Driven by a historic low solar and wind power tariff, India is about to take a leap of faith on the renewable energy front, lining up green project auctions to the tune of about Rs 2.7 lakh crore in 2018. The government has drawn up a plan to auction 30 GW (gigawatt) of solar, 10 GW of wind and 5 GW of offshore wind projects next fiscal, pegged at Rs 2.7 lakh crore with an average equipment cost of Rs 6 crore per megawatt (MW).

To put things in perspective, wind power tariff dropped sharply to an all-time low of Rs 2.43 per unit during an auction conducted by Gujarat Urja Vikas Nigam Ltd (GUVNL) yesterday. Earlier, the tariff was down at Rs 2.64 during the second auction of the Solar Energy Corporation of India (SECI) for 1 GW projects in October this year. In the first round, the tariff stood at Rs 3.46. A senior official attributed this to a fair and transparent bidding process on the back of lower equipment and borrowing costs.

As for solar power, the tariff too dropped to a record low of Rs 2.44 during an auction earlier this year. Investors are upbeat about the government’s new proposal of offering incentives in the order of Rs 11,000 crore to promote domestic manufacturing of solar equipment. It is likely to be approved and implemented in 2018.

But worries remain. Huge dependence on import for setting up of solar projects due to inadequate domestic manufacturing capacity here is still a sticking point. The proposed incentives and the recently floated expression of interest for 20 GW solar capacities by the SECI are expected to address the issue.

During an interview earlier this month, Power and New & Renewable Energy Minister R K Singh had told PTI, “We want to bring two expressions of interest for setting up domestic manufacturing capacities of solar equipment. That would be for polysilicon.” Only those who would set up manufacturing capacities in India from polysilicon onwards could bid, Singh had added.

The government, the minister had said, would buy equipment for generation of 20 GW, but the bidders would set up manufacturing capacity in stages. “They would set up manufacturing capacity for solar cell and modules in the first year. In the second year, they would set up capacity for solar wafers. In the third stage, they would set up capacity for polysilicon,” Singh had said.

There are also plans to float solar capacities at hydro plants where evacuation facility is available. To allay industry fears on meeting renewable purchase obligation (RPO), the minister has promised that these issues will be addressed through the Electricity Amendment Bill, which is likely to be pushed in the Budget session of 2018.

He has also given an assurance that the RPOs will be made mandatory. The RPO refers to the legal obligation on some entities to either buy electricity generated by specified ‘green’ sources, or buy, in lieu of that, ‘renewable energy certificates (RECs)’ from the market.

The other big policy initiative that would help the renewable cause is removal of distinction between small (up to 25 MW) and large hydro power projects under the proposed hydro policy, which provides for incentives to the tune of Rs 16,000 crore for this segment.

Currently, large hydro projects are not counted as renewable ones and are not entitled to incentives available to small projects. Removal of the distinction is expected to add another 45 GW to the renewable kitty. India’s renewable energy capacity now stands at around 60 GW.

This is seen as a crucial step to help India achieve 225 GW of renewable energy capacity by 2022 against the targeted 175 GW. India’s target includes 100 GW of solar and 60 GW of wind energy. Sanjeev Aggarwal, Managing Director and CEO, Amplus Energy, said that in 2018, the states should be on par with the Centre when it comes to promotion and adoption of renewable energy.

About issues raised by the industry on honouring of power purchase agreements, Singh had clarified that these agreements are legal obligations and must be honoured.

Aggarwal pitched for providing greater powers to state regulators. He also made a case for making RPO a statutory requirement and introduction of penalties for non-compliance. He is hopeful of bankability of discoms and improvement in their financial health in 2018.

He suggested that the grid infrastructure needs to be strengthened to accommodate 175 GW of renewable energy and standardisation of contractual bids. There should be “single window” for land acquisition for grid evacuation, and renewable energy specific lending and financing should meet the current investment parameters of the sector.