Solar PV is proving to be a viable alternative option for industrial and commercial category of power consumers, says Vishwanathan Iyer, DGM & Head-Business Development (Solar), West & South India, Sterling and Wilson.
You have emerged as the largest pure play solar EPC Company in the country. Since we have few players in this space, does solar as a sector possess difficulties for EPC players?
There are quite a number of EPC players today in the solar PV segment in India, possibly more than that in any other construction space in the country. Building solar PV based power plants is not rocket science, and there are no major entry barriers for any aspiring EPC player interested in the solar industry. In the last four years, any company that thought it could handle challenges of working capital, and had basic knowhow of constructing power plants has probably taken a shot at the EPC business, particularly in the solar PV segment, assuming it to be the least risky-decently profitable part of the value chain. What has also aided this inrush is the absence of a solid nationwide/global standard on best solar PV construction practices, which has meant each EPC could standardise its own technical criteria to make an entry into the area. A successful entry does not guarantee sustained success and this is where top tier EPCs rise above the others.
It depends on how an EPC company creates its own market share or niche, by adhering to certain standards and understanding the consumer needs. I would say our existing engineering expertise in electrical/civil areas backed by strong execution capabilities cultivated over 87 years of our exposure to the Indian power sector is something which all of our customers value and appreciate. This is particularly evident by the fact that we get a lot of repeat orders from our existing customers. We have more than 25 branch offices covering most States across the length and breadth of the country. This gives us scale and wherewithal to undertake and execute any size of solar project in the country within a short span of time. And with experience of over 50 projects without any cost over-run, delay damages or generation loss damages, we have only proven this capability of ours further. The recent recognition that we received from world renowned Photon Consulting, of being a ´global cost leader in the PV downstream segment bears further testimony to our differentiated capabilities in this industry.
We have also been successful in creating our own market and play in a ´Blue ocean´ of sorts, where we target the private solar space focused on consumers with long term solar power outlay plans, consumers with depreciation appetite and consumers interested in merchant supply of power to industries and consumers rather than just relying on EPC tenders and government allocation based projects. We provide a total turnkey package to clients, starting from concept, business plan, PPA, land, permits and evacuation assistance, apart from provision of our turnkey EPC & O&M services and case based co-ordination support on project funding. It also helps that our sister concerns within Shapoorji Pallonji are also into financing and development of large scale solar power projects in India and overseas, which gives us a developer´s and financer´s perspective too. This approach of ours has been reflected in our recent 5-6 successes in the utility scale as well as the rooftop space over the last 18 months.
How much capacity of solar PV do you expect to commission in this fiscal year?
For the current fiscal we already have turnkey EPC order backlog of about 43 MW in India. These predominantly include orders which have been booked before March but whose sale we would realize this fiscal essentially our current projects under execution/commissioning. Looking at the enquiry pipeline we are addressing at present, we are extremely optimistic about adding another 75-80 MW of new order booking to the tally this year in the Indian market alone. If we consider the total order backlog and the new order book, we can safely assume that we would be able to commission roughly 100 MW this year in the Indian market alone. Out of this, we expect majority of the orders to be total EPC turnkey solutions.
So at present your hands are full?
Irrespective of the issues grappling the sector such as the PV anti-dumping duty fiasco and high interest rates, yes, we are fortunate to have a decent order book. Interestingly, this position of ours allows us to be more selective and focused about the kind of opportunities we pursue, since we have a reputation to safeguard, given our parentage that of belonging to the prestigious 148-year-old, $2.5 billion Shapoorji Pallonji group, and that of being India´s leading solar EPC (as rated by IHS Solar Research) player. Secondly, as a top tier EPC and a true cost leader in the segment, we are ever conscious of not compensating on execution quality or technicality in the pursuit of numbers. We intend to develop lasting relationships with our clients, which transcend beyond just doing a ´one-deal affair´ and we would be happy to hear from potential clients who value what we bring to the table.
How do you see the decentralised solar market developing in India? As an active solar player, what kind of thrust do you expect from the government to boost the sector?
While a majority of solar power plants in India are grid-connected utility scale, we are witnessing quite a rise in public interest to adopt solar in a decentralised fashion. As a SP1A rated MNRE channel partner, we have about 3.5 MW of solar rooftop projects to our credit, including very large MW-scale rooftops. We believe that as net-metering takes shape across various states, and grid infrastructure is improved to assist bi-directional flow of energy over the next 3-5 years, various support schemes by the Governments would push the adoption of solar in a decentralised fashion over roofs. For instance, in Germany, which is the global solar leader in installations, 70 per cent of the solar power generated is from roofs and as an aspiring solar powered nation, our aim should be to emulate another Germany and use less of land and distribution network. This will also help the nation tide over its crisis of additional cost, efforts and time incurred in building conventional energy capacity to reach remote corners of the country through an inefficient transmission & distribution infrastructure over long distances.
