FIT removal threatens RE companies
The proposed National Electricity Policy raises concerns over the abolition of the Feed-in Tariff (FIT) for Renewable Energy Developers, potentially undermining investments, industry experts say.
The Renewable Energy Developers Association (REDA) urged immediate government intervention and supportive policies to retain energy security. The proposed removal of the FIT system, which currently supports approximately 92 per cent of renewable projects under 10 MW, is seen as a threat to small- and medium-scale local entrepreneurs, a REDA Member told the Sunday Times Business.
He said that if the broader issues are resolved, then others, such as handling curtailment, will also be addressed. Pointing out that the new policy says that curtailment can be done due to certain economic reasons, he noted that this policy has been drafted after tabulating old figures, hence thermal power has come out as cheaper than solar power. Industry experts also noted that there is an urgent need to change the long-term generation planning cycle.
Rooftop solar contributes more than 20 per cent of the 6000 MW grid capacity.
Competitive bidding is considered impractical for certain renewable energy technologies, such as rooftop solar, mini-hydro, and biomass. This shift could result in project delays and increased transaction costs, impeding the development of these technologies.
Additionally, the policy states “uncompensated curtailment,” which instructs that if the National System Operator (NSO) curbs a project’s output, the developer will not receive any compensation for the lost production. This aspect raises concerns about the financial viability of projects, an industry official pointed out.
The removal of FIT, paired with mandatory time-of-use tariffs for rooftop solar and the potential for rupee-only contracts, renders significant financial risks to developers. These changes could render projects “un-bankable,” making it difficult for developers to get financing from lenders, the official added further.
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