Raj Prabhu, CEO, Mercom Capital Group
cumulative solar installations in India stand at 1,761 MW with about 557 MW
installed so far in 2013. With most of the CSP projects that were due to be
commissioned in May 2013 delayed, the forecast for installations in 2013 looks
flat compared to 2012. Only about 60 percent of the targeted installation goal
has been achieved so far despite the commissioning deadline of Phase 1 of JNNSM
ending in May. Considering India is an emerging solar market where the growth
rate is expected to be much higher than other parts of the world, installations
in 2013 will likely end up disappointing the markets. The current solar policy
environment looks more like an experiment than a serious policy that will help solve
the current power crisis in India.
can truly be a game changer in India as a disruptive energy source that has the
potential to solve energy poverty, address India’s massive power shortage
problem and dramatically impact India’s slow growth rate and inflation. However,
the current “please all parties” policy regime is forgetting the key
stakeholder, the consumer. Policy uncertainty is rife, with rules changing
every other month.
current PV/CSP split and domestic content requirements are examples of this. Our
first analysis of the Indian solar market still holds true: We said that dictating the ratio of technology (PV:CSP),
rather than allowing the market to select the most efficient and cost effective
technology for India, was not a good idea due to CSP costs, water shortage in
India, and a 30 percent domestic content requirement. Still, policy makers bent
to the CSP lobby and sliced the solar pie to please everyone, and the result
should not surprise anyone. The 470 MW CSP due to be commissioned in May 2013
are struggling to complete with only 50 MW to be commissioned and the rest have
been granted a 10 month extension. We strongly urge JNNSM to discontinue the PV/CSP
split and let the markets pick the most cost effective technology.
these early growing pains, there are few signs yet to indicate lessons have
been learned. Domestic content requirement policies (like those that contributed
to the delays that CSP developers are experiencing) are being pursued even more
aggressively. There are talks about closing the thin film “loophole” in the
domestic content requirement, again picking and choosing technologies to appease
the local PV manufacturing lobby. There is a disconnect between the policies pursued
and the original goal of procuring solar at the most cost effective prices. In
fact, many policy changes have been contradictory. The reverse bidding process
was chosen so solar could be procured at the lowest possible bids but now all
efforts are being made to ensure that developers can’t access the lowest priced
equipment. The government is desperate for foreign investments in power
projects, but at the same time they scare away investors by dictating how
projects are to be built and where their equipment should be made. All this has
made the investment community very confused.
latest WTO ruling against the Canadian province of Ontario sets a precedent and
is a big blow for countries pursuing domestic content requirements. It would be
wise for India to settle its trade dispute and remove the uncertainty clouded
around this case.
JNNSM Phase II Draft Policy
Ministry of New and Renewable Energy (MNRE) recently proposed a draft Phase II
policy and has opened it up for comments. Phase II would have a target of
achieving 3,000 MW of solar power through various batches as previously seen in
Phase I. The Batch 1 of the Phase II policy is targeting 750 MW of solar
installations. Instead of bidding for the lowest tariff, developers will now be
bidding for the Viability Gap Funding (VGF) requirement.
VGF, developers will sign a Power Purchase Agreement (PPA) for 25 years to sell
power at a fixed tariff of Rs.5.45/kWh (~$0.10/kWh). In the case of accelerated
depreciation, the tariff will be reduced by 10 percent to Rs.4.95/kWh
(~$.09/kWh). The maximum limit for VGF is 30 percent of the project cost, or Rs.2.5
crore/MW (~$500,000/MW), whichever is lower. The challenge with VGF is that
since most of the funding is done upfront, there is no incentive to build the
most productive project, a recipe for disaster in a young and inexperienced
market. This is yet another experiment to see what happens.
the policy environment was conducive for investments, a mechanism like VGF to
make solar projects commercially viable would be unnecessary.
make it even more interesting, the 750 MW Batch 1 of Phase II policy will be
spilt into “Part A“ and “Part B”. Part A does not have a domestic content
requirement and Part B does. The MW split is currently under review.
so much complexity, developers have to ask the question: is JNNSM worth all
this trouble? Or is it better to pursue individual state policies? Looking at
the cumulative installation data and in spite of all the noise around JNNSM and
since announcing the policy in 2010, only about half - 591 MW has come from
JNNSM projects compared to approximately 1,170 MW installed through various
Update on Various India
JNNSM - Phase I
Batch 1 –
PPAs for Batch 1 projects were signed on January 10, 2011 for 610 MW (140
MW-PV, 470 MW-CSP). PV projects were due to be installed by January 9, 2012.
