Volatile exchange rate and delay in policy implementation are hitting the investor sentiments, says Arulkumar P Shanmugasundaram, Executive Vice President Projects, and Chief Technical Officer, Tata Power Solar. In a tOte-a-tOte with Pradeep Pandey, he shares his insight on the market sentiments in India and overseas growth potential.
What kind of market sentiments are you observing in India?
Market sentiment in India is quite positive. I think there is an obvious concern about the government policies not being implemented. Non-implementation of renewable purchase obligation (RPO) could be a major concern for the power sector. Largely, there are many investors willing to invest but their sentiments are dampened due to absence of clarity on policies. Two elements are hitting the investor sentiments: one is the volatile exchange rate and other is delay in policy implementation whether it is for the Jawaharlal Nehru National Solar Mission (JNNSM) or roof-top policy. The JNNSM phase II has finally come out recently with DCR requirements, which should support Indian Cell and Module manufacturing. Just to mention, it is not only solar energy affected due to volatile exchange rates but also the power generated by the fossil fuel is impacted. Immediate impact is felt on solar energy capex. I believe the equilibrium between conventional power and solar will happen, but temporarily that equilibrium is missing.
The government seems to be active in bringing out new reforms for the power sector. When can we expect a turnaround for the sector?
We are expecting a better turnaround in this sector as compared to the last two years.
People are talking about grid parity by 2017 for solar energy. What is your assessment on this?
We were pretty close to grid parity this year; however, in the next 2-3 years, the grid is going to increase by 6 per cent. If you take the average grid price growth rate over the last 15-20 years, it is continuously growing at the rate of 6 per cent CAGR year after year. There is going to be almost 18 per cent increase in the grid cost and some marginal improvement in the solar cost. Hopefully, the exchange rate deterioration wonÆt be as bad as what has happened in the last few months. Talking about roof-top projects, grid parity has been achieved even today. According to Bridge to India report, almost 4-5 states are in grid parity with some subsidy, whether it is accelerated depreciation benefit or capital subsidy. I think, by 2017, many more states even without subsidies will reach the grid parity. This is a trend and will happen.
What kind of operational and managerial changes have taken place after the separation of British Petroleum (BP) from Tata Power Solar? How has been your experience post separation?
BP was largely a go-to-market channel for international markets for the products that the partnership manufactured in India. They provided us with the required technological engineering capabilities to create and export world-class products.
BP´s exit gave Tata Power Solar greater flexibility in addressing the solar market and has helped us ramp up our focus on the downstream areas, primarily on projects and systems. We are also working towards reinventing our export strategy, where we have seen an increased traction in the recent period. We have been able to successfully compete globally, which showcases both the quality of our product as well as our competitive pricing.
In which countries do you see potential for growth?
In the foreign markets, you have to look at it from the perspective of manufacturing and solutions. From a manufacturing perspective, there are some barriers to Chinese products in Europe and the US; there is an opportunity for us to be competitive with the Chinese products. We are obviously looking at the Middle East and Africa as a core market, wherein Tata Group has a good foothold and has done really well.
Currently, how much is your manufacturing capacity in the country and what kind of capacity expansion plans do you have?
Plans are always there but it all depends on policy developments in the country. We need to have some clarity on the government policy before we execute our plans. We are not asking unreasonable support from the government but we need reasonable level of commitment to both manufacturing and feed in tariffs from them.
Do you expect policy clarity post election?
I don´t know much about politics, so I cannot predict. In my view, policies should be government independent, and whatever is happening is in the best interest of the overall energy security for the country. Mainly policies are driven by bureaucrats and I don't think that policy drivers should change with change in governments. Other than the Central govt, if you take state-wise Madhya Pradesh and Chhattisgarh have been quite aggressive recently, although Gujarat was quite kind of a leader in terms of solar policy initiatives. Even, Tamil Nadu and Andhra Pradesh have come out with good solar policies.
Do you think that buying of renewable energy certificates (RECs) should be made mandatory?
There are several initiatives taken by few states but I don´t see REC buying will significantly increase. If you look at the REC market and their availability, only 10-15 per cent of the RECs have been sold till date. But with the states initiative for making it mandatory, the buying can improve. The Maharashtra Electricity Regulatory Commission (MERC) has announced the enforcement of the same, and, according to news reports, Chhattisgarh has also sent a notice to 3-4 major steel players.
About Tata Power Solar
Tata Power Solar (TPS), formerly known as Tata BP Solar, is an integrated solar solutions provider with more than 23 years of domain expertise in the Indian solar industry. Founded in 1989, the company was originally formed as a joint venture between Tata Power and British Petroleum Solar (BP Solar). As a pioneer and market leader in the solar space, TPS now operates independently as a wholly owned subsidiary of Tata Power. Headquartered in Bangalore, TPS operates three manufacturing units there and has eight regional offices, 40 authorised service centres plus a network of more than 1,000 dealers and sub dealers nationwide.