Solar Energy Corporation of India’s (SECI) tender for 2 Gigawatt(GW) of Interstate Transmission System (ISTS) connected solar photovoltaic (PV) project under tranche IX has been over-subscribed by about 2.35 GW. The tender received bids of a total of 4,350 Megawatt(MW) solar capacity from 12 project developers. SECI floated this tender in the month of March 2020 but its bid submission deadline got extended till June 22 after the lockdown, according to JMK Research & Analytics.
This is the first major tender by SECI where bid submission is conducted after almost a gap of four months due to COVID-19. This has also been the first tender after the Ministry of New and Renewable Energy (MNRE) announced the removal of ceiling tariffs for wind and solar tenders. Apart from this 2 GW tender, there is about 18.2 GW of SECI tenders where the bid submission date is before July 31, 2020.
A major project that has a bid submission in July is a 5000 MW round-the-clock project with power from coal-based thermal power projects under tariff-based competitive bidding (RTC-II). The project completion timeline for the project is 18-30 months. Other major projects include a 7500 MW Solar Power Projects in Leh and Kargil, a 2500 MW ISTS-connected Solar PV Power Projects at UMREPP, Koppal District, Karnataka(ISTS-X), 2000 MW ISTS-connected Wind Power Projects in India (Tranche-IX), and a 1200 MW ISTS-connected Wind Solar Hybrid Power Projects in India (Trance-III).
July 2020 is an important month as a new form of duties in form of Basic Custom Duties (BCD), of up to 20% is likely to be notified before the lapse of safeguard duty (15%) by July 31, 2020. With ongoing China border issues, it is likely that 20% of BCD will be applicable now on imported solar modules instead of 10% in initial years. This will increase the solar project costs as module prices will increase. However, for projects where auctions are already completed before the notification of BCD, these projects will be protected under the ‘grandfathering’ clause.
“Next month’s auctions will be crucial in determining the future of investment in renewable energy for the upcoming year,” said Jyoti Gulia, Founder, JMK Research & Analytics to The Blue Circle. She added that tariffs will more or less be stabilised at 2.5-2.8 per unit.
In the last few years, clean energy has made a room for itself in almost every energy discussion around the globe. There has been an influx of investments which are delivering substantial returns. A study by Imperial College London and the International Energy Agency (IEA) found that renewables investments in Germany and France yielded returns of 178.2% over a five-year period, compared with -20.7% for fossil fuel investments. In the U.K., over five years, investments have generated returns of 75.4% compared to just 8.8% for fossil fuels. In the U.S., renewables yielded 200.3% returns versus 97.2% for fossil fuels.
There has been a downward trend in the fossil fuel markets in the last few months and years. Energy experts believe that the days of upstream oil and gas projects earning big risk-adjusted returns are gone. Also, the green energy stocks were less volatile as compared with oil and gas due to the turmoil caused by the pandemic.
However, IEA in its report said that the total global investment in energy is down 20%, almost $400 billion as compared with last year, largely due to the coronavirus crisis. It added that the drop can have severe implications for clean energy transitions.
The world is likely to add only 167 GW of renewable power capacity this year – 13% less than in 2019. The majority of delayed utility-scale projects are expected to come online in 2021, but installations of rooftop solar PV for businesses and households may continue to be depressed in the medium term without strong government support. Lower demand for energy, lower prices, and a rise in non-payment of bills, were the prime reasons for the drop in investments.
Experts warned that despite the impressive returns from the renewable sector, investors have been hesitant in putting money to a level enough to help address climate change.
The imperial college report said that large asset managers and institutional investors such as pension funds require deeper liquidity than the renewables market currently holds. A lot of investors consider the renewable power sector area as emerging. There are not many popular players in the industry with large trading histories.
Dilip Kumar, Director, Inspire Clean Energy told TBC that in the short term, investment into any asset class will slow down as cash is king for now. In the paucity of finance, firms have shifted their priorities as the core operations have failed to yield encouraging results. That has impacted the rooftop solar industry as they cater to the commercial and industrial segments.
“As we get to know more about the virus, investment sentiments would restart and those would be into technology firms & long term stable returns assets class like renewables,” said Kumar.
For India, he suggested a few policy measures to boost the confidence of investors – a clear nationwide policy with less uncertainty, and the timely payouts from DISCOMs. The other policy measures include the adoption of proposed amendments to the Electricity Act, developing more MicroGirds, and supporting them through village entrepreneurship. He added that the focus should be on GE (Energy Generated) instead of GW (Installed Capacity). Gulia pointed out that it’s a great opportunity to build our own domestic ecosystem that could have a big positive impact in the long term.
The Future is Clean
A Goldman Sachs report said that the investment in renewable is set to overtake those in oil and gas for the first time next year. The renewables will represent about 25% of all energy spending in 2021, up from 15% in 2014.
It noted that clean energy could drive $1 to $2 trillion a year in infrastructure investment between now and 2030 and create 15 to 20 million jobs globally. Additionally, the high cost of capital for fossil fuel development is leading to an under-investment situation which could lead to higher oil and gas prices which will drive the clean energy transition even faster.
The interest rate for renewable energy loans is a mere 3% as compared with 20% for companies borrowing to finance new oil and gas exploration.
Kumar reckons that the sector also has advantages in the form of unprecedented low levels of Oil and lower leveled cost of REpower.
Advocates from various international organisations have been saying that greater investment in clean energy will help recover quickly from the coronavirus scare. The latest in the series of backing clean energy was the Asian Development Bank. “It is clear that the COVID-19 crisis has made tackling climate change and other development issues an even bigger challenge,” said Asian Development Bank (ADB) President Masatsugu Asakawa at the Asia Clean Energy Forum (ACEF). IEA Executive Director, Faith Birol stressed the importance of addressing climate change and air pollution in the recovery in his keynote at the forum.
In this context, Equinor is already taking giant leaps. The Norwegian state-controlled energy giant will spend around $6.5 billion over the next three years to build offshore wind projects which are often capital-heavy.
Besides this, Manchester has started the construction of the world’s largest liquid air battery to address the concern of the unavailability of wind and solar all the time. The plant will store renewable electricity and reduce carbon emissions from fossil-fuel power plants. The liquid air battery is due to be operational in 2022 and will be able to power up to 200,000 homes for five hours and store power for many weeks.
As the future of green energy looks bright, only time will tell how the investments pan out in the coming year.
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