesa is looking to aggressively enter the Indian solar energy market, as the country is set to become the fastest growing market in the world. The Indian government is set to come out with tenders for 15000 MW of solar power this year and is choosing on financing from different domestic and international sources for boosting solar energy in the country. Some large renewable energy developers like SunEdison, Abengoas etc. have already made big plans to set up massive capacities in India. Gamesa is not looking at the solar development space, rather it is looking at ramping capacity through EPC. The company has set up a 10 MW solar plant in Tamil Nadu for a clutch of textile companies, who will sell the power to the state government at Rs 7.01/kWh or ~11c/kWh. Gamesa is also looking to set up solar panel / inverter manufacturing capacity in India.

Gamesa like other major wind turbine companies is facing saturation in the wind energy market, while the solar market continue to show double digit growth. In 2015, solar energy should eclipse the wind energy in capacity additions, with 55 GW of solar plant capacity additions being expected. It is imperative for Gamesa and other players like Suzlon to look at solar energy to keep up their growth rates. Suzlon has also firmed up plans to massively increase its solar development and EPC plans. These companies hope to utilize their skills at RE development and land acquisition. They also have experience in project financing for large capacity power plants.

Gamesa has been a successful wind energy equipment supplier and contractor for wind farms in India. While wind energy is also getting a boost by the Modi government, solar energy is where the main action is and Gamesa is ramping up to take advantage.

Indian Transport to get Solar Power

3 Jul, 2015 by
India,Solar Energy

Solar Power at Indian Airports

The transport industry in India is now considering using solar energy to cut its dependence on thermal power and diesel consumption. The AAI (Airport Authority of India) will now construct solar power plants at its airports to meet its power requirements, according to the MoU signed between AAI and Solar Energy Corporation of India (SECI). Any excess power will be supplied to the grid as well. It will first instal 50 MW capacity solar plants on its roof top surfaces as large areas are available at airports. This will be increased to 150 MW over a time period. AAI has plans to solarize 30 such airports at the moment.

The AAI spokesperson said the solar plants would not only achieve significant savings in power bills over a period of time but also lead to significant saving in carbon emissions. The plants would also make airports self-sustainable so far as energy requirement is concerned, he said.

Source: TOI

Also read about Solar Powered Cars here.

Solar Power in Indian Railways

The Indian Railways is also considering to supply power to the railways using solar energy. A trial run was conducted on a indian railwaysnon-AC coach of the Indian Railway, with solar panels on its rooftop surface. The roof surface of a coach is ~40 square meter and can accommodate a maximum of 18 solar panels. It is generating 17 units of energy on a daily basis, enough to support the lighting system in the coach. The Indian Railways is also considering establishing rooftop solar railway stations, other railway buildings and land. It is planning to generate 1 GW solar power in the next five years. This will reduce diesel consumption and will enable Rs.1.24 lakhs saving per coach year.

“As the pilot project, one non-AC coach has been fitted with solar panels on the rooftop. The trial has been successful so far with the coach generating nearly 17 units of electricity every day. Depending on its success, decision will be taken to convert the entire train into a solar power-enabled one,” said Divisional Railway Manager, Arun Arora.

Source: Dailymail
India is a vast country with large power needs. All these efforts will go a long way in saving power cost and reducing the burden over the states. The transport industry has been considering the adoption of alternative fuel for sometime now. If the power problems get solved by this, I think the industry will then be in a better position to address other service related issues that the customers who are traveling face. Thinking Solar was an excellent idea in my view.
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