Only half of India’s tendered 53 gigawatt (GW) solar power contracts are under construction, according to a JM Financial Institutional Securities Ltd report.

Mint earlier reported about falling clean-power tariffs putting already awarded solar and wind energy capacity in limbo. Fund-starved state electricity distribution companies (discoms) are unwilling to sign power supply agreements (PSAs) with intermediary procurers such as state-run Solar Energy Corporation of India (SECI) for these previously-awarded projects at a comparatively higher tariff.

“Discoms’ lag in signing PSAs stems from slow demand growth and falling solar tariffs, implying that the last to sign PSAs gets the cheapest power. However, we estimate 32GW of fresh PSA potential if all states meet their RPO (renewable purchase obligation) targets,” the report said.

This comes at a time when Chinese solar equipment suppliers are increasing solar module price to 25 cents per kWh from 19 cents per kWh. The suppliers are reneging on their contracts to supply equipment that had already been contracted for, even at the risk of their bank guarantees getting encashed.

The report said, “We find only 50% actually under construction as 35% lack PSAs, while another 14% has been cancelled. Of the remaining 27GW, about 44% includes PSAs with discoms while 56% includes state tenders that have an implicit PSA with respective discoms.”

Also, clean energy developers are looking at more riskier states’ contracts.

The report said, “With Seci tenders facing difficulty in getting PSA, the trend is again moving towards individual state tenders, which offer ready PSAs, though they come at great receivables risk of each state discom’s credit rating.”

This comes at a time when the country’s peak electricity demand is growing and breached the 200 GW mark. India currently has an installed renewable energy capacity of 89.63GW, with 49.59GW under execution.

According to ICRA Ratings, India’s renewable energy capacity addition will improve to at least 10.5 GW in the current financial year from 7.4 GW in FY21. As per the rating agency, there is a strong project pipeline of 38 GW and an additional 20 GW of clean energy projects being bid out.

“The CoD (date of commissioning) schedule implies 17-18GW additions in FY22, on covid19-led spillovers from FY21, which saw addition of 5.5GW vs. the peak of 14.5GW in FY17. Yet, the pipeline beyond FY22 is weak unless more tenders with signed PSAs emerge. The current pipeline of tenders in FY22 is for 10GW,” the report added.

India has a solar power generation capacity of 41.09 GW, with plans to achieve 100GW of solar power by 2022.

Source: Live Mint