Month: February 2014

The year 2013 was a comparatively good year for the global solar market. While 39 GW of solar was installed globally in 2013, India, which got off to a good start two years back, is now facing a tough time achieving its 1.1 GW target set for the current fiscal year (2013- 14). China alone installed 12 GW in 2013 with Japan and the US tied at around 4 GW each. In terms of future targets, China has set an ambitious target of 35 GW by 2015 (20 GW utility scale and 15 GW distributed). In comparison, the National Solar Mission (NSM) target of 20 GW by 2022, does not look as ambitious anymore.

Delays associated with state solar policies and roll-out of phase II of NSM has resultd in sluggish capacity additions in the current fiscal year

Moving forward, prospects of solar capacity additions do not look gloomy

To keep the momentum going states and center need to work cohesively towards a more sustainable capacity addition roadmap

India has installed only ca. 550 MW of grid connected solar in the current fiscal year (until January 2014). More importantly, around 200 MW of the 550 MW projects have been from non-policy projects. Thanks to Gujarat, in the previous two years India has comfortably achieved its targets.

The key reasons for the sluggish capacity addition in the current fiscal year have been the delays associated with the state solar policies and the delay in roll-out of the phase II of the National Solar Mission. Draft guidelines for Phase II of the NSM were released in December 2012 but the final call for bids came only in the last quarter of 2013 after facing a delay of almost a year. The PPA signing process has also been delayed in states including Andhra Pradesh, Tamil Nadu and Karnataka.  In addition, setting a bad precedent, the commissioning of projects has been delayed without any penalties in Rajasthan, Karnataka and Madhya Pradesh.

Moving forward, prospects for solar capacity addition in the country do not look as gloomy. The allocation process for NSM phase II batch I is currently underway and the PPAs are expected to be signed in April 2014. New projects are also being executed in Karnataka, Andhra Pradesh, Uttar Pradesh and Punjab and are expected to be commissioned in the next one year. As a result, the next fiscal year (2014- 15) is expected to be better. To keep the momentum going and ensuring demand through the year, the states and the center need to cohesively work towards a more sustainable capacity addition roadmap.

On 21st February 2014, Solar Energy Corporation of India (SECI) opened the financial bids for the allocation of solar PV projects under batch one of phase two of the National Solar Mission (NSM). A total of 122 project bids were received from 58 developers. The lower the VGF sought, the higher the chances of success. Four bids – those by PMP Auto Components, Zandu Realty, Golden Crystal and Green Energy Wind – were cancelled as they did not meet the techno-commercial criteria. The bid by Moser Baer was cancelled as the bank guarantee was not provided.

Most developers opted for Gujarat or Rajasthan during the bidding session for allocation of solar PV projects

Some notable bidders who probably will not get projects are First Solar and Renew Power

In total, the government will likely pay a VGF of INR 4.02 billion

As expected, most of the developers have opted for locations in Gujarat or Rajasthan. The highest and lowest Viability Gap Funding (VGF) under the domestic content requirement (DCR) category were INR 13.5m (USD 0.23m) by Swelect (10 MW) and INR 24.99m (USD 0.47m) by IL&FS Renewables (10 MW). The lowest and highest VGF sought for projects outside the DCR were INR 1.7m (USD 28,300) by Gujarat Power Corporation Limited (10 MW) and INR 24.9m (USD 4.7m) by Madhav Infra (10 MW).

Based on the final tally, under the non-DCR category, 15 project developers are expected to be invited to sign power purchase agreements (PPAs) for 24 projects, totaling 375 MW. The average project size per developer would be around 25 MW. The highest winning bid under the non-DCR category is INR 13.5 m (USD 0.23m). Prominent developers that are likely to be allocated projects are Acme, SunEdison, Azure, Hero Future Energy and Belectric.

Under the DCR category, 15 project developers are expected to be invited to sign PPAs for 21 projects, also totaling 375 MW. The average project size per developer would also be around 25 MW. The highest winning bid under the non-DCR category is INR 24.5m (USD 0.4m) by Tata Power Solar. Other prominent developers that are likely to be allocated projects are SunEdison, SolaireDirect, Azure Power, Waaree, IL&FS and Hero Future Energies.

Some notable bidders who probably will not get projects, include US-based module supplier First Solar and Goldman-Sachs backed Renew Power. Leading Indian developer Welspun missed the mark by only INR 65,000 (USD 1,083).

In total, the government will likely have to pay a VGF of INR 4.02 billion (US $64.78 million) to cover all the allocations under the open category and INR 7.49 billion (US $120 million) to cover all the allocations under the DCR category. The extra INR 3.47 billion (US $55.9 million) is being provided by the Indian government to help support sale of Indian modules.

While most developers opted to keep their projects in a single location, SunEdison bid for most of their projects in different locations: Madhya Pradesh, Rajasthan, Gujarat and Tamil Nadu. The actual figures for the allocations and VGF will only be determined after the PPAs have been signed. We expect that to happen in the first week of April.

The Kerala State Electricity Regulatory Commission (KSERC) has announced its draft net metering policy titled, ‘Draft Kerala State Electricity Regulatory Commission (Grid Interactive Distributed Solar Energy Systems) Regulations, 2014’. Stakeholders are invited to provide comments on or before 28th of February 2014.

