Month: September 2013

Allocations under batch one of phase two of the National Solar Mission (NSM) were supposed to begin in May 2013. However, there has been a significant delay in the process and these allocations have not yet been announced. Officials from the Ministry of New and Renewable Energy (MNRE) have been quoted as saying that the documents for phase two of the NSM are now with the union cabinet for approval (refer).

NSM expected to be kept on further hold due to the looming elections

The capital subsidy scheme is also on a hold creating a void for state governments looking at rooftop solar policies that are tied to central subsidy scheme

The investors are increasingly losing patience with the flagship policy of the Indian solar market

The NSM has primarily been held up due to India’s fiscal deficit and the resultant focus on reducing government spending. Apart from that, the MNRE also wanted to wait for more clarity on the domestic content requirement (DCR) case that the US has registered against India at the WTO and the ongoing investigations on anti-dumping duties within India.

The union cabinet may keep the NSM further on hold due to the looming elections. Some market participants expect that the NSM may only be announced after the general elections, to be held by May 2014.

The capital subsidy scheme for smaller projects under phase two of the NSM is also stuck in the same process. This creates an awkward void for state governments looking at rooftop solar policies that are tied to the central subsidy scheme (Uttarakhand has already announced its policy (refer), Gujarat’s policy for 40 MW of rooftop systems to be released soon (refer), Andhra Pradesh is working on a similar policy). All these policies depend on the central subsidy scheme and then provide incentives over and above that. With no clarity on the timelines for phase two of the NSM, the effective implementation of these state policies comes into question.

The state solar policies of Tamil Nadu, Andhra Pradesh, Uttar Pradesh, Punjab, Rajasthan and Karnataka have helped keep the market moving for a greater part of this year. However, many Indian and international developers have not participated in these allocation due to the high PPA risk perception and have been waiting for the announcement of the bids under the NSM. These investors are increasingly losing patience with the flagship policy of the Indian solar market. It is of great importance that the government more actively communicates with the market and provides regular information on the status and timelines of the NSM.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE. Sign up to our mailing list to receive these updates every week.

You can view our archive of INDIA SOLAR WEEKLY MARKET UPDATES here.

What are your thoughts? Leave a comment below.

The Ministry of New and Renewable Energy (MNRE) has been planning to build mega size solar projects (>500 MW) in India (refer to the July 2013 edition of the India Solar Compass). These projects would be aimed at bringing down the cost of solar power to around INR 5/kWh (USD 0.08/kWh).

PGCIL, the key stakeholder of the ultra-large solar project, is expected to bring an equity contribution of 16%

The high cost of convntional power has already made solar power viable (on the consumption end) in some parts of India

If mega projects can bring down the cost of solar power to INR 5/kWh, it should be an option worth looking at

There has been no official confirmation as to how the government plans to develop these projects. However, according to recent reports, India’s first ultra-large solar power project, perhaps under the same objective and with a capacity of 1,000 MW is being planned in Rajasthan (refer). Based on this report, the Power Grid Corporation of India Limited (PGCIL) is the key stake holder in the project is expected to bring an equity contribution of 16%. Along with PGCIL, Hindustan Salt is another stakeholder as it will ensure land availability for this proposed project. Hindustan Salt has over 20,000 acres of land available in the salt plains of Rajasthan. Other stakeholders in this project include Solar Energy Corporation of India (SECI) and Satluj Jal Vidyut Nigam. Bharat Heavy Electricals Limited (BHEL) is likely to be the EPC partner as well as bring investments for this project. The work on this project is expected to begin as soon as a Special Purpose Vehicle (SPV) company is created after the government’s cabinet level approval. Apart from these five partners, the consortium would also be roping in other investors in the project as equity partners. Power produced by this project would be transmitted to the grid by Power Grid under its green corridor project. It is expected that the overall objective of these mega projects would be to build a capacity of 3,000 MW in six phases of 500 MW each.

According to BRIDGE TO INDIA, there are two fronts on which solar power will compete with conventional power in India in the future. The first is at the generation end and the second at the consumption end. At the consumption end, the tariffs are high (as high as INR 10/kWh in some cases) for conventional power due to all the losses, charges and margins in between. This has already made solar power viable in some parts of India, especially for commercial consumers who pay the highest tariffs among all consumer categories in India.

Under all existing policies, solar power is currently competing with conventional power at the generation end as most of these projects are ground mounted and located away from consumption centers. We understand that new coal based generation now costs between INR 3.5/kWh to INR 4.5/kWh and solar power still costs around INR 6/kWh for project sizes above 10 MW. If these mega projects can bring the cost of solar power down to INR 5/kWh, it should be an option worth looking at, on the generation side.

However, we think that it makes more sense for the government to facilitate the adoption of solar power at the consumption end, where it already makes financial sense. This can be done by taking steps to enable easier grid connectivity, by providing net-metering for sale of excess power and removing open access and other such charges for co-located projects.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE. Sign up to our mailing list to receive these updates every week.

You can view our archive of INDIA SOLAR WEEKLY MARKET UPDATES here.

What are your thoughts? Leave a comment below.

A recent article (refer) revealed that Indian C-si PV manufacturing is witnessing a five year low. The poor performance of domestic manufacturing in the last few years is well known. In response, the MNRE recently announced the establishment of the ‘National Institute for Solar Energy’ (NISE) to support the development of advanced solar technologies and bring benefits of cost reduction to Indian manufacturing (refer).

Indian manufacturing is not competitive because of the lack of scale

Solar industry in India is moving towards minimal government support

Manufacturers should focus their efforts on increasing the scale of individual manufacturing facilities

Most manufacturing facilities in India are either lying idle or are operating at a very low utilization rate. The key reason is that Indian manufacturing is uncompetitive in terms of costs with international, especially Chinese competitors. In a recent report that compares manufacturing costs in the US and China, it has been established that subsidy is not the driver for the cost competitiveness of Chinese manufacturers. Instead, the report claims that the key reason is the scale effect (and to a lesser extent the cost of labor) (refer). BRIDGE TO INDIA believes that Indian manufacturing is not competitive because it lacks precisely that – scale. The largest manufacturing facility in India is around 200 MW, while several Chinese companies have capacities above 2GW.

In this context, while something like the NISE may help domestic manufacturers with their R&D efforts, it will not address the main problem of Indian manufacturing, i.e., the lack of scale.

With 1.75GW already installed, India has gained a good momentum for solar, with ongoing demand created by the NSM and different state policies. Solar is also already a viable option in relation to diesel and grid power in many parts of the country. This means the industry is moving towards minimal government (financial) support. Generation side obligations such as a domestic content requirement will just increase the cost of solar to power consumers and tax payers. However, costs will continue to play an important role in determining the manufacturing in industry’s future. If there is anything that the manufacturers or the government should focus their efforts on, it is to increase the scale of individual manufacturing facilities in order to create a company that can compete globally without government support. Whether it is a good investment for India to create such national champions is a different matter.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE. Sign up to our mailing list to receive these updates every week.

You can view our archive of INDIA SOLAR WEEKLY MARKET UPDATES here.

What are your thoughts? Leave a comment below.

Uttarakhand Renewable Energy Development Agency (UREDA) has released a document explaining the scheme developed to promote grid-connected rooftop and small-size solar PV power plants in the state.

The scheme provides for ‘net metering’ for grid connected rooftop solar plants and states that the solar system owner will be compensated for the excess power supplied to the grid at a tariff of INR 9.20/kWh

The scheme has a limit of 5MW, which means approximately 50 rooftop systems will be able to apply for this scheme

In case the 30% subsidy proposed by the MNRE is availed, this net metering scheme could be a good business proposition

The document (refer) in its current form, banks on the 30% subsidy provided by the MNRE. The benchmark cost for solar power plants, without battery and up to 100kW is specified as INR 100/W and the benchmark cost for the power plants ranging from 50 kWp to 100 kWp has been set at INR 90/W. The scheme provides for ‘net metering’ for grid connected rooftop solar plants. This means that the excess power generated by the rooftop system can be fed back into the grid. In turn, when sunlight is insufficient, power can be withdrawn from the grid. The scheme states that rooftop solar system owners will pay to the utility only for the net power consumed (power used from the grid minus power supplied to the grid). However, in case of excess generation, the system owner will be compensated for the excess power supplied to the grid at a tariff of INR 9.20/kWh as determined by the Uttarakhand Regulatory Commission (refer here). This amount will be paid directly by the Uttarakhand Power Corporation Limited (UPCL) to the system owner and will not be adjusted in the billing. To determine the value of net power consumed, two meters can be installed to measure the export and import of power separately.

As per the scheme, plant sizes eligible for the benefits are limited to 300 W to 100kW for systems with battery and up to 500kW for systems without battery. The application form to avail the scheme is available on the UREDA website. Once the target of 5MW is attained the applications will be closed.

Uttarakhand is the 5th state in the country to introduce net metering. BRIDGE TO INDIA believes that in the wake of increasing grid prices, as markets approach parity, net metering is a step in the right direction. We have seen recent solar policies, such as those of Tamil Nadu and Kerala, introducing net metering as well. The CERC is also expected to release net metering guidelines within this year.

We believe that in case the 30% subsidy proposed by the MNRE is availed, Uttarakhand’s net metering scheme could be a good business proposition. Especially for industries in Uttarakhand that can already benefit from various other schemes provided by the state, such as, Special State Transport subsidy, VAT Reimbursement and single window clearance. However, the MNRE has not been able to clear its backlog of subsidy claims, which is the most important concern for those interested in reaping the benefits of this scheme. With only a limit of 5MW, approximately only 50 rooftop systems will be able to apply for this scheme. Given that the power tariff is significantly lower than the solar default tariff in Uttarakhand, there is an incentive for users to power into the grid rather than consume it. We asked the Uttarakhand authorities how this could be avoided, but could not get a clear view on it.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE. Sign up to our mailing list to receive these updates every week.

You can view our archive of INDIA SOLAR WEEKLY MARKET UPDATES here.

What are your thoughts? Leave a comment below.