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Solar park scheme simplified and downscaled


23 April 2019 | BRIDGE TO INDIA

Solar park scheme simplified and downscaled

In March this year, MNRE introduced significant changes to the government’s solar park scheme. The amendment envisages SECI acting as the solar park developer and paring down the scope of services to bare bones land and external transmission infrastructure. Internal transmission and all other infrastructure facilities (site levelling and fencing, access to water and electricity, drainage etc) have been excluded for SECI developed parks. The amendment also restricts central government capital subsidy of INR 2 million/ MW to only SECI parks.

  • By restricting central government subsidy support to only SECI solar parks, MNRE has effectively signalled an end to other modes of solar park development;
  • Solar park share has fallen to about 15% of total solar project development, much lower than the 67% target;
  • Downscaling the scheme scope is a step in the right direction but unless implementation improves urgently, the scheme risks losing relevance;

The new model also envisages significant changes in the fee that the project developers must pay for using solar parks:

  1. 100% of land ownership or rental cost;
  2. 40% of external transmission infrastructure cost subject to a range of INR 1-3 million/ MW;
  3. INR 0.02/ kWh to the respective state government for facilitating land acquisition;
  4. INR 0.02/ kWh to SECI for creation of a payment security fund to mitigate DISCOM payment risk for use by all project developers in solar parks;

The scheme still allows other government authorities or private companies to develop solar parks. However, restriction of central government subsidy support to only SECI solar parks effectively signals an end to other modes of development.

The scheme, with a target capacity of 40,000 MW, was supposed to play a crucial role with two-thirds share of the 60,000 MW utility scale solar target. But solar park development has not taken off as envisaged due to implementation delays, poor infrastructure quality and exorbitant cost. So far, MNRE has approved 38 solar parks with a total capacity of only 23,104 MW across 16 states. As of 31 December 2018, actual project capacity commissioned and in pipeline was only 4,195 MW and 4,125 MW (17% and 20% share) respectively. The share falls to just 14% for new tenders issued and in various stages of bidding.

Figure: Share of government solar parks

Source: BRIDGE TO INDIA research

Notes: This data is as of 31 March 2019 except for commissioned capacity, which is as of 31 December 2018. Pipeline capacity comprises projects which are allocated but not yet commissioned. New tender issuance includes tenders for which auctions are yet to be completed. Data excludes all solar parks developed outside of MNRE solar park scheme.

The scheme, announced in 2016, is a good example of bold policy initiative and the Indian government’s commitment to the sector. It has been immensely helpful in scaling up growth and attracting international investors. But poor coordination between different government agencies, delays in land acquisition and completion of transmission works have reduced the scheme’s effectiveness. Solar park development – land identification and acquisition, approvals for land conversion, clearances, levelling of land, developing internal roads, transmission and other infrastructure – usually takes up to 3-4 years. Nonetheless project tenders have been rushed out in a bid to meet capacity addition targets.

We believe that paring of the scheme to just land and external transmission connectivity is a step in the right direction. On-the ground implementation needs to improve urgently, failing which, the scheme risks losing relevance. Despite growing challenges in land acquisition and transmission connectivity, most developers are beginning to go the self-development route as is evident from the success of many large recent ISTS auctions.


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