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‘Sudden policy changes jolting solar power plant investors’ confidence’

According to reports, new allocations of solar power capacity to companies that put up the solar plants could touch 2,390 MW in the second half of the current financial year, says Ernst & Young. If these projects take off, they could involve an investment of Rs 19,080 crore, the consulting firm says in a recent report on India’s Renewable Energy sector.

E&Y comes up with these figures on the basis of the various solar programme in various states, but it also cautions that “regulatory uncertainties” are hurting investor confidence.

Considering that the total grid-connected solar power capacity in the country is around 1,800 MW, the allocation of 2,390 MW looks pretty big, inviting scepticism from industry observers.

Experts in the industry point out that the impending allocations of capacity are fraught with uncertainties. For instance, the 750 MW allocations from the National Solar Mission depends upon when the Cabinet clears it. Apart from Punjab and Rajasthan, project awards in other states are still work-in-progress.

The E&Y report also points out that certain developments have jolted the confidence of investors. For instance, the Gujarat Urja Vikas Nigam Ltd, the State-owned distribution company of Gujarat, petitioned the state regulator to re-negotiate (i.e., reduce) solar tariffs. “The CERC struck down the proposal, but it did have an impact on investor confidence,” says E&Y.

It also notes that the regulator in Tamil Nadu has come up with “an extremely low” draft solar tariff of Rs 5.78 per kWhr, without any annual escalation (which contrasts with the tariff of Rs 6.48 with 5 per cent annual hike for ten years, discovered through a bidding process in the State). Andhra Pradesh, on its part, “announced a sudden policy shift after the completion of its bidding process.” The State threw out the tariff discovered through the bidding process and instead brought in a fixed tariff.

“Such developments are discouraging for investors, especially for project developers and suppliers who had already invested in the State,” the E&Y report says.

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