Last month, Karnataka issued Letters of Approval (LOAs) for 910 MW of solar projects it allotted in its 1.2 GW solar auction held in March. The Karnataka Renewable Energy Development Limited (KREDL) has now approved 910 MW of projects ahead of its signing of power purchase agreements (PPAs).

This certainly comes as a positive news given that solar developers in some states last year complained of delays in the signing of PPAs. For instance, in Telangana, developers last year called an emergency meeting when even months after a major 2 GW solar auction, LOAs were still held up in the chief minister’s office.

In the 1.2 GW auction, bids were received for up to 20 MW of capacity a time, across 60 taluks in Karnataka. At the time of the auction, consultancy firm Bridge to India reported that the dispersed tender had affected the transparency of the entire tender process for solar developers, due to some players losing out on capacity despite bidding aggressively, since they were competing for different taluks.

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Source: The Hindu Businessline

Tata Power’s subsidiary, Tata Power Renewable Energy also reported receiving a Letter of Intent (LOI) from the Karnataka Government, for the 100 MW of capacity that it won in the 500 MW auction previously held in the state.

Anil Sardana, chief executive and managing director, Tata Power, said: “Tata Power is delighted at this project win as it further fortifies our vision of generating 30-40% of the company’s total generation capacity from non-fossil fuel sources by 2025.”

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India’s ambitious goal of attaining 100 GW of solar power by 2022 is well known globally and has garnered both interest and scepticism in liberal doses. However, a fact that doesn’t get quite as much attention is that 40 GW out of this is based on distributed energy generation i.e. solar rooftop systems. These solar rooftop systems can be set up at residential or commercial establishments or airport terminals, with capacities ranging from kilowatts to megawatts. Till October last year, the country had over 525 MW of solar rooftop systems.

A fact that has well been established is the crucial role that electricity regulators and discoms will play in the whole plan. Discoms have gained central prominence in the solar rooftop rollout plan, be it in terms of grid connectivity or net-metering arrangements. An interesting trend that has come up is that with the onset of rooftop-mounted solar systems, retail consumers are now playing the roles of both the electricity consumer and the generator.

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Source: The Hindu Businessline

Worldwide, the electricity sector is undergoing fundamental changes that might impact the business models that utilities run on. This might pose a considerable threat to discoms, whose risk perception stems from the fact that if a big consumer base shifts to solar rooftop systems, it would result in significant revenue loss since discoms would have to invest into and maintain the electricity supply infrastructure even as the demand for grid electricity reduces.

In many Indian states, industrial and commercial consumers provide subsidised electricity to the agriculture and residential ones. Thus, a wide-scale adoption of solar rooftop systems could impact the financials of discoms.

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The Ministry of New and Renewable Energy (MNRE) recently submitted a request with the Department of Revenue for the exemption of renewable energy from some effects of the contentious Goods and Services Tax (GST) bill. The GST, which is a levy on the sale and consumption of goods and services in the country, was planned to come into effect by April this year, with the aim to bring the various Indian states under one umbrella.

However, there were industry concerns regarding the effect of the tax on renewable energy prices owing to changes in import duties on equipment brought into the country. According to the energy minister Tarun Kapoor, the GST can potentially raise the cost of solar power and other renewables due to higher taxes. Since the GST provides for the exemption of some taxes, the energy ministry asked for the exemption of renewables.

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Source: The Hindu

In spite of this, there are various potential advantages to manufacturers from GST. MNRE had commissioned a study to ascertain the effects of GST on the renewables industry, whose findings it shared with the Department of Revenue, predicting a 12-16% increase in the cost of grid-connected solar power projects in the country.

Other than the GST, another plan to rationalize corporate taxes from 33% to 25% is being formulated. This move would require the removal of tax exemptions that the solar industry enjoys. According to consultancy firm Bridge to India, the benefits under Section 80IA of the Income Tax Act, which gives a 10-year income tax exemption to solar developers, could be removed, impacting all solar power projects in the country. But since the minimum alternate tax (MAT) is already in force, the net impact on solar tariffs could hover around 4-5% or even less.

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Recently, the World Trade Organization (WTO) ruled against India’s domestic content requirements for large solar development projects, which enjoy subsidies and guaranteed government procurement if they use locally manufactured equipment. The case was filed by the US in 2013 to have India remove any disadvantages to imported solar equipment.

India’s ambitious National Solar Mission envisages solar electricity production of 100 GW by 2022, up from the current 5 GW. Achieving this requires access to affordable equipment and the domestic renewable energy industry would find it impossible to stay afloat without economic incentives. While a scale-up of climate policy is required, the WTO ruling is largely set to pose a hindrance to the process.

In response to the ruling, India has offered to modify the “buy local” provisions. It has proposed restricting the rules to apply to solar equipment manufactured for public use, such as defence and railways instead of electricity on a whole. This falls within the purview of GATT, where governments can favour domestic products if the procurement is “not with a view to commercial resale”.

