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Solar Power Likely to Get Eclipsed: Next Wave of NPA in Power Sector Coming Soon

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  • December 2018
  • Region: Global
  • InfraInsights
  • ID: 4849772

The capacity created in India’s renewable energy sector may be impressive, but the pace has begun to slacken. Solar capacity installations in the country is at 25,000 megawatts (MW), or one-fourth of the 2022 target of 100,000 MW and it will require to grow at 35-40% CAGR over next 3 years to achieve the 100,000 MW target. Cleary there are signs of exhaustion, energy infrastructure constraints are also making developers wary. Last month, the Solar Energy Corp. of India had cancelled a 2,000 MW tender after it was under-subscribed due to insufficient transmission infrastructure, many analyst have started downgrading the overall projected capacity addition outlook targets. Government actions, such as the imposition of import duty, cancellation of tenders (in solar) and proposal to cap tariffs, have hit investor sentiment. As a consequence, the cost of capital is rising as investors are factoring in more risks and project returns have fallen to low teens tracking the steady drop in tariffs. On other side, discoms are making every attempt to put spanner in the growth of solar, for instance, rattled by the exodus of its consumers towards solar generation, MSEDCL after seeking a surcharge of Rs. 1.26 per unit on such consumers, has also proposed to replace net metering by gross metering. Gross metering will make solar roof top unviable.

Overall, the authors are cautiously optimistic, and hold the strong view that the future of solar is solar roof-top and the key architect of this future will be power consumers. In 2012, the publishers pre-empted that solar roof-top would emerge as a bigger component than utility scale solar. The publishers are of the strong view that, solar's true potential can be harnessed in decentralized, micro grid model. Solar is currently a push based or sellers' market, wherein government agenda is delivered by pushing Discoms to buy costly solar power, irrespective of their financial health. So, what prompted the jump into this solar Euphoria?

India's solar dream of building 100 gigawatts (GW) of capacity by 2022 continues to garner massive interest from global investors, buoyed by the promise of strong returns. But it also faces financing challenges as investors become more cautious amid a fall in solar energy tariffs. The research report "Solar Power Likely to get Eclipsed: Next Wave of NPA in Power Sector Coming Soon!" by no means intends to play a spoil sport but attempts to unearth the reality from optics, so that investors don't face a situation as faced in developed markets like Spain.

Table of Contents

1. Executive Summary

2. Approach & Methodology

3. Solar Power in India – Sunrise to Sunshine Journey
Growth in Solar Capacity Addition
Solar Capex & Solar Industrialization
Enabling Policy
Challenges & Hurdles Weathered

4. Solar Power Penetration Levels across different states in India
State wise solar power capacity addition
Solar power component in overall power supply basket
RPO Target Compliance % Vs Actuals

5. Solar Power Generation across different states in India
CUF Levels
Trend in power generation

6. Solar Power Generation Cost vs Feed in Tariffs across India

7. Challenges faced by solar power developers in India
Project Construction Related Challenges
Land Acquisition
Project Financing Related Challenges
Credit Cost
Viability Gap Funding
Project Monetization Related Challenges
Transmission Constrain
Feed in Tariff
Net Metering / Gross Metering

8. Key Success Stories & Failures in India’s Solar Power Sector
Companies expanding solar foot print
Success factors and what did they do differently
Companies calling it quits in solar power sector
Where did they burn their fingers and lessons learnt

9. Projected growth trajectory of solar in India
Critical analysis of likely realization levels against target

10. Utility Scale Solar vs Roof Top Solar Projects

11. Factors that weighs heavily on the solar sector
Discoms financial health
Discoms not keen on buying solar from roof-top
Discoms not complying by RPO norms
Transmission constraint
Pricing under pressure
Project IRRs becoming near negligible

12. Check for Signs of Exhaustion
Solar Power Capacity Addition
Underlying growth in solar power consumption
Policy becoming less accommodative
Banks becoming stringent in lending to solar sector

13. Consumers of solar power
Solar power buyer profiling – beyond discoms
2017-18 solar power sales / consumption segmentation by end user

14. Will Evization of mobility landscape be a game changer for solar power sector in India?

15. NPA risks looms large – a close look
Detailed interviews of solar power projects across country to ascertain financial health of a project
M&A trend

16. Bankers view on potential NPA risk in Solar Power Sector
Cases of NPA in solar
Projected cases of NPA

17. Framework on identifying projects in solar that are likely to fail
Location of project
Project type – solar roof top vs utility scale
Buyer profile – discoms, exchange, rec’s etc
Cost vs tariff / realization
CUF actual Vs CUF estimate during project appraisal

18. Detailed profiling of projects that are likely to be up for sale
Promoter profile
Core businesses
Solar portfolio
Recent expansion vs exits
Stakeholding analysis