MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Global Overview of the Solar PV Market
The Renewable Energy Market Update 20221 of the IEA revealed that Renewable
capacity is expected to further increase over 8% in 2022, reaching almost 320 GW. However,
unless new policies are implemented rapidly, growth remains stable in 2023 because solar
PV expansion cannot fully compensate for lower hydropower and steady year-on-year wind
additions. Globally, forecast additions for 2022 and 2023 have been revised upwards by 8%
from December last year, thanks to strong policy support in the Peoples Republic of China
(hereafter, "China"), the European Union and Latin America, and despite downward
forecast revisions in the United States.
In India, new records for renewable capacity expansion are expected to be set in 2022
and 2023 as delayed projects from previous competitive auctions are commissioned,
especially for solar PV. Nonetheless, the financial health of distribution companies
(DISCOMs) remains the primary challenge to renewable energy deployment in India, with
potential project cancellations and protracted contract renegotiations. Indias renewable
energy growth recovered in 2021 following a record slowdown in 2020 due to project delays
related to Covid-19 challenges. With the commissioning of already auctioned utility- scale
projects and the acceleration of the distributed PV market due to policy improvements,
Indias renewable capacity additions in 2021more than doubled compared to 2020.
Prices for many raw materials and freight costs have been on an increasing trend since
the beginning of 2021. By March 2022, the price of PV-grade polysilicon more than
quadrupled, steel increased by 50%, copper rose by 70%, aluminium doubled and freight
costs rose almost five-fold. The reversal of the long-term trend of decreasing costs is
reflected in the higher prices of wind turbines and PV modules as manufacturers pass
through increased equipment costs. Compared with 2020, we estimate that the overall
investment costs of new utility-scale PV and onshore wind plants are from 15% to 25%
higher in 2022. Surging freight costs are the biggest contributor to overall price
increases for onshore wind. For solar PV, the impact is more evenly divided among elevated
prices for freight, polysilicon and metals.
Overview of Indian macroeconomic landscape
Review of Indias economy
India is the sixth-largest economy in the world, with gross domestic product
("GDP") of Rs.135 trillion in Fiscal 2021, as per estimates of the National
Statistical Office ("NSO").
Its GDP shrank 7.3% in Fiscal 2021, buffeted by the Covid-19 waves in the first half of
the year. With the pandemic having abated, the economy is set to grow 9.2% this fiscal on
this low base. It turned positive in the second half of the year, with fourth quarter GDP
estimated to have posted a mild 1.6% uptick. However, the fierce second wave in the first
quarter of this fiscal challenged the economy. While the lockdowns were localised across
the states, the pandemic took a toll on growth recovery curves.
GDP growth for the first quarter of this fiscal came in at 20.1%, a tad better than
expectation. Consumer inflation dropped to a lower-than-expected print of 5.3% in August,
while industrial growth was quite strong in July as well August 2021. Exports cruised
along with global demand, leading to a positive spillover effect on industrial activity.
Goods and Services Tax ("GST") collections have been healthy and both the
central and state governments are doing well on public investments front.
Raising the long-term potential
Domestic economic growth hinges on revival in private consumption, lowering of banks
NPAs, improvement in the investment climate, and many more such factors. The central
government has taken the following steps in this regard: The steps taken by the Reserve
Bank of India ("RBI") in this regard include: (a) post-pandemic policies to
revive the economy;
(b) monetary policy (RBIs Monetary Policy Committee kept its policy rates and
accommodative stance unchanged in its meeting in September 2021);
(c) passage of key bills; and (d) Atmanirbhar Bharat Abhiyan. Under Atmanirbhar Bharat
Abhiyan, the government has adopted several measures to contain the economic fallout of
the pandemic. A relief package of nearly Rs.20.9 trillion has been released, taking into
account key sections of the economy such as migrant labourers, small vendors, farmers and
micro, small and medium enterprises ("MSMEs").
The scheme focuses on helping India to recover from the Covid-pandemic while making it
more self-reliant.
