India may have a tough time meeting its solar energy capacity targets as developers steer clear of government auctions

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  • The central government has instructed the Solar Energy Corporation of India (SECI) to release a tender to add 1,000 MW of solar energy capacity every month from November 2018 to February 2019 in order to meet its targets.
  • The tenders, if successfully bid for by developers, will add 4,000 MW to the already existing capacity of 25,000 MW in India.
  • As a result of the muted response to previous auctions, SECI will incentivise developers to bid by increasing tariff rates and extending project timelines.
As it heads into election year, the central government is wary of underperforming on its solar energy mandate. As a result, it has instructed the Solar Energy Corporation of India (SECI), a company housed under the Ministry of New and Renewable Energy to facilitate the government’s solar energy projects, to release a tender to add 1,000 MW of solar energy capacity every month from November 2018 to February 2019, according to the Indian Express.

The tenders, if successfully bid for by developers, will add 4,000 MW to the already existing capacity of 25,000 MW in India. However, going by the muted reaction to recent manufacturing-linked tenders, it remains to be seen if anyone will bid for them.

Why is the interest in these tenders waning? It seems that the lack of certainty regarding the demand for solar energy doesn’t justify the investment required.

In June 2015, the Indian government announced that it planned to add 100,000 MW of solar energy capacity by 2022. What seemed an ambitious target at the time became a lot more realistic over the next few years as a number of solar power projects were commissioned and India undertook the stewardship of the International Solar Alliance.

However, in the last year, there has been a significant slowdown in the solar energy sector. Imports of solar panels from China, which are used in 80% of solar power projects in India, have been getting more expensive because of the falling rupee and a reduction in subsidies from the Chinese government to the solar energy sector. Funding from banks has also dried up as the sector becomes less of a safe bet.

All that means is the upcoming auctions will be crucial to get India’s solar energy ambitions back on track. And SECI knows that it has to adequately incentivise developers to bid. It has, therefore, increased the tariff rates for solar energy developers to sell their products to distribution companies. It has also extended timelines for the implementation of projects.

If the next few tenders fail to attract sufficient bids, it might have to do away with the process of capping tariff rates entirely and even permanently relax the 25% duty imposed on imports of Chinese solar panels and modules.

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