Indian Railways: Blazing a trail towards solar power

As India shifts to a low-carbon emissions trail, the Indian Railways has set a goal of reduction in emissions intensity of 33 per cent by 2030. This includes spotlight on improvement of rail traction energy and fuel efficiency of 8-13 per cent. In recent years, the Indian Railways has taken considerable steps to increase the share of renewable energy in its electricity mix, which includes solar and wind, to reduce energy costs as well as carbon emissions.

With the Indian Railways already on track to achieving its 1 GW target, with the same impetus it could potentially achieve 5 GW by 2025, with about 1.1 GW coming from rooftop projects and about 3.9 GW from utility scale projects. This would result in 25 per cent of the Railways’ electricity mix coming from renewables by 2025.

It was expected that the 1 GW target would serve as a signal for financiers and solar developers to come forward and participate actively in bidding for tenders floated by the Railways, for installation of solar projects. While the initial response was overwhelming, there have been concerns raised on various issues ranging from technical and financial to policy aspects.
Solar capacity addition on all India level remained at 5.5 GW in FY 2017 and 5.8 GW in FY2018. While solar energy capacity share in the all-India installed overall power generation capacity still remains limited at about 5 per cent as on Dec 2017, its share within the renewable segment stood at about 27 per cent and the same is expected to rise considerably in the near future. In the long run, demand outlook for solar energy remains favourable, given the strong policy support from GoI, an improved tariff competitiveness of solar energy and supportive regulatory framework.

As per ICRA estimates, solar energy capacity addition in FY 2018 is estimated at about 7.5 GW, backed by strong project awards in the last 12-18 month period. Nonetheless, the bidding activity for award of solar projects however slowed down in CY 2017, which was also due to several factors like GST roll-out w.e.f. July 2017, an upward pressure on PV module price level in recent months and uncertainty on anti-dumping duty/safeguard duty including time lines and quantum thereof.

Further, the new bidding guidelines issued in September 2017 remain favourable for solar IPPs, given that the same provides for compensation to solar power generators in case of off-take constraints arising from the delay in commissioning of transmission infrastructure, grid unavailability and grid back-down. While MNRE has recently announced significant tendering plans for award of solar projects under NSM so as to meet cumulative target of 100 GW by FY 2022, timely clarity/resolution on import duty/safeguard duty matters coupled with the willingness and timely signing of power supply agreements by the discoms in non- RE rich states with the intermediaries like SECI remains critical in the near to medium term. Further the solar energy sector continues to face regulatory challenges and continuing delays in payments from distribution utilities in some states. Regulatory challenges mainly arise from:

• A wide variance in solar RPO norms across states.
• Weak compliance of such RPO norms by obligated entities – mainly distribution utilities with the absence of enforcement of penalty framework by the State Electricity Regulatory Commissions (SERCs) across most of the states.
• The risk of forced back down by the utilities, as seen in a few states.

The timely alignment of RPO trajectory in line with targets specified by the Ministry of Power along with improvement in RPO compliance remains extremely crucial for achieving the RE capacity target set by the Central Government.

With the solar prices falling considerably in the recent years, it makes an economic case for the railways to further reduce their electricity costs and at the same time, increase the share of renewable energy, chiefly, solar, in their energy consumption mix.

Indian Railways is setting up a massive surge of renewable energy consumption for its enormous network, aiming to meet 25 per cent of its power demand with renewables, principally solar, by 2025. With solar power generation only being accessible for 7-8 hours a day, the path to 5GW will necessitate a large number of projects to come to culmination.

Solar and wind energy companies are therefore hoping that this change in leadership will boost renewable energy sources for the rail sector.

Railways as potential sector
Hartek Singh, CMD, Hartek Group says, “There is a huge potential for solar power in the railways, which is in for a makeover as a completely de-carbonised and most energy efficient and electrified rail network in the world. Aided by the falling costs of solar power and a tremendous response from investors, this transition is already underway with the railways embarking on ambitious plans for rapid deployment of solar energy. As a significant step in this direction, the railways recently decided to invite tenders for setting up 3,000-MW solar projects on the rooftops of railways stations, railway buildings and its unused land. The contracts are expected to witness aggressive bidding from both private players and public sector undertakings like the National Lignite Corporation.”

The potential is enormous and the opportunities aplenty, considering that the railways is the single largest consumer of electricity in India, consuming about 18 TWh per annum, or roughly 2 per cent of the country’s total power generation. A United Nations Development Programme (UNDP) study conducted last year has found that the railways can generate 5 GW of solar power at an investment of $3.6 billion. The railways have now teamed up with the UNDP to formulate a plan to reach the 5-GW milestone, which will include 3,900-MW utility-scale and 1,100-MW rooftop projects, continues Singh

As part of its solar mission, the railways aim to secure 25 per cent of its energy requirements from renewable sources, particularly solar power, by 2025. It has already earmarked 5,000 acres of land deemed unsuitable for commercial purposes to install solar power plants, which can generate up to 500 MW for railway stations. There are plans to install rooftop solar power systems at 7,000 railway stations across the country. Besides, solar panels will be installed on the rooftops of more than 250 trains to power fans and lighting systems, asserts Singh.

Shailendra Bebortha, Managing Director India, IBC Solar says “Indian Railways presents a huge opportunity in the field of Energy Management. Indian Railways is in the midst of a massive restructuring in its operation and now is the right time to expand the solar initiative for sustainable and profitable growth. We view it as an important area of focus for future growth of Solar in India.”

“The company has not yet participated in any activities in the railways segment, yet. We are in the middle of formulating a Go-To- Market strategy for the segment,” affirms Bebortha.

Sabyasachi Majumdar, Senior Vice President and Group Head- Corporate ratings, ICRA says “The improved tariff competitiveness of solar energy against the prevailing grid tariff and waiver of inter-state transmission charges for solar energy remains favourable for Indian Railways, so as to meet its energy requirements through solar energy. As a result, opportunities for solar sector in Railways remain sizeable also given the higher capex proposed by railways (including for capacity creation and electrification of network) which in turn would also lead to demand for deployment of solar energy for meeting its energy requirements.”

Indian Railways has announced its plans for augmenting the solar capacity to about 5 GW – phase wise in next few years, which will be mix of roof-top and ground mounted projects in surplus land parcels available across the states (based on industry sources), adds Majumdar.

There is a huge potential for solar power in the railways, which is in for a makeover as a completely de-carbonised and most energy efficient and electrified rail network in the world.
Hartek Singh, CMD, Hartek Group

Indian Railways is in the midst of a massive restructuring and now is the right time to expand the solar initiative for sustainable and profitable growth.
Shailendra Bebortha, Managing Director India, IBC Solar

Opportunities for solar sector in Railways remain sizeable given the higher capex proposed by railways.
Sabyasachi Majumdar, Senior Vice President and Group Head- Corporate ratings, ICRA