India Faces Mounting Calls to Move Solar to Fixed Tariffs

Oct. 13 (Bloomberg) — India should move its solar industry
to a fixed-pricing model like the one used in Germany, said one
of the nation’s biggest clean-energy lenders, as Prime Minister
Narendra Modi prepares to expand renewable targets.

“It may be time to move over to feed-in tariffs,” Sanjay Mandavkar, Yes Bank Ltd.’s senior president of corporate
finance, said Oct. 10 by phone. “They offer stability,” making
them more attractive to lenders.

Modi’s government wants to attract $100 billion of
investment in clean energy over the next five years. Companies
and lenders say that will require a shift in policy from India’s
current auction-based system, which caps installations to
control the scale of solar fitted and the amount of subsidy
payments incurred.

“Bidding is now counter-productive,” Vineet Mittal,
managing director of Welspun Energy Ltd., India’s biggest
photovoltaic developer, said in an Oct. 10 interview in New
Delhi. With global panel prices stabilizing after a three-year
decline, auctions risk encouraging over-aggressive bidding that
could lead to unviable projects, he said.

India led the world in competitive bidding — followed by
Brazil and South Africa — which helped push down the cost of
solar power by about half since 2010. In recent months,
government officials and developers including Goldman Sachs
Inc.
-backed ReNew Power Ventures Pvt. have begun calling for a
transition to feed-in tariffs. That system sets a uniform price
and invites any generator willing to supply at that rate to
install as much as they want.

The government is considering whether to grant fixed solar
tariffs instead of holding competitive auctions, Tarun Kapoor,
joint secretary at the Ministry of New and Renewable Energy,
said in August. As the price of solar converges with the cost of
conventional power, state distribution utilities would be “more
comfortable” with such a shift, he said.

Recent coal power projects in India price their electricity
at about 5.5 rupees a kilowatt-hour. In comparison, the most
recent national solar auction priced photovoltaic power at about
6.5 rupees a kilowatt-hour, according to data compiled by
Bloomberg.

Germany has installed 35 gigawatts of solar, compared with
India’s 2.7 gigawatts, according to data compiled by Bloomberg.

To contact the reporter on this story:
Natalie Obiko Pearson in New Delhi at
npearson7@bloomberg.net

To contact the editors responsible for this story:
Reed Landberg at
landberg@bloomberg.net
Indranil Ghosh, Jason Rogers

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