Among the key reasons for India’s impressive renewable energy growth over the past few years are the country’s transparent competitive bidding mechanism for allocating projects and bankable contracts between offtakers and developers. The Solar Energy Corporation of India (SECI) has played a significant role in this having conducted the majority of the auctions in this space. Originally formed to facilitate the National Solar Mission, SECI is now operating across the solar, wind, hybrid, energy storage and solar manufacturing segments, as well as the more recent round-the-clock (RTC), green hydrogen and corporate renewable power procurement segments. At the helm of the organisation is Suman Sharma, who, as managing director, is steering the organisation through uncharted waters. In this interview with Power Line, she discusses the achievements of the past year and highlights the opportunities for SECI in the near future…
What have been the key highs and lows for India’s renewable energy sector over the past one year?
The renewable energy sector has witnessed the highest ever capacity addition of 14.08 GW during the year 2021-22. Of this, 12.76 GW has been through solar power projects. India has achieved the third highest solar PV capacity addition in 2021 after China and the US, according to the REN21 Renewables 2022 Global Status Report.
The installed capacity of renewable power projects (excluding large hydro) stands at 119.09 GW, which is over 29 per cent of the total installed power generation capacity in the country. Renewable energy technologies have matured, and the country has gained much experience in deploying projects. The commercial and industrial (C&I) segment’s focus on renewable energy procurement has enhanced significantly, with major companies announcing their sustainability targets. This offers a huge opportunity for development.
The novel concept of standalone battery energy storage projects was successfully tested by SECI through probably the world’s largest tender for 1,000 MWh at a single location, and the same is being replicated by several discoms across the country. The thrust on domestic manufacturing was increased after the successful conclusion of the first tranche of the production-linked incentive (PLI) scheme for domestic module manufacturing, with a total outlay of Rs 45 billion. Subsequently, SECI has issued a tender under the second tranche of the scheme, for a total outlay of Rs 195 billion. The two tranches alone throw up a very promising over 50 GW of domestic module manufacturing capacity expected to come up in the next three to four years. These milestones have given a much-needed boost to the renewable power sector, particularly investors.
With the expansion of the sector, several implementation challenges have also been faced, which are being taken up with the concerned authorities. Issues such as the Great Indian Bustard case and the levy of basic customs duties have impacted the industry. Hopefully, these should be resolved soon, as we enter the new year.
The dependence on imports, especially in solar energy, is making the sector prone to global supply shocks; hence, strengthening the domestic manufacturing base is a priority. Sustaining demand for renewables is being addressed through a long-term renewable purchase obligation trajectory and other measures. Besides, the technological challenges that hamper the growth of solar energy in the grid are being tackled through energy storage and complementary energy sources, and the goal is to increase uptake in a cost-effective way.
What are the key priority areas for SECI currently?
Rapid capacity addition, well within the scheduled timelines, is an important area of concern for us to avoid the wastage of this precious resource. For this, SECI has been taking several steps, consulting with other stakeholders such as the ministries, discoms and the CTU, to achieve a common ground. We are also working with C&I consumers to create a high-volume open access market. Initial estimates are promising as there is gigawatts of untapped demand that can be catered to by renewables. Different implementation models are being explored.
Emerging segments such as energy storage and green hydrogen are also a key focus area for SECI. We are contributing to the framing of guidelines for upcoming tenders.
What is your view on the results of the recent tenders, especially in terms of tariffs?
India has historically been on the lower side of the global electricity tariff spectrum. While the global electricity average tariff is 14 cents per unit, India’s average electricity tariff is just about half of this, that is, 7 cents per unit. Therefore, we are in an advantageous position to spearhead the global energy transition with little or no adverse impact on our end-consumers. To add to the perspective, India’s tariff is one-fourth of the average tariff of Europe and one-third that of the US.
We are, of course, a price-sensitive market. Thus, tariff fluctuations, as witnessed in the several auctions held this year, have the potential to unnerve buyers. But we understand that these numbers reflect the current market scenario, and the module supply chain disruption plaguing the sector is not a secret. Module prices have been on an increasing trend, and in my opinion, the tariff hike is likely to be sustained for a few more quarters. However, tariffs are still quite competitive and lower than most of the discoms’ average revenue realised.
SECI is issuing more and more innovative tenders rather than standalone wind or solar bids. Does the organisation plan to continue along these lines in the future as well? What is the rationale behind this?
Realising that the discoms are looking for enhanced products from SECI, we are working closely to address their specific requirements and designing customised solutions, for example, matching the energy delivery with the discom’s or offtaker’s demand pattern and seasonal power purchase agreements (PPAs) of storage in renewable energy projects. SECI has always been a sort of trendsetter in coming up with new products, and the sector is likely to witness some more of these in the next year.
Which emerging renewable energy segments, in your view, have the most potential to grow?
Renewable installations, especially in hybrid mode, wherein the developer assures a higher plant load factor and stable output to meet consumers’ grid operators’ requirements, are a high-potential segment. Energy storage technologies will be a key component in meeting these aspirations.
The C&I segment, as highlighted above, is an emerging market, and has huge potential to grow rapidly, requiring additional renewable energy capacity. Then, there are market-based transactions that are gaining popularity, and they present an alternative to buyers against the current practice of 25-year PPAs. The concepts of contracts for differences and other exchange-based mechanisms are quite exciting and new to the Indian electricity market. This segment will be closely watched in the coming years, in my opinion.
The offshore wind segment is yet another potential waiting to be tapped. The recent draft tender for leasing of blocks is a big step in this direction. Other segments such as rooftop solar, greening of smart cities and green hydrogen have high potential.
What are your plans in the green hydrogen space?
The Green Hydrogen Mission recently announced by the government is expected to drive demand by major industrial segments as the hydrogen and ammonia transition begins. The growth may be exponential, and we are hoping to leverage our capabilities in renewables in this segment as well. SECI has already started consultations with the major players in this regard.
Are there more RTC and energy storage tenders in the pipeline?
As highlighted above, we are here to provide solutions to buyers’ requirements. The current energy profile and consumption pattern trends in the major states point towards the RTC and energy storage concepts being optimum solutions. So, the next year is likely to witness a few tenders in this direction.
How have the current geopolitics and global inflationary tendencies impacted the climate action targets?
The world is just recovering from the pandemic shock and is staring at a global economic slowdown amidst heightened geopolitical complexities. In this situation, sustaining climate financing is undoubtedly a challenge. However, India has emerged as a priority investment destination for renewable energy as our economy and our on-ground actions to transition to clean energy have given confidence to investors.
What is your outlook for the sector?
Given the size of India’s market and the significant impact of economies of scale witnessed in the country, backed by forward-looking policies, the outlook for renewables definitely looks promising. Thus, for the foreseeable future, India can be one of the leading destinations for investors. The world is in a critical decade for delivering a more secure, sustainable and affordable energy system. Investments in clean electricity and electrification offer cost-effective opportunities to cut emissions more rapidly while bringing down electricity costs.