Crisil Report on India’s Flagging Renewables Drive Draws Strong Rebuttal from MNRE

Anand Kumar- The Secretary is not Impressed

Less than 4 days after reports first appeared in the media, including this one on Saur Energy, that used a CRISIL report to pan India’s renewables drive, comes a strong rebuttal from the Secretary of Ministry of New and Renewable Energy (MNRE). The denial, worded in strong terms and with more than a little data, is a strong indicator of the importance the minister and his team clearly put to the numbers. Numbers that they continue to announce at every available forum, will be met.

The detailed letter from the office of the MNRE Secretary Anand Kumar says that “the doubts are ill-founded and not reflective of the status on the ground and plans ahead. By the end of September 2019, India has installed more than 82,580 MW of renewable energy capacity with around 31,150 MW of capacity under various stages of installation. Thus, by the first quarter of 2021, India would have installed more than 1,13,000 MW of renewable power capacity.

This would constitute nearly 65 percent of the targeted capacity. Besides this, around 39,000 MW of renewable power capacity is at various stages of bidding which would be installed by September 2021, taking the percentage of installed capacity to over 87 percent of the targeted capacity. With only 23,000 MW of renewable power capacity left to bid, India is confident that the target of installing 1,75,000 MW of renewable power capacity will not only be met, but exceeded”.

The letter reiterates that the objective of the government remains enabling a conducive business environment, the results of which have been that “the wind power tariffs have fallen from Rs 4.18 per unit in 2016 to Rs 2.43 per unit during last year and even today it remains below Rs 2.75 per unit. Similarly, the solar tariffs have fallen from Rs 4.43 per unit (with VGF) to Rs 2.44 per unit”.

Going back to the start of the renewables push in 2014, the letter goes on to highlight that “since March 2014, India’s renewable power capacity has increased from 34000 MW to 82,580 MW recording 138 percent growth. Globally, India stands 5^th in solar power, 4^th in wind power, and 4^th in total renewable power installed capacity.

If large hydro (is) included, India stands 3^rd in renewable power capacity globally. India’s renewable energy programme is much beyond the production of electricity and covers a basket of applications including the use of solar thermal energy for cooling, heating, drying and other industrial applications. Renewable energy has emerged as a true multi-benefit system, combining ecological necessities with domestic priorities, economic and job creation opportunities.”

The letter highlights how the ministry acted quickly to remove misgivings around PPA’s in Andhra Pradesh by declaring that no negotiations could be allowed unless specifically allowed in the PPA document, or where corruption is established. It also adds that the MNRE ministry is working actively with state governments of Gujarat, Rajasthan on the issue of land allocation and land facilitation charges, respectively.

Adding on steps like ongoing construction 66,500 MW of additional transmission system to ensure evacuation and injection of 1,75,000 MW of power into the main grid by October 2021, the letter has also highlighted the steps being taken to maintain the momentum.

These include “developing Ultra Mega Renewable Energy Parks to overcome the problem of land allocation. These parks will have dedicated transmission. The first such park is being planned in Dholera, Gujarat by SECI. These apart, the ministry has strengthened PPA clauses for strengthening investors’ confidence.  For mitigating off-takers risk and ensuring timely payments to developers, the ministry has made a letter of credit must for purchase of power by distribution companies.”

Three of the ministry-led schemes have been highlighted yet again for their transformative potential. First is the “Central Public Sector Undertaking (CPSU) Scheme Phase-ll for setting up 12,000 MW grid-connected SPV Power Projects by the Government Producers with Viability Gap Funding (VGF) support of Rs 8,580 crore for self-use or use by Government or Government entities – both Central and State Governments.

The Scheme mandates the use of both SPV cells and modules manufactured domestically as per specifications and testing requirements. The second is PM-KUSUM (Pradhan Mantri Kisan Urja Suraksha evam Utthan Mahabhiyan) scheme to be implemented over the next four years for de-dieselization of the farm sector and increasing farmers’ energy independence and income.

Under the scheme, India has plans to provide 1.75 million stand-alone solar agriculture pumps and carry out solarisation of 1 million grid-connected agriculture pumps by the year 2022. Under the same scheme, the government is also encouraging farmers to set up small solar plants of the size of 500 KW to 2 MW on barren lands for their additional income.

Three components combined, the scheme aims to add a solar capacity of 25,750 MW by 2022. The total central financial support provided under the scheme would be Rs. 34,422 crore. The third is the Rooftop Solar Phase-II programme SRISTI (Sustainable Rooftop Implementation for Solar Transfiguration of India) scheme for accelerated deployment of solar rooftop systems in the country.

Under this scheme, Central Financial Assistance for 4000 MW of small rooftop capacity and incentives to Distribution Companies for 18,000 MW capacity by 2022 has been provided. These schemes will also act as a catalyst for adding solar cell and module manufacturing capacity in India. Further, the Tariff Policy is being revised to ensure the timely adoption of tariffs.”

With such a strong rebuttal, and all within a timeline that is well within the next general elections, what do we make of this letter?

On the positive side, it is fantastic to see the government respond to what it believes to be ill-informed, or ill-judged estimations of its intent and ability. However, we see a few things that are still a cause for worry. One, with the inclusion of large hydro, we are still not clear of the 175 GW target includes that or not anymore. Especially since large Hydro is included while making a pitch for India as the world’s third-largest region with renewables capacity.

The three big initiatives that have been mentioned again, remain heavily dependent on cooperation from state governments. Importantly, the ambition on rooftop solar, or developing the corporate and industrial market seems to be limited still, which, in our opinion, is leaving too much to chance and a stretched government machinery to execute. Even the 7.5GW Ladakh project is not even mentioned here, incidentally.

Finally, if we were at CRISIL, would we worry?

Just a little perhaps. But to give them credit, they have used actual data and events on the ground to come to this conclusion and are definitely not alone in being pessimistic about solar prospects. And it was a brave call to release a report as scathing as they did. However, that doesn’t change the fact that the whole renewables sector will be hoping that on this occasion, the government is proved right. And if it takes a tough reality check to get them going and place their perspective on record, we should welcome such views too.