Sunshine Blues

Solar energy firms are in wait-and-watch mode; they are hoping to see a reversal in macro conditions that have slowed down the sector.

- Aveek Datta

There is little one can do when one is caught in a downpour on a day that began in fine, sunny weather. It’s best to take shelter and wait it out, hoping that the sun would be back before long. Solar power companies in India are in a similar situation. No longer do they enjoy the benign macro conditions that prevailed four years ago when they set sail in good hope in the wake of the government setting a target of achieving a clean energy generation capacity of 175 gigawatt (GW) by 2022.

HOWEVER, companies in the renewable power sector in India should be heartened to see how things are panning out. The government has revised its green power installation target for 2022 to 227 GW from 175 GW and has announced its intention of auctioning 40 GW of renewable capacity every year till 2022; a lot of this capacity is expected to be met through solar power. Solar capacity addition stood at 9.4 GW in FY18, up 69% over the previous year. The revised target would require an additional investment of $50 billion.

But solar power firms are in wait-and-watch mode. Rising interest rates, a depreciating rupee and the regulatory uncertainty over the prices of imported photovoltaic (PV) modules needed for solar power generation have made them assume a cautious approach. “Power developers have to be extremely cautious when they pitch for new tenders,” says Rahul Munjal, chairman and managing director of Hero Future Energies, a part of the Hero Group, which has 1.2 GW of installed renewable power capacity.

“Till now, people have bet on assumptions like interest rates staying at a certain level for a few years while bidding for projects. But the scale has become so large that one can’t afford to make mistakes anymore,” he explains.