In order to further boost growth of decentralised solar, we would request the State and Central Government to consider the following suggestions:
a) First, regulators to consider allowing net-metering as a concept for all category of consumers and not restrict industrial and commercial clients from going solar through their roofs. Solar helps the industrial facility go green and reduce the grid power intake to a certain extent, which makes the workload for the state utility and the industry easier to manage.
b) Second, regulators to consider a category of LT connection which allows a third party investor/IPP to set up solar on roofs of an industrial or commercial facility and connect the plant at 415V for internal consumption (internal grid). Our grouse is that at present, all regulator´s norms only recognise two categories of projects captive or third party captive mandates investment by facility owner, which is a deterrent for businesses new to solar, while third party imposes prohibitive charges on the investor making it impossible for him to put a solar asset on someone else´s roof and make returns. Our view is if we solve this issue and reconsider LT (internal facility grid) connection as mentioned above, industrial and commercial rooftops would flourish across the country.
c) Third, governments could incentivise the rooftop segment by offering tax credits to individual investors, local tax exemption on equipment and services within states, and allowing RECs or introducing some other form of REC (tradable commodity), which could boost adoption of solar power through roofs.
d) Fourth, governments should speed up the work on green corridors at the State and Central level, without which net metering and addition of more renewable power to the grid might be a difficult task.
e) Fifth, the Central government could either look at lowering interest rates for renewable power projects through priority sector categorisation or consider offering interest subsidy to the sector, like it does to promote farming and the textile industry.
Industry people estimate that grid parity will be achieved in India by 2017. Your comments?
Averaging the price of power on the grid from all sources at all given times to establish an imaginary price number is probably not the optimal way to look at this. Most of the utilities procure power at varying rates depending on fuel source, time of day and type of contracts (short-term or long-term procurement). Today, with the levelised price of energy that solar PV developers have achieved through various allocations in India, we can safely establish that solar PV has achieved parity on the grid with liquid fuel and natural gas powered plants. Moreover, solar tariffs are also very close to peak power tariffs in certain States, which excites industries and commercial establishments to consider solar power as an option to satisfy their peak power needs. With the present cost projections from the solar PV industry, it would be reasonable to envisage that solar power pricing will be at parity with wind and potentially with imported coal based supercritical coal power over the next 3-4 years.
India is not known for manufacturing activity as far as the solar industry is concerned; when is it likely to shape up?
In India, the overall sentiment at a project investment and installation level is quite upbeat, however, on the manufacturing front, some are unhappy with the status quo. Based on recent reports emerging with reference to solar module exports from India, many local module manufacturers seem to have increased exports to other countries in the past two years and are able to compete even in the face of growing foreign module imports, whereas a handful of them are trying to make a case that domestic manufacturing overall is unable to compete with foreign imports which sounds paradoxical. While we believe Indian consumers should benefit from the plethora of global technology options to help IPPs deliver solar power at prices as close to grid parity as possible (which is presently difficult using locally manufactured modules), we strongly believe that India should aim to compete globally in solar manufacturing in the long term, to maintain its relevance as a thought leader in the global solar industry. To achieve this, all hopes lie on progressive policy and support actions of the new government at the Centre to promote manufacturing excellence in the solar PV industry in India. A right policy move can obviously help Indian manufacturersto start turning the tide on low cost large scale solar PV manufacturing of the ´correctly identified´ solar PV technology against its more established global peers in the next 5-10 years.
As compared to solar PV, how economically viable and technically feasible is thermal solar in India considering the geography?
Both solar PV and solar thermal have their unique positions in the solar power generation sector, although solar PV has clearly overtaken solar thermal by miles in terms of global installations at present. Solar thermal is very much feasible but limited to certain States depending on factors like Direct Normal Irradiance (DNI) and availability of water. In the short term, solar thermal would mandate government support in various areas, given that the economies of scale on technology that is available to solar PV is not available to this sector globally and hence project pricing and grid tariffs would take time to compete with other sources of renewable energies. However, solar thermal is the closest that any solar technology could get, to being a base load solution. Is in the interest of governments worldwide to ensure it is fairly able to compete and maintain its importance as an alternative. Economically, solar thermal viability does work out as an effective large scale solar power/steam solution, depending on effective deployment of storage alongside.
How do you see the solar market in the coming year?
Just between 2010 and 2014, the Indian solar PV installations have grown from a few megawatts to over 2GW. We expect the upward trajectory to continue in the forthcoming year as well, with State solar programs in Karnataka, Telangana/Andhra Pradesh, Madhya Pradesh and the Solar Mission, supported by growing excitement among industrial and commercial consumers to venture into purchase of solar power in the private space. Being cautiously optimistic, we see a solar PV market of about 1GW in India this coming year, given that the cloud of anti-dumping duty hovering over the industry could play spoilsport and prove a serious deterrent, slowing the solar growth story. That said, we do expect to get over this uncertainty as well, given that the finance ministry has to announce a decision on the dumping issue within the next couple of months and we wish and hope whatever be the decision, it works towards the benefit of consumers and solar power producers in general.