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Source: The Hindu Businessline

The case sheds light on the US’ double standards where 23 states have “buy local” incentives in place to make the shift to a clean energy economy. In addition, President Obama had supported India’s low-cost solar mission. What we see is a classic case of developing nations coming in the way of emerging economies’ efforts towards climate change.

The ruling could also provide a setback to other solar plans and initiatives such as the International Solar Alliance of developing countries, which relies heavily on the access to affordable solar equipment, a central tenet of which is a domestic manufacturing industry.

WTO’s move is widely being seen as an obstruction to the country’s initiatives to achieve its renewable energy goals.

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40 banks and NBFCs recently sanctioned USD 10.7 billion worth of commitments for financing renewable energy projects in the country made at the Re-Invest event held in February last year. Of this amount, USD 4.4 billion has already been dispersed by financial institutions.

Re-Invest 2015, a government-organized “meet and expo” was conducted in New Delhi, and is India’s flagship event for the promotion of renewable energy development and investment in the country. As part of the event, these financial institutions committed to providing debt funding for renewable energy projects of cumulative capacity of over 78.75 GW over the next five years. The amount sanctioned till date accounts for over 18% of the total pledged amount.

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Source: The Hindu

This news is a positive development amidst the growing concerns over the lack of adequate financing for Indian solar projects. The solar PV industry is still thinking over the possible long-term effects of SunEdison’s financial troubles as it tries to offload about 1 GW of renewable capacity in the country. Meanwhile, no developer that bid for solar projects at a tariff lower than INR 5 per kWh has secured financing yet.

The Re-Invest 2015 event witnessed renewable energy commitments of more than 283 GW from the stakeholders along with a commitment of 62 GW of manufacturing capacity in the country. These commitments complement the government’s target of 175 GW of renewable capacity by 2022, which includes 100 GW of solar energy. As per the Ministry of New and Renewable Energy (MNRE)’s calculations, this would require an outlay of USD 160 billion. Banks and NBFCs are expected to have a major role to play in providing low cost and long term financing for projects of this nature.

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In a first-of-its-kind solar development initiative, two Andhra Pradesh villages, Toorputallu and Pedhamyanavanilanka will now run completely on solar power, becoming the first two villages in the country to have achieved this feat. Nirmala Sitharaman, the Commerce and Industry Minister has adopted these two villages as part of the Sansad Aadarsh Gram Yojna (SAGY).

SAGY, an ambitious project for rural development, was launched by Prime Minister Narendra Modi, as part of which each Member of Parliament has to adopt three villages, taking on the responsibility of developing their institutional and physical infrastructure by 2019.

A 2 MW solar power plant is in the pipeline, to be developed by a private entity while the power generated will be sold to Andhra Pradesh discom Andhra Pradesh Eastern Power Distribution Company Limited (APEPDCL). As part of the proposal, the required land for the construction of the plant has already been earmarked and the APEPDCL has consented to buy solar power from the developer. The construction of the plant is expected to be completed by August 2016. Additionally, the plant is also expected to generate a substantial income for the village, to the tune of 60 paise per unit.

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Source: The Hindu Businessline

The move certainly sets a precedent for not just the country but around the world, especially as countries across the globe are increasingly vying to make the shift to renewable sources of energy. Moreover, it gives a major boost to the country’s ambitious plan of achieving 100 MW of solar capacity by 2022.

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After the World Trade Organisation (WTO)’s recent ruling in US’ favour following its complaint against India’s solar equipment localisation rules, the Joint Secretary of the Ministry of New and Renewable Energy (MNRE), Tarun Kapoor, came out in favour of Indian manufacturers and said the ruling , does “not affect the future course of action” of the country.

WTO’s Panel recently ruled that the Indian domestic content requirements were discriminatory against US solar modules since they mandated solar developers to use modules and cells manufactured in India rather than imported ones, as part of the National Solar Mission in the country. In response, Tarun Kapoor emphasized US and India are working on the DCR related issues between the two nations to find an amicable solution. The US went ahead and circulated the report on the WTO ruling.

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Source: The Hindu

The US trade representative has also said they will continue working with India, in continuation of the last several months, and will “negotiate a resolution of this dispute” as per WTO rules. Kapoor added, “It does not affect the future course of action which India is considering as India is committed to protecting its industry while following WTO regulations. This will not, therefore, cause any dent in [the] ‘Make in India’ programme because we still have several options to support the domestic industry while remaining within the WTO regulations.”

Kapoor also went on to say how India still has the option of appealing against the ruling by WTO. According to Jasmeet Khurana, associate director at Bridge to India, the ruling could possibly make India’s capital subsidy scheme for solar rooftop power vulnerable to similar rulings in the future.

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