Cement Energy and Environment

Apart from energy source, India has to also focus on how cities are planned to minimise commutes and to maximise use of public transport for the commute that cannot be avoided. As India urbanises fast, how well it is planned will determine our carbon footprint. Courtesy: The Economic Times, 30. 11.2015, From Internet SHADOWS OF THERMAL POWER GLOOM LOOM OVER SOLAR INDUSTRY While India's solar power tariffs are declining, the industry may be at risk if costs escalate on account of currency fluctuations and project delays. In addition, transmission networks aren't expanding rapidly enough to absorb the capacity of solar power being built. Rachita Prasad reports A day before bids for a solar park in Andhra Pradesh closed, executives at a foreign investor– backed company found it hard to conceal their excitement. After a go-ahead from the bosses to go "aggressive" and a lot of number crunching, they reduced their bid to below Rs 5 a unit. What were the chances they wouldn't win? They didn't. US-based Sun Edison bagged the project, quoting the lowest-ever bid of Rs 4.63 a unit. India's solar energy sector has seen record capacity addition and tariffs bid for new projects have fallen to unprecedented levels. But is the "sunrise industry" at risk of repeating the mistakes of the thermal power industry? While solar power developers are bidding aggressively, they're not leaving enough room for cost escalation, threatening the viability of projects. As the sector adds generation capacity, transmission infrastructure isn't expanding as quickly. Also, like the thermal power industry, the solar sector's growth hinges on buying cheap equ ipment from overseas even as Indian equipment manufacturers bleed. "The government asked us to run and the industry sprinted. The sector has not learnt lessons from the thermal power sector and most solar power developers are bidding very aggressively. If their call goes wrong, it will have a far-reaching effect," said Sunil Jain, chief executive officer at the renewable arm of Hero Group-Hero Future Energies. "This business has become like the ecommerce game people are not playing on bottom line but are trying to build high valuation by adding large capacities so that they can exit later." Jain's company bid for and lost the Andhra Pradesh project. For almost a decade since the ea rly 2000s, thermal power companies aggressively offered low tariffs to grab projects offered by the government. When fuel prices increased and project execution cost escalated due to delays, they found that the power purchase agreement didn't have a provision for tariff revision. Tata Power, which bagged the Mundra ultra– mega power project with a bid of Rs 2.26 a unit, had to book an impairment charge when Indonesian coa l prices increased. Reliance Power's bids of Rs 1.77 a unit for the Tilaiya ultra– mega power project and Rs 1.196 for Sasan were celebrated in 2007-2009. The company has now exited Tilaiya and is said to have asked state-run Power Finance Corporation to buy out its Sasan project. The contract for solar power doesn't include a tariff revision provision, either. While solar power projects don't have to worry about escalating fuel costs, their pricing projections are exposed to risks related to project execution , foreign exchange and equipment and replacement costs. "A bid below Rs 5 can at best give modest returns, which is not encouraging for investors and may impact capital flow," said Sumant Sinha, chief executive officer of Renew Power. Sinha said that for National Solar Mission projects, bids could settle at Rs 5-5.25 a unit given that execution is easier and financing options are better, while that for state projects could be 25- 30% higher. "I met some Chinese solar power companies who were horrified to hear our tariff has fallen to 7 cents while it's still about 13 cents in China," Sinha said. Sun Edison has said it will sell 425 MW of projects in India to its 'yieldco' Terra Form Global Inc. for $231 million. Yieldcos are typically set up by clean-energy companies to buy their power plants. The developers get capital for new projects while yieldcos hold assets that generate revenue from selling electricity. Most companies setting up solar projects in India are looking at selling to yieldcos in the US. 48 I