130 MW have been commissioned, with several delayed for months, incurring
fines. 10 MW have been canceled because two project developers failed to
Only one 50 MW CSP project
is expected to be complete out of the 470 MW that are due to be commissioned by
May 2013. The remaining projects have been granted a 10 month extension giving the
developers a total of 38 months to complete from their PPA signing dates, which
would move these projects to a 2014 commissioning date.
Batch 2 – 300
MW of the 340 MW Batch 2 projects have been commissioned so far with the
remaining 40 MW expected to be commissioned in the next 3 months.
JNNSM - Phase II
Phase II policy
announcements by MNRE are expected to be made sometime in the May-June timeframe.
The target for installations under Phase II is about 3,000 MW, which would
include different mechanisms like VGF and bundling of power. The draft proposal
will be submitted to the cabinet for approval which is expected to take another
As part of the JNNSM
Phase-II Batch-I, Solar Energy Corporation of India (SECI) will be announcing a
Request for Selection (RfS) to set up grid connected solar PV projects for a
total aggregate capacity of 750 MW. The bidding process will be divided into
two parts, Part A and Part B. Bidders can apply for projects under Part A or
Part B or both Part A and Part B. Projects under Part B will have a domestic
content requirement, the only difference between the two.
Tamil Nadu proposed
a goal of 3,000 MW of solar power by 2015 through utility-scale and rooftop
projects. It announced a 1,000 MW tender in December 2012 for solar projects.
However, qualifying bids only amounted to 494 MW. Out of that, only 266 MW of
projects were issued a letter of intent; the rest are pending. Tamil Nadu used
an L1 bidding process (the lowest bid has to be met by all bidders). This
resulted in a very low (Rs.5.47/kWh - ~$0.10/kWh) bid which was deemed
unviable and prompted Tangedco (the state DISCOM - or government utility) to
(~$0.12/kWh) as the acceptable bid. Essentially, Tamil Nadu is establishing an
FiT even though it is calling the process “bidding.”
Tamil Nadu faces
severe power shortage problems, but the state is also notorious for not paying
the power producers on time.
has 857 MW of solar PV plants commissioned and no policies coming up in the
foreseeable future for solar development.
Odisha is scheduled
to announce a new solar policy by the end of June. The state has installed a
total of 13 MW; 5 MW under JNNSM Batch-I and 8 MW under JNNSM rooftop projects.
Another 55 MW have been allocated and work on these projects is expected to begin
The Madhya Pradesh
Power Management Company, the holding company for all DISCOMs in the state,
signed PPAs for 225 MW of PV projects with five project developers under a
reverse auction mechanism, and another 50 MW with National Thermal Power
Corporation (NTPC) with a December 31, 2013 deadline for commissioning.
announced bids for 1,160 MW of solar PV projects which was oversubscribed by
570 MW, totaling 1,730 MW. Project sizes are 5 and 10 MW each. The highest bid
(~$0.30/kWh) and the lowest bid was Rs.6.49/kWh (~$.0.12/kWh).
recently announced a solar policy with a goal to develop 500-1,000 MW of PV projects
by 2017. Projects amounting to 225 MW are pending PPAs and may be signed in three
to four months. The delay in signing PPAs is due to the local DISCOM reportedly
sitting on a power surplus, a rarity in India.
Power Generation Company Limited (MahaGenco) currently has 160 MW of PV
projects installed. 125 MW of the 150 MW Dhule solar project is complete with
the remaining 25 MW to be commissioned. The project has a rich Rs.15.31/kWh
(~$0.29/kWh) tariff and is split between 50 MW thin film and 75 MW c-Si
Rajasthan issued a
200 MW RfS for 100 MW of solar PV projects and 100 MW of CSP projects,
resulting in only 75 MW of solar PV projects being selected due to a lack of interest
in CSP projects. The lowest bid was Rs.6.45/kWh (~$0.12/kWh) through an L1 bidding
Punjab had set a
target of 1,000 MW of solar power generation capacity under the 2012 New and
Renewable Sources of Energy (NRSE) Policy released in December 2012. The tender
is expected to open in May and will follow the L1 bidding process.
About Mercom Capital Group
Capital Group, llc is a clean energy communications and consulting firm with
offices in the U.S. and India. Mercom consults with its clients on market entry,
strategy, policy, due-diligence and joint-ventures. For more information,
visit: http://www.mercomcapital.com. To
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