MARKET UPDATES
Wind and Solar Met 9.8% of Global Electricity Production in H1 2020: Report A new report has put the spotlight on how fast wind and solar energy have expanded over the last few years to become major sources of electricity generation in most countries around the world and have almost singlehandedly reduced coal burn throughout the world. The rise has been so rapid, that in the first half (H1) of 2020, wind and solar generation rose 14 percent compared to H1-2019, generating 9.8 percent or nearly one-tenth of global electricity. The data was revealed in a new half-year analysis issued by Ember. It aggregated national electricity generation for 48 countries making up 83 percent of global electricity production. The report found that in the 48 countries analysed, wind and solar generation rose from 992 terawatt-hours in 2019 to 1,129 terawatthours in H1-2020. That meant wind and solar’s share of global electricity has risen from 8.1 percent in 2019 to 9.8 percent in H12020; and their share more than doubled from 4.6 percent in 2015, when the Paris Climate Agreement was signed. The two sources generated almost as much CO2-free power as nuclear power plants, which generated 10.5 percent of global electricity in H1-2020 and whose share remained unchanged from 2019. The report then goes on to add that many key countries now generate around a tenth of their electricity from wind and solar. China (10 percent), the US (12 percent), India (10 percent), Japan
(10 percent), Brazil (10 percent) and Turkey (13 percent). The EU and UK were substantially higher with 21 percent and 33 percent respectively; within the EU, Germany rose to 42 percent. While at the other end of the spectrum, Russia is the largest country so far to shun wind and solar, with just 0.2 percent of its electricity from wind and solar.
Change-in-law Payments Worth an Additional Rs 4000 Cr for Solar Sector: CRISIL Recent commencement of Change in Law payments by state power distribution companies (Discoms) and the Solar Energy Corporation of India (SECI) for Goods and Services Tax (GST) to solar power projects, comes as a shot in the arm for the sector. Together with safeguard duty (SGD) reimbursements, which also qualify under ‘Change in Law’, the payments will lead to Rs 4,000 crore cash inflow for the sector. This can restore project returns by as much as 220 basis points (bps) and is positive for credit quality, according to CRISIL. Earlier, the research and ratings agency had said that the imposition of SGD on import of solar cells and modules had increased the implementation cost of ~5.4 gigawatts (GW) projects by as much as 15 percent and compressed the returns of developers by 160 bps. Add to this the hike in GST levy on modules and balance of the plant, and returns reduced by a further 60 bps. While Central Electricity Regulatory Commission (CERC) was quick to recognise the SGD imposition as a Change in Law event, uncertainty prevailed over the timeliness and mechanism of its reimbursements. Now, counter-parties including SECI and Discoms such as Maharashtra State Electricity Distribution Company Ltd (MSEDCL) have started making payments towards GST reimbursements for their respective projects. To ensure returns don’t diminish because of delays in payment, the reimbursement is in the form of a 13-year 34 n August 2020 n Saur Energy International
annuity and also factors in a carrying cost of 10.4 percent on a retrospective basis, in line with the CERC’s latest tariff orders. Manish Gupta, Senior Director, CRISIL Ratings said “these annuity flows are not conditional upon project performance and receipt of payments by central counter-parties from the underlying Discoms. This lends more stability to these cash flows and supports the credit quality of these projects.”
