22 July 2014 | Jasmeet Khurana
Last week, the Ministry of New and Renewable Energy (MNRE) released a draft document outlining allocation process for another 1,500 MW of solar PV capacity under phase two of India’s National Solar Mission (NSM) (refer).
- Allocations will be made to bidders on the basis of the highest discount they offer on a benchmark tariff
- The new allocations will have no VGF however, will have a DCR
- Developers proposed to encourage a more even spread of plants (than it is currently) across India by introducing separate tariffs for different states
These allocations have been divided into two parts of 750 MW each. The first part is expected to be allocated by March 2015 and the remaining 750 MW six months later. Allocations will be made to bidders on the basis of the highest discount they offer on a benchmark tariff. For the current financial year, the benchmark tariff has been fixed at INR 6.99 (USD 0.12)/kWh by the Central Electricity Regulatory Commission (CERC). NTPC Vidyut Vyapar Nigam (NVVN) will be the off-taker of solar power and will bundle it with thermal power to sell to distribution companies across India at a competitive rate.
There will be no viability gap funding (VGF) mechanism as in batch one of phase two of the NSM. This mechanism was adopted last time only due to unavailability of thermal power for bundling.
The new allocations will again have a domestic content requirement (DCR). A capacity of 250 MW will be reserved for domestically manufactured cells and modules under each part of the allocation (500 MW in total).
On 18th July 2014, MNRE had called a meeting for the developers to get their inputs on the bidding framework. This is a welcome departure from the past, when the ministry first got a sanction on the allocation process from the cabinet and then held a pre-bid meeting with stakeholders. The problem with the old process was that by the time the stakeholders could give their feedback, the process was largely irreversible.
At the stakeholder meeting, the most important point raised was on anti-dumping duties and their potential impact on the new allocations. MNRE did not offer a conclusive response, but is known to have said that if duties are enforced, the domestic content requirement might be dropped.
Another point raised was related to the need for developers to obtain and submit a letter at the time of bidding from a substation confirming feasibility of evacuation. The developers asked for this to be reconsidered, arguing that it should only be required for successful bids to avoid inconvenience for both the developers and the grid operators.
Another point that was discussed was that solar power plants are concentrated in Rajasthan due to high irradiation and cheap land. This will increase the cost to the government for transmitting solar power to other states. The developers proposed to encourage a more even spread of plants across India by introducing separate tariffs for different states.
Jasmeet Khurana is a consultant at BRIDGE TO INDIA.