Atmanirbhar Bharat Abhiyan is focused on multiple sectors in the economy, including the
renewable energy space and the key schemes introduced herein are as follows:
• Production-linked Incentive ("PLI") scheme ‘National
Programme on High Efficiency Solar PV Modules, where the financial outlay has been
increased from Rs.45 billion to Rs.240 billion (as announced in Union Budget 2022)
• Phase - II of Grid Connected Rooftop Solar Programme for achieving 40 gigawatts
("GW") capacity from rooftop solar by 2022
• Public Procurement (Preference to Make in India) to provide for purchase
preference (linked with local content) with respect to the power sector (September 2020,
July 2020, March 2020).
• Implementation of the Pradhan Mantri Kisan Urja Suraksha Evem Utthan Mahabhiyan
("PM KUSUM") scheme; Ministry of New and Renewable energy ("MNRE"),
in November 2020, scaled up and expanded the PM KUSUM scheme to add 30.8 GW by 2022 with
central financial support of Rs.340.35 billion
• Approved Models and Manufacturers of Solar Photovoltaic Modules (Requirement for
Compulsory Registration) Order, 2019
• List of Manufacturers and Models of Solar PV Modules Recommended under the
Approved List of Models and Manufacturers ("ALMM") Order periodically
• Scheme of grid connected wind-solar hybrid power projects
• Safeguard duty ("SGD") on solar cells and modules (till July
21)
• Basic customs duty ("BCD") of 25% on solar cells and 40% on
modules, respectively, effective April 1, 2022.
Renewable market executive summary
Economic and power market overview in brief
Going forward, conventional sources are expected to witness limited additions of ~29 GW
over fiscals 2022-26, limited by a focus on adding clean energy; funding constraints for
conventional power plants, especially private ones; and a focus primarily on completion of
previously announced projects. On the other hand, renewable capacity additions are likely
to increase further to 80-85 GW over the period, largely owing to the environment-driven
shift towards renewable generation, government support through favourable policies and a
mandate for renewable power offtake, growing participation from centrally owned power
generating agencies in addition to existing private entities, and strong funding support
from domestic as well as foreign investors and financial institutions
Overview of the solar energy market - global and India
Global installed solar photovoltaic ("PV") capacity has grown at 29% CAGR
over calendar year ("CY") 2011-2020, led by government support to renewables in
the form of clean energy penetration mandates, taxation and other incentives, subsidized
tariffs set for renewables along with government-led renewable project allocations to
drive additions in the segment. It further increased approximately 22% year-on-year
("y-o-y") to 710 GW in 2020.
Globally, approximately 126 GW of solar PV capacity was added in 2020, led by Asia
alone, which together added approximately 76 GW or approximately 60.6% of total capacity
during the year. In terms of cumulative installed capacity as of December 2020, China is
the market leader with a total installed base of approximately 254 GW.
With increasing investor interest for the segment, the global drive towards clean
energy supported by governments, the sustained trend of falling component costs over
several years, and increasing private participation, bid tariffs for solar energy have
been falling globally. There have been several drivers, mainly regulatory support and
creation of policy frameworks, to either incentivize solar project installations and/or
lower costs for developers. This has been done by providing subsidized capital /
infrastructure for setting up projects or providing additional revenue streams post
operationalization to developers.
Indian power sector
Domestic power sector vis-a-vis global scenario
The power industry, being a core sector, fulfils the energy requirement of several
other industries and has a multiplier effect on the economy by being a key enabler in the
functioning of large and small industries. Electricity generation in India is the third
highest after China and the US, with 5.8% global share in CY2019. Indias electricity
generation increased from 1,262 billion units (BU) or terawatt-hours (TWh) in CY2014 to
1,559 BU at 4.3% CAGR, faster than global CAGR of 2.4%, even as China grew the fastest at
5.3% CAGR over the same period.
Power demand-supply scenario in India
Power demand is expected to register 4-5% CAGR between Fiscals 2022 and 2026, supported
by economic growth recovery, expansion in reach via strengthening of transmission and
distribution ("T&D") infrastructure and improved power quality
Conventional capacity additions make way for renewable sources
The total installed generation capacity at end-March 2021 was 382 GW, of which
approximately 80 GW was added over Fiscals 2017-2021 (net of approximately 12 GW
retirals). Coal and lignite-based installed power generation capacity has dominated over
the years, accounting for 55% as of March 2021.
