How the policy flip-flops will adversely affect the renewable energy targets?

A report by Crisil makes the following observations:

• India is likely to miss the renewable energy target of 175 GW by 2022 owing to regulatory challenges, policy flip-flops and steep fall in tariffs.
• India is set to miss the targets by a full 42 per cent since the industry is witnessing fast waning interest from developers since the past fiscal.
• The report estimates that renewable energy capacity may increase by 40 Gw to 104 Gw in 2022 from 64.4 gw in 2019 owing to the lingering policy uncertainty and tariff glitches. The result would be India falling short be a good 42 per cent short of the government target of 175 gw.
• The report cites that as much as 26 per cent of the 64 gw of projects auctioned by the Centre and the states have received no or lukewarm bids, while another 31 per cent are facing delays in allocation after being tendered.
• As a result, despite the increase in tendering volume, not only the allocation of projects slowed down, but both under subscriptions and cancellations of awarded tenders have also increased.
• The report puts the ratio of auctioned or awarded projects to tendered projects plunged to 34 in fiscal 2019 from 77 over fiscals 2016 and 2017.

The report concludes that  “The unstable policy environment poses big risks for the renewable energy targets. This is evident in the growing incoherence between the policy thrust on the one hand, and the actual action by implementation agencies like the Solar Corporation of India and state discoms, on the other.”

Policy Paralysis

The discoms of Andhra Pradesh alone owe Rs 2,600 crore to developers, part of which was due to ongoing tariff dispute and the resultant delays in payments. Such instances of prolonged payment delays and disputes will not only set a negative precedent but also put at risk existing and planned investments.

The new draft solar and hybrid policy of Rajasthan proposes an additional annual levy of Rs 2.5-5 lakh per MW on all projects that sell power to entities outside the state. Measures like this could be highly detrimental for the growth of the sector as Rajasthan is one of the most sought-after states for solar power plants.

Topics: GS-III: Infrastructure Energy Sector