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Interaction | September 2018

"Solar and wind will provide larger opportunities in the RE space"

For Uday Bhende, Managing Director, Kirloskar <span style="font-weight: bold;">Solar Technologies</span>, it remains to be seen as to what impact the imposition of safeguard duty would have on the manufacturing sector supporting solar energy. <p></p> <p> <span style="font-weight: bold;">How significant is the current market for your product? What products do we expect to see at REI Expo 2018?</span><br /> Kirloskar Solar Technologies (KSTPL) offers products and services. With India targeting solar energy generation capacities of 100 GW by 2022, there is a significant market for solar modules, inverters and solar kits offered by KSTPL. The EPC and O&amp;M services offered by KSTPL also have a huge market, given the pace at which solar power plants are coming up. Recent advances in the renewable energy sector should all be on display at the RE Expo. Storage solutions too should have a significant presence given the importance that they are acquiring in lieu of the consumption patterns for electricity in India. KSTPL itself is launching a PVT system which would provide hot water and electricity through a single module orpanel.</p> <p>Kirloskar Energen would have a new small hydropower turbine technology on display. All discreet components of a conventional hydropower plant have been combined into a single turbine with just one moving part. Easy to transport, install and maintain, with significantly reduced costs and gestation periods to generation. This technology has been patented in almost 20 countries including the USA, the UK and Europe.</p> <p><span style="font-weight: bold;"> What are the upcoming opportunities for the RE sector in India?</span><br /> Solar and wind seem to be at the forefront of the government's agenda and hence, they would continue to provide the larger opportunity in the renewable energy space. However, small hydropower and biogas and CNG offer a significant opportunity, should the government decide to support these forms of renewable energy.</p> <p> <span style="font-weight: bold;">GST has left its mark on almost every sector. What are the challenges faced by the solar sector at the moment?</span><br /> GST has indeed left its mark on every sector. While implementation challenges continue, there are also questions around interpretation. There is not much of an impact on the renewable energy sector. However, some clarity is required around the interpretations especially, for the EPC business where supply and service converge at a single customer.</p> <p><span style="font-weight: bold;"> What are the positive impacts of government policies on the RE industry? </span><br /> The government's RE policies are basically focussed on solar and wind energy. Both these areas have benefitted significantly from the government's targeted push towards the capacities it is committed to creating by stated timelines. However, a corresponding growth in the manufacturing sector for the solar energy-related equipment has not been witnessed. Imports have grown significantly. It remains to be seen as to what impact the imposition of safeguard duty would have on the manufacturing sector supporting solar energy. The hybrid policy would have its benefits. Dual energy generation from the same parcel of land with common evacuation should provide significant benefits. Some states like Gujarat have even provided some relief from cross-subsidy charges, energy charges and wheeling charges. It remains to be seen whether the other industrialised states such as Maharashtra adopt such a policy.</p> <p> <span style="font-weight: bold;">How do you think the issue of RE financing can be solved quickly and efficiently? </span><br /> Since both wind and solar energy are produced at specified periods of the day, banking of the energy is a must. For captive units, there ought to be no problems in ready finance being made available. The original financing institution should permit an escrow account to be operated from where the EMI of the secondary financing institution is paid, much akin to a statutory payment like the one being made to the state power distribution company. This would provide significant risk mitigation to the institution financing the solar or wind plant. A similar methodology if permitted for open access purchase would permit the power plant owner (third party) to avail finance quite easily as their EMI payments would come from the escrow account.</p> <p> The solar power tariffs in India have fallen in nominal terms from Rs 15 /Kwh in 2009 to Rs 2.44 /Kwh in 2017. Please elaborate its impact on the sector, the government and the consumer? Solar power contributes about 7 per cent in India's energy mix. Therefore, the impact of these lower FITs does not reach the consumer immediately. Once the government's target of 100 GW of solar power by 2022 is reached, there would be a significant impact. However, it remains to be seen as to how the energy storage cost would get factored into this FIT as it would become almost mandatory to store this energy as well as the wind energy that would be generated.</p> <p> <span style="font-weight: bold;">Is this a massive solar enthusiasm or company's sheer desperation to be not missed out?</span><br /> There is some element of confusion and scepticism here, but most developers have assured us that their math is right and returns of 12-14 per cent are all they look for. These seem achievable, given the falling costs of modules and other equipment. Secondly, for SECI and NTPC tenders, the payment risk is almost absent and that lends a great deal of credibility to the project financials. </p> <p><span style="font-weight: bold;"> How do you think RECs, net metering incentives and assured Power Purchase Agreements are going to impact solar companies?</span><br /> RECs demand has picked up. However, the generator gets only the floor price of Rs 1,000 and the balance goes to CERC. Non-solar RECs have also had a reasonable demand in the recent past. CFA is available as per the old policy to the government organisations, educational institutes and residential rooftop solar installations. In the draft new policy, educational institutions have been eliminated from CFA. This may disincentivise this sector from putting up rooftop solar plants. Maharashtra State Electricity Distribution Company is proposing a gross metering methodology whereby they would continue to charge the gross rate paid by the consumer for all electricity consumed and provide credit for the solar power fed into the grid at their average rate of purchase of renewable energy, making rooftop solar projects under net metering completely unviable.</p> <p><span style="font-weight: bold;"> Though the RE sector has witnessed an incredible progress over the years, do you think the current funding scene will help India attain its renewable energy goals?</span><br /> There seems to be plenty of support for investments in solar plants backed by assured PPAs. It is left to be seen whether other avenues of renewable energy would receive any similar interest and support. Small hydropower and bionergy do not seem to enjoy any significant government support as of now.</p> <p><span style="font-weight: bold;"> &quot;Some clarity is required around the interpretations especially, for the EPC business where supply and service converge at a single customer.&quot;</span></p> <p><span style="font-weight: bold;"> - RAHUL KAMAT</span></p>
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