Renewable capacity (includes solar, wind, small hydro and other renewable sources) has
nearly doubled from approximately 46 GW in Fiscal 2016 to approximately 94 GW in Fiscal
2021, with its share in overall installed capacity growing from approximately 15% to
approximately 25% over the same period. The substantial rise in renewable capacity was led
by solar capacity additions to the tune of approximately 33 GW on the back of strong
private participation and competitive tariffs, along with steady government policy support
through nodal agencies such as Solar Energy Corporation of India ("SECI") and
National Thermal Corporation Ltd ("NTPC").
Major conventional gencos have been moving towards renewable energy capacities to
address the uncertainty arising out of imminent phasing out of thermal power generation in
the distant future.
Renewable capacity additions to lead the way over next five years
Conventional capacity additions are expected to moderate further to approximately 29 GW
over Fiscals 2022-2026, driven by moderate growth in power demand (barring Fiscal 2022
owing to lower base of Fiscal 2021), focus on completion of previously announced projects,
reduced need for additional capacity due to declining power deficit, and delays in a few
projects due to funding constraints. Moreover, bankers are also adopting a cautious
approach given their high-power sector exposure, apart from apprehension in funding
conventional power capacities stemming from increased scrutiny of conventional energy
investments by global investors.
On the other hand, renewable capacity additions are likely to expand further to
approximately 83 GW over the same period, owing to environment-driven shift towards
renewable generation, government support through favourable policies for domestic
equipment manufacturing and renewable power offtake, growing participation from central
gencos in addition to existing private entities, and strong funding support from domestic
as well as foreign investors and financial institutions.
Consequently, the overall installed capacity is expected to reach 485-490 GW by Fiscal
2026, largely driven by growth in solar capacity at 20-22% CAGR over Fiscals 2022-2026,
supported by wind capacity growth at 7-9% CAGR over the period. As a result, the share of
solar capacity in overall installed capacity is expected to reach 20-22% by Fiscal 2026,
out of renewable capacity share of 35-37%, even as the share of conventional capacity is
likely to fall from approximately 75% in Fiscal 2021 to 63-65% in Fiscal 2026
National Hydrogen Energy Mission announced to promote clean alternative fuel
In Union Budget 2021-22, the Central Government announced the National Hydrogen Energy
Mission (NHM) envisaging the use of hydrogen as an energy source, leveraging its utility
as a clean alternative fuel. The focus of the NHM is to generate hydrogen from renewable
energy sources, helping India achieve its emission goals under the Paris Agreement while
reducing the countrys dependence on fossil fuels. Also, on 17th February 2022 power
ministry has unveiled the green hydrogen policy. The key measures outlined under the
policy are:
• The waiver of ISTS charges shall be granted for a period of 25 years to the
producer of green hydrogen & green ammonia from projects commissioned before June 30,
2025.
• Banking shall be permitted for 30 days for renewable energy used for making
green hydrogen
• Renewable energy used for production shall be counted towards RPO compliance of
consuming entity.
• Green hydrogen production facility can be co-located or remotely located &
green hydrogen plants will be granted open access for sourcing of renewable energy within
15 days of application.
• MNRE will establish a single window clearance for all approvals required for
setting up a manufacturing plant.
• To achieve competitive pricing, MNRE may aggregate the demand from different
sector and have consolidated bids conducted for procurement of green hydrogen.
Further to these proposals, there would be a second round to the policy that would be
announced shortly.
