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IREDA ex-CMD on why pause in India’s RE sector is a good thing

In this conversation, KS Popli weighs in on the pace of development currently and explains why a small pause en route India’s RE target is good
New Delhi: In a report titled ‘REturn to uncertainty,’ released in October, CRISIL cast doubts on India’s ability to reach its RE (renewable energy) target. It said that India is set to miss its RE (renewable energy) target of reaching 175 GW of installed capacity by 2022 by 42 percent. In the backdrop of this report, PSU Watch spoke to KS Popli, former CMD of Indian Renewable Energy Development Agency (IREDA). In this freewheeling conversation, Popli weighs in on the pace of development currently, explains why a small pause en route the big target is good for all stakeholders in the industry and predicts that even if India stops short of the RE target, it will not be too far off from the finishing line. Here are excerpts: Between January and September, India has added a total of 7.8 GW to its total RE installed capacity. What do you think of the pace at which capacity addition is being done? There’s a little slowdown in the pace of development. However, the expansion should pick up the pace soon. At this point, more than 80 GW is already installed and another 40 GW is bid out — out of which power sale agreements have been signed for around 30 GW and these should get installed in the next two-to-three years. The expansion will gather steam as soon as these projects come up in the next three years. Further, MNRE has plans to bid out another 40 GW in the next two years. No doubt, we are seeing some slowdown, because of payment issues from utilities, land and evacuation issues which are being continuously addressed by the government. As soon as these issues get resolved, the pace of installation would also pick up. The tariff ceilings have become more rational now and are attractive for utilities; bankers should also be comfortable in financing these projects. However, we are seeing a little pause but the pause is good for everyone. You said that there is a little pause in India’s RE growth and it is good. What did you mean? We are seeing a little pause or slowdown mainly because of delay in payments from utilities in few states and because some states are trying to review signed contracts which is a major concern. However, once these issues are settled, the RE sector should gain momentum again. This is a course-correction time. We still have three years to go for our RE target. In the meanwhile, there’s no major shift in policy. The government is there for the next five years. And most importantly, there is a political will. A report by CRISIL that came out last month spelt an ominous warning about India’s RE target. It said that India is set to miss its target of having an installed capacity of 175 GW in place by 2022 and also pointed out policy uncertainty and tariff glitches. What is your assessment of the report? See, let us not focus on numbers only. Tariffs that are now being quoted appear to be more rational and all large companies are quoting in the same range. We must remember that India’s RE target is an ambitious target and it was deliberately kept that way. The MNRE, however, has made a road map to achieve that target by December 2022. There are few pressing issues, which ones resolved, will put RE growth on track again. Off late, there have been few setbacks. We have had lesser number of investors coming forward. This is expected to change soon. Also, there has been a general slowdown all around and we should factor this in as well. So, by December 2022, where do you think India would be? Even if we do not surpass the target, we will be close to the envisaged target of 175 MW. In my opinion, what we manage to achieve will be a milestone to be proud of. With policy certainty, improvement in technology and reduction in costs every year, we can expect a greater pace of growth in RE sector in the coming years. With respect to electric mobility, how do you think will the synergy between electric vehicles and RE pan out? There’s a complete convergence between electric vehicles and renewable energy. Because solar peaks in the day time and a large chunk of vehicles at this time can be charged through solar power, obviating the need for backing down of other power sources in the daytime. As storage technology improves, and costs come down, providing round-the-clock power through RE will become competitive and affordable. Going forward, what is the biggest hurdle India faces in RE expansion? Stressed discoms and privity of contracts. I think there’s a major issue with utilities who owe payments to developers. That is something that could keep new investors away from the market. Eventually, if the health of utilities does not improve and there are delays ranging from six-nine months and sometimes even more, it could prove to be a hindrance to growth in the sector. Also if signed contracts by utilities or third parties are not honoured, we cannot expect desired investment in the sector. These could eventually turn out to be major reasons for the slowdown in the sector and could affect other sectors of the economy as well.