Category: Power Sector

Could bank deposits be swept by winds?

Could you lose your deposits in banks by extreme unpredictable weather conditions? Yes! How?

Extreme weather events seem to have become the latest risk to Prime Minister Narendra Modi’s renewable energy goal to quadruple solar power generation to 100 gigawatts by 2022. India may further push it to 440 gigawatts of green power by 2030, the country said in its latest forecast this month. This is considered a highly lucrative sector by the venture capitalists in India.

But, Freak climatic conditions are damaging renewable energy projects, threatening a business which survives on wafer-thin margins. For instance, A storm in India’s Rajasthan state, known for its deserts and sunny days, tore through a solar park and blew away modules of various developers. In the adjoining state of Madhya Pradesh, sections of a 750 megawatts project was submerged in 10 feet of water due to unseasonal rains. The design basis of 50-year pattern of water-flow in the area has been found inadequate. It’s not just unpredictable rainfall but also solar radiation in India that can no more be taken for granted. Cloud bursts may not seem to be infrequent after all! On top of it, Over the last 6-8 months radiation has been lower by 4% to 6%, hurting power generation.

The race to bid lower tariffs that has prompted the developers to contain engineering and structural costs with lesser design margins, made them more vulnerable to extreme weather phenomena. The financial sector, which has been betting big on solar power given the number of sunny days the country experiences, is now left worried and calls for innovative financing models.

India’s ambitious plan to take the leadership position among nations as one of largest producers of renewable energy may run into some unfavorable weather.

Investments in green energy may not be ‘green‘. So, be prepared to risk your deposits in banks, as loans to the renewable energy sector companies may turn into non recoverable debts!

Credits:

https://www.bloomberg.com/news/articles/2019-07-16/freak-weather-events-pose-new-risk-to-india-s-renewables-goals

Policy Paralysis in Indian Power Sector

A catch-22 situation stares at the thermal power plants that are fraught with perineal problems with many of the assets becoming NPA! The new projects either suffer from absence of fuel supply agreements or long term power purchase agreements. 

While the operating plants suffer from non payment of power bills. UDAY has not yielded expected results as most of the state DISCOMs did not utilise the breather to improve the finance stability by tariff rise: Vote-bank politics! This has resulted in overdue of credit repayments- result is the strict RBI norms for declaring NPA. 

There is another obligation to the DISCOMs: they have to purchase around 20% of power from renewable resources. Those who don’t , have to compensate by purchase of bonds equivalent to the value from others! The delays in implementing the solar energy projects indirectly raised the cost of conventional power as DISCOMs have to compensate by purchase of these ‘green bonds’. Going green is a policy decision while the industry has not matured enough to yield the expected results! 

Most of the DISCOMs are in dire straits! Hence the power bills are overdue! Unless the power bills are paid back, the power producers cant pay back the loan! 

Many of the problems are policy driven and not the industry management. Though many of the bottlenecks related to coal production and movement from the pit heads have been resolved, the ministry’s hands are full, to address the issues of the coal consumer.