Que: Please tell about CRISIL Infra advisory services in India with regards to Renewable Energy Sector

Ans: CRISIL Infrastructure Advisory is a multi-disciplinary Consultancy, offering services in the infrastructure domain spanning across the entire development life cycle. With over two decades of experience, we are involved in shaping public policy and regulatory reforms, program management, preparing bankable infrastructure projects, undertaking transaction advisory, bid advisory, market assessments and due diligence of companies/ assets. We deliver credible and practical solutions, guided by CRISIL’s core values of analytical rigor, independence, integrity, commitment, and innovation.

In the renewable energy (RE) space, CRISIL Infrastructure Advisory has assisted policymakers and regulators at the highest levels of the government, helping them shape policies, design frameworks, implement policies, regulations and evaluate the impact of interventions. Some of the marquee mandates in this space include independent evaluation of the Jawaharlal Nehru National Solar Mission (JNNSM) for Ministry of New & Renewable Energy, assessment of Renewable Purchase Obligations (RPOs) for Forum of Regulators, evaluation of solar and energy storage proposal with indigenous manufacturing for Niti Aayog and options for wind Generation Based Incentives (GBI) scheme for Indian Renewable Energy Development Agency to name a few.

We also actively work with developers, investors (PE, Pension and Sovereign wealth funds) and lenders, both domestic and international looking to invest in the renewable energy space – assisting them in market assessment studies, business plans, creditworthiness of counterparties, risk analysis (RE curtailment, offtake, demand etc.) and due diligence.

Que: MNRE has set an ambitious target of 175 GW of RE Capacity addition by 2022. According to you, what are the key drivers that will play an important role in accomplishing this target?

Ans: MNRE has set a target of 175 GW of RE capacity by 2022. The key drivers that are critical to ensure rapid growth in the sector are as follows:

Stable regulatory and policy environment
Further, a drop in Levelized cost of renewable energy generation so that it can compete with coal-based power after taking into account grid integration costs
Timely execution of green energy corridors and other intra-state transmission lines
Timely payments from state distribution companies
Release of tenders with round-the-clock RE supply or with the back-up of about 6 hours
Thrust on rooftop solar-driven by policy support at the state level

Que: Please tell us about the factors that have impacted the downgrading of the RE Capacity addition target?

Ans: CRISIL was always of the view that achieving the 175 GW target is expected to be challenging. However, the recent past has clouded prospects for RE further. Several issues have emerged – the Cancellation of PPAs/ LOAs, capping of tariffs and a lack of policy consistency (with the introduction of safeguard duties and GST). Land and power evacuation related bottlenecks have also emerged. Payment delays from discoms across major states have also added to woes of IPPs. Lastly, rising RE is also increasing overall power purchase cost given the fixed cost burden of contracted long-term thermal PPAs.

To counter these issues, the above-mentioned measures (refer responses to Question 2) need to be implemented at a swift pace.

Que: What is your view on the 25% safeguard duty levied on Solar Modules? A boon or a bane

Ans: The imposition of safeguard duties enhanced domestic solar competitiveness relative to imports, albeit only temporarily. This was because imported solar PV product prices witnessed a sharp decline due to a fall in demand from China. We believe that the levy of safeguard duty failed to address the core issues associated with Indian PV manufacturing. A long-term demand roadmap, phased incentive structure along with investments in R&D are critical to ensure a robust PV manufacturing value chain.

On the flip side, the imposition of safeguard duty led to uncertainty, which resulted in sluggish project development. However, given the tapering structure of the safeguard duty, developers of certain tenders were able to partially tide the same owing to longer gestation for project commissioning.

Que: The government has been aggressively promoting the adoption of E-Mobility under the FAME II scheme. According to you, what impact will the FAME II scheme have in accelerating EV adoption in the county?

Ans: The FAME II scheme has an enhanced total outlay of Rs 10,000 crores (for 3 years), which is a significant hike as against the total outlay of Rs. 895 Crore under FAME-I Scheme. FAME-II is expected to support 10 lakhs electric two-wheelers, 5 lakhs electric three-wheelers, 55000 four-wheelers and 7000 buses. The FAME II scheme also emphasizes the electrification of public transportation, including shared transport. Private buyers for electric four-wheelers are excluded from the scheme.

Also, there will be a larger push towards investment in setting up charging stations, with the active participation of public sector units and private players. FAME II will also encourage interlinking of renewable energy sources with charging infrastructure.

However, the build-out of charging infrastructure, availability of a wide range of vehicles by OEMs, a fall in battery costs as well as timely disbursement of subsidy will be key monitorable. In a nutshell, the development of the entire ecosystem will be critical to large scale adoption of EVS in India.

Que: With RE & EV being the major focus at present. What future do you see for both the sector in the country concerning the policy framework and infrastructure development?

Ans: RE and EVs are technologies that are expected to garner significant interest, especially in light of India’s global commitment to fight climate change. However, we believe that a conducive policy and market environment needs to be created to ensure sustainable growth in these sectors.

First and foremost, with the increasing interplay among energy fuels, there is a need to adopt an integrated energy approach to sustainable growth. Thus, considering changes and growth in the load curve as well as technology evolution and costs thereof, determination of future supply and it’s mix as well as T&D infra augmentation must be planned.
There is a need for Round The Clock (RTC) power from RE sources given the supply curve mismatch with the load curve. The Government should issue RTC power supply tenders for RE with phased incentives. Bundling of RE with battery storage and gas-based power plant must be increasingly implemented.

Payment security should also be made the more robust and effective on-ground implementation of the same is crucial. Re-building lender confidence is critical for which the Government needs to ensure long term policy clarity, structuring of standard bankable PPAs, no capping and renegotiating tariffs. Lastly, Independent Power Producers could relook at bidding strategy, ensure timely project completion and ensure quality compliance.

These actions if implemented could ensure a robust power system that provides a flexible and reliable source of electricity from renewable sources, reducing overall dependence on conventional sources.

On the EVs side too, while a scheme has been announced by the government, effective implementation of the same is critical. Also, the development of a favorable ecosystem – Build-out of charging infrastructure, availability of a wide range of vehicles by OEMs, fall in battery costs as well as timely disbursement of subsidy – will be a key monitorable.