Obstacles in the path of Green Energy in India

Despite the compelling reasons for India to follow a green path into the future, serious obstacles remain, not least the sorry state of the country’s coal-fired power industry, currently forced to slow its operations by a surplus of electricity in the market.

“These guys are hurting,” an analyst says, and that has knock-on effects for India’s slowing economy. “They have taken loans, and they can’t sell electricity, so they can’t repay the loans. And if they can’t repay the banks, the banks have no money to lend for more growth.” Recent months have seen a backlash against renewables, with intensified lobbying for coal.

Another analyst says: “We’ll [do] it because we don’t have that much high-quality coal. We are already hitting high pollution [levels]. We already have issues with imports, and so energy security is a big factor. All of those things will lead us to moderate (the use of coal for energy).”

The key to raising low-cost finance in India (for green energy) is by reducing risks for large foreign and domestic investors as well as by raising funds from the domestic and foreign retail market. Instruments like payment security mechanism – that ensures the investor will be paid for the amount of energy fed into the grid even if the DISCOM defaults – and a government-sponsored foreign exchange hedging facility to reduce the risk of currency fluctuation, can go a long way in increasing the confidence of investors and thereby reduce the costs of finance. Similarly, raising funds from the market via green bonds, etc., can also become an important source.

The MNRE has fixed the maximum permissible tariff at ₹2.68 per unit. A developer who did not wish to be quoted said the proposal for tariff cap would “kill the market” considering the rupee nearing an all-time low of 72 against US dollar. He added that the projects bagged at ₹2.44 last year are already suffering as shipments of photo-voltaic modules ordered for those projects have to be cleared now, at an effective exchange rate.

The National Solar Energy Federation of India has appealed to Minister of Power and New and Renewable Energy RK Singh to intervene to get private solar developers that have commissioned projects in Karnataka their payments.

The projects with power purchase agreements signed with Solar Energy Corporation of India, have been commissioned and are feeding power to the grid. But the power producers have not been receiving payments due to the delay in assigning scheduled commissioning date for these projects.

According to industry sources, the projects of major players such as Hero Future, Adani Group, ACME, and Actis, with a cumulative capacity of 970 MW, are stuck. This means around ₹6,000-crore loans could become non-performing if the matter is not resolved.