Further, The Ministry of New and Renewable Energy ("MNRE") has been
supporting a broad-based Research Development and Demonstration programme on hydrogen
energy and fuel. Projects at industrial, academic, and research institutions are being
supported to address the challenges of hydrogen production, which has resulted in the
development and demonstration of internal combustion engines, two-wheelers,
three-wheelers, and minibuses that run on hydrogen fuel. Two hydrogen refuelling stations
have been established (one each at the Indian Oil R&D Centre, Faridabad, and the
National Institute of Solar Energy, Gurugram). In order to encourage offtake of green
hydrogen for energy consumption, the central government is planning to mandate the
purchase of green hydrogen for certain industrial segments such as refineries, fertiliser
manufacturers, etc, in line with the renewable purchase obligation ("RPO")
currently applicable for renewable sources such as solar, wind, and hydro.
Major players from the energy industry have also started dabbling in green hydrogen
with projects aimed at generating and supplying cost-effective green hydrogen. In July
2021, the MNRE gave its go-ahead to NTPC to develop a 4.75 GW renewable energy park in the
Rann of Kutch in Gujarat, which will also generate green hydrogen. NTPC Renewable Energy
Ltd ("NTPC REL"), NTPCs wholly owned subsidiary, invited a domestic tender to
set up Indias first Green Hydrogen Fuelling Station in Leh, Ladakh, in the same month, as
part of its plans to become the largest green hydrogen producer and provider in India,
marking a strategic shift towards clean energy for Indias largest thermal energy
producer. Reliance New Energy Solar ("RNESL"), a wholly owned subsidiary of
Reliance Industries Limited ("RIL"), a major fossil-fuel producer in India, has
partnered with Stiesdal A/S, a Danish company, for licensed manufacturing of low-cost
hydrogen electrolysers with the objective of reducing the price of green hydrogen.
Hydrogen produced from renewable energy sources is known as green hydrogen. Green
hydrogen can be produced by electrolysis (splitting of water using an electrolyzer powered
by renewable electricity such as wind and solar) or through conversion of biomass. Energy
can be extracted from hydrogen through combustion or through fuel cells that emit only
water as a by-product. Hydrogen provides a means for storage of variable renewable energy
to stabilise its output. For long duration storage over several hours, converting excess
available energy into hydrogen and utilising it for grid support and other applications is
a suitable alternative. Fuel cell electric vehicles (FCEVs) run on hydrogen fuel and have
no harmful emissions. BEVs could be suited for the light passenger vehicle segment for
shorter driving ranges.
Following the launch of the National Hydrogen Mission by the government, several large
private players have announced their plans to enter the segment. Reliance plans to bring
down the cost of green hydrogen below $2 per kg within a decade by setting up an
electrolyser giga-factory. Similarly, Adani group has set ambitious green hydrogen targets
as part of its $70 billion investment plan in renewables, while IOC, one of Indias
largest fuel retailers, announced plans to manufacture green hydrogen at one of its
refineries. As per estimates by the European Commission, one million tonne of hydrogen may
require 5-10 GW of electrolyser capacity. Further, the International Energy Agency pegs
the electricity so required for 1 tonne of hydrogen to be around 50-55 MWh. At a plant
load factor of 22-23% (typical of solar power currently in India), this would imply around
25-30 GW of solar power consumption for one million tonne of green hydrogen production.
The aim is to develop India into a global hub for manufacturing hydrogen and fuel cell
technologies across the value chain. However, considering the cost implications and low
requirement, green hydrogen may currently have a limited role in the power sector,
considering the segment is still nascent. However, in the long term, renewable energy
sources will be very cost- effective. Therefore, RE sources should be used in the most
efficient way possible to produce green hydrogen.
Amid these reforms, Indias economic growth is currently recovering and is expected to
pick up, since four drivers - people learning to live with the new normal, flattening of
the Covid-19 affliction curve, rollout of vaccinations, and investment- focused government
spending - are converging
Company achievements and plans
During FY21-22, the year under review, Waaree Renewable Technologies Limited (Erstwhile
Sangam Renewables Limited) commissioned 25.41MWp projects. A total of 359.20 MWp are under
construction.
The Company plans to continue its focus on the Commercial & Industrial (C&I)
market segment to sign Power Purchase Agreements with companies of high credit rating
(BBB+ and better), to install Solar PV plants on rooftops as well as ground mounted
(within campus or remotely located under open access) to offer operation and maintenance
services to existing as well as new clients.
Operational Performance during FY22
During FY22, your Companys revenue on consolidated basis was Rs 16,149.55 lakhs as
against Rs. 1,297.83 lakhs in previous year and profit of Rs.889.12 Lakhs as against loss
of Rs 236.67 in previous FY21.
Opportunities and Challenges
In India, PV capacity additions more than triple in 2021 compared with 2020 as delayed
large-scale utility projects become operational. Moreover, the government awarded 27 GW of
PV in central and state auctions in 2020, which is the primary driver of PV growth this
year and next. Distributed PV expansion remains sluggish due to administrative and
regulatory challenges in multiple states, while the reluctance of DISCOMs to adopt
commercial PV remains a key barrier to faster growth.
Over medium and long term, Indias transition towards renewable energy presents an
incredible opportunity but also challenges. Increasing the power system flexibility is not
easy as more intermittent renewables are added to the grid. Grid integration has already
become a significant issue as more solar power comes online in several regions of the
country.
For our Company huge opportunities exist in solar PV Rooftop market, as well as the
Open Access market in many states, both in public and private sector, and specifically in
C&I market segment. There is increased willingness of consumers to meet a higher share
of their energy demand through onsite sources. Many PSUs, Municipalities and Government
agencies are planning for Solar Rooftop plants over their buildings due to a strong policy
push by national and local governments.
Boost in government demand, on the other hand, is very encouraging with Government
expected to become a major demand source for rooftop solar in the coming years.
The tilt towards the RESCO model is driven by an increase in the number of companies
offering projects under this model, government procurement, acceptance by large C&I
consumers of long term contracts and lower performance risks. Lack of financing for RESCO
companies however continues to be a dampener. RESCO adoption has been limited to C&I
and government clients so far.
Risk & Concerns
The Company is exposed to various business risks such as un-anticipated labour costs,
interest rates, financing appetite of lenders, execution challenges such as less
experienced installers, strength of roof, rental property, government regulatory policy
changes, likely imposition of anti-dumping and/or safeguard duty, delay in subsidies
payments, lack of third party insurance products, future construction risk and above all
biggest risk of tariff re-negotiation by power off-taker in light of dropping tariffs,
global sourcing, forex and solar plant cost. The Company is also exposed to the
fluctuations of economy, exchange rates and industry cycles / downturns.
During the current FY 21, the major concern is the COVID lockdowns and restrictions,
affecting our marketing efforts and construction activities at sites.
Adequacy of Internal Control System
The Companys has adequate internal control systems for the business processes in
respect of all operations, financial reporting, compliance with laws and regulations, etc.
The Management information system forms an effective and sound tool in monitoring and
controlling all operating parameters. Regular internal audits ensure that responsibilities
are executed effectively. The Audit Committee reviews the adequacy of internal controls on
regular basis.
Human Resource Development
The company recognises its human capital as its most important resource, and takes
pride in the commitment, competence and dedication shown by its employees. Company is
committed to nurturing, enhancing and retaining all its employees through superior
Learning and Organizational development. The company recognises that its employees are
critical pillar to support the organizations growth and its sustainability in the long
run.
The company has granted 97,910 stock options to eligible employees of the company under
the Waaree RTL ESOP 2022. The company will grant more stock options in future to motivate
employees, to promote retention and to attract talent in the company.
Cautionary Statement
Statement made in the Management Discussion and Analysis Report, as describing the
Companys outlook, projections, estimates, expectations and predictions may be
"Forward Looking Statements" within the meaning of applicable securities Laws
and Regulations. Actual performance may be and could differ materially from those
expressed or implied.
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On behalf of the Board |
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For Waaree Renewable Technologies Limited |
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(Formerly known as Sangam Renewables Limited) |
|
Pujan Doshi |
Hitesh Mehta |
| Place: Mumbai |
(Managing Director) |
(Executive Director) |
| Dated: August 10, 2022 |
DIN:07063863 |
DIN:00207506 |
| Registered office |
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| 504, Western Edge-I, off. Western Express Highway |
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| Borivali (East), Mumbai 400066. |
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+91-9892691696
