India

RECAI: Country focus

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RECAI 39 - Country Focus: India

 

Ding ding, round two. As part of its goal to install 10GW of solar capacity by 2017, after almost two years, India has officially launched phase two of its flagship National Solar Mission.

In early October, the first round of phase two saw the Government invite bids for 750MW of capacity. The national program aims to reduce the cost of solar power to compete with other forms of grid-supplied electricity by 2017; the 2GW of current installed capacity has helped cut average costs by about 51% since the auctioning of licenses through the National Solar Mission began in 2010.

Plugging the gap. The new auction will see the Government offer a baseline tariff of INR5.45/kWh for projects with capacity 10MW-50MW. Developers will then submit bids for additional funds— up to 30% of the project cost — in what will effectively be a reverse auction process. Winners will be those needing the least funds. This additional support is part of the Government’s new “viability gap” funding scheme that will offer around INR18.75b (US$303m) in grants through the tender process. It will stagger disbursal of the grants, with 50% to be paid upon plant completion and the remaining in 10% increments to meet various generation targets.

Raising the bar. Mid-August finally saw Cabinet approval for the much anticipated reinstatement of the generation-based incentive for wind projects, the March 2012 expiry of which resulted in a 42% plunge in turbine installations. Wind farms built between 2012 and 2017 will receive INR500/MWh (US$8.20), with installations during the hiatus period qualifying retroactively. The updated scheme also increases the cap on the total support a project is eligible for by 61% to INR10m/MW (US$164,000).

Too little, too late? The wind sector has of course welcomed the reinstatement, but the changes may not be enough to enable India to add the 3GW per year needed to meet its target of 15GW wind capacity in the period 2012 to 2017. India wind farm developer, Simran Wind Project Pvt., had planned to add as much as 150MW annually, but halted this financial year’s expansion, saying government subsidies arrived too late. An estimated 1.5