Gujarat, India plans to retroactively reduce high FITs for 1 GW of Solar Plants in the state

India’s western state of Gujarat has been the poster boy of solar energy success in India installing almost 1 GW of solar capacity in a couple of years. The state gave a fixed tariff and a hassle free experience to solar energy developers that attracted more than $2 billion in solar investments. The top Indian industrial groups such as Welspun, Tatas and Adanis have built large solar power farms in the state to take advantage of the high feed in tariffs. The state’s solar energy success overshadowed the tardy progress of the much bigger federal solar subsidy scheme JNNSM and made the Gujarat government crow about its success. Read on GWI Gujarat trailblazes solar energy growth in India. 

Gujarat state feels the blues

The government is now feeling the blues as it installed much more capacity than it wanted and is paying a high price for the solar electricity. The state utility GUVNL now wants the tariff to be reduced by 30% as it feels that the solar developers are making huge profits at the expense of the customers. Note the solar panel prices crashed in the last few years, which made the cost estimates of the solar power plants come down sharply. The solar developers paid much less for the plants, that was estimated leading to big profits. The government’s argument is that since the thermal power developers are being paid higher tariffs as they are making losses, the solar developers should be paid lower tariffs because they are making huge profits.

There is precedence

This is not the first time that bureaucrats and policymakers have got the solar subsidy wrong. Huge profits have created massive booms across the world (Japan is currently experiencing one). While some countries such as Germany and Italy are absorbing the huge profits being made by solar energy developers, some countries such as Spain and Czech have retroactively reduced the tariffs through taxes and cesses. Like Gujarat, I expect the investors to make a huge hue and cry and go to the courts. But this won’t fly as public opinion and courts would like to pull back the profits

Solar developers can do little

Solar developers can do little if the electricity regulator pulls back the tariff. Indian courts will take a long time to decide and governments in India have too much power vis-à-vis the developers. Only crony capitalism and lobbying can help these guys now.

Also read List of Current and Future Solar Photovoltaic Energy and Solar Thermal Plants/Projects in India.