The net metering policy is by far the best consumer oriented net-metering policy

The highlights of the commercial, technical and procedural details are given below

The policy prescribes a penetration limit of 50% which is significantly higher than the 15% limit in Delhi and 30% in Tamil Nadu

Kerala’s net metering policy is by far the best consumer oriented net-metering policy. It is open to all consumers across the state unlike Tamil Nadu’s net metering policy that is limited to residential consumers, or Andhra Pradesh’s policy that is limited only to consumers that have three phase connections. The policy, similar to Uttarakhand’s net metering policy, allows third party ownership models. This is expected to attract a lot of interest from developers that look at third party ownership models. The highlights of the policy are:

Commercial details

The policy does not set an upper cap on amount of energy that can be banked. The net metering policies of Delhi and Tamil Nadu – both suggest a maximum cap of 90% of the consumer’s energy requirement in a calendar year. The policy also prescribes that the DISCOM shall pay the consumer the Average Pooled Purchase Cost (APPC) of INR 1.99/kWh for the excess energy injected onto the grid after the banking settlement – a first in India. This is perfect for consumers that want to capitalize on excess rooftop space. No longer shall such consumers be limited by the maximum energy that can be injected on to the grid.

This policy has a first of its kind ‘sharing concept’ wherein a consumer that has several premises across the state, can install a solar plant on one location and wheel the excess power to the other locations. Although, this entails a wheeling charge of 5%, this is a perfect opportunity for IT companies, textile mills and other retail outlets that may have multiple locations in the state. This way, the consumer can optimize on the ideal rooftop space and minimize installation and maintenance cost.

From the DISCOM’s point of view, all energy generated from solar plants registered under this policy shall be considered to meet the DISCOMs Renewable Purchase Obligation (RPO).

Technical details

The policy limits system sizes to 3 MW

The policy suggests the following grid connectivity voltages across different solar system sizes

The connection voltages are as follows:

System size of 5 KW or under to be connected at 240 V (single phase)

System size of 100 KW or under to be connected at 415 V (three phase)

System size of 3 MW or under to be connected at 11 KV

From a technical perspective, this policy prescribes a penetration limit of 50% of every distribution transformer capacity. For instance, if a certain locality has a distribution transformer capacity of 1 MVA, then 500 kW of solar capacity shall be approved on a first-come-first-serve’ basis. This limit is significantly higher than Delhi’s limit of 15% and Tamil Nadu’s limit of 30%.

Procedural details

The policy mandates the DISCOM to grant connectivity within seven days provided there is enough capacity on the distribution transformer. If not, then the DISCOM is required to upgrade the transformer with two months. This seems highly unlikely. Questions such as who bears the cost of the upgradation are not addressed in the policy. It is very likely that the DISCOM will oppose any upgradation unless adequately compensated for.

Barely two weeks ago,  after being challenged by the Tamil Nadu Spinning Mills Association and Tamil Nadu Electricity Consumers’ Association, the Appellate Tribunal for Electricity termed the state’s Solar Purchase Obligations (SPOs) as illegal. Tamil Nadu had an original and rather innovative plan to drive the demand for solar power through procurement obligations on the large consumers in the state. The decision to term SPOs as illegal had the potential to stop the implementation of the state’s solar policy in its tracks.

Tamil Nadu to tweak the implementation of its policy by shifting the onus of demand creation from SPOs to RPOs

The earlier SPO mechanism would have helped make solar more market driven

In the long run, it would be difficult to keep imposing RPO requirements on distribution companies that are already under financial stress

However, Tamil Nadu has now proposed to tweak the implementation of its policy by shifting the onus of demand creation from SPOs to Renewable Purchase Obligations (RPOs). The state has drafted guidelines to increase the solar RPO from 0.5% to 2% for the next two years. This RPO is usually applicable on all obligated entities, i.e., the distribution companies, open access consumers and captive power producers. However, the current draft only makes the RPO mandatory for the distribution companies for the time being. As a stay was granted by the courts on a batch of writ petitions filed by the open access and captive consumers, this means that for now, the demand will only come from the distribution companies. If the draft (refer) is accepted, Tamil Nadu will have the highest solar specific RPO (as a percentage) in the country. The new requirements will create enough demand (approx. 400 MW of solar PV) to cover most of the projects that have been waiting to sign PPAs under the earlier allocation process that has been dragging along for more than a year now.

Now that the RPO will be applicable directly on the distribution companies, the process would work just as it would have under any other state policy and the complication of the distribution company only acting an intermediary would be removed. This new development raises hope for fast tracking the signing of PPAs and making them more bankable through a legally sound off-take. However, this will increase the financial burden on the distribution companies who will presumably have to pass on the impact of the obligations to the same power customers who opposed a direct obligation on themselves.

The earlier SPO mechanism was an innovative tool that could have helped make solar more market driven and would have helped bring in several innovative business models. It would have lifted the financial burden from the distribution companies and would have helped create a market place for solar at the consumer level, where the cost differential between solar and the grid tariff was not very large to begin with.

In the long run, it will be very difficult to keep imposing high RPO requirements on distribution companies that are already in a financial stress, not just in Tamil Nadu but across India. The current turn of events might be a gain for the short term, but perhaps not for the longer term. Nevertheless, the effort of the Tamil Nadu state government to continue to try and make solar work in the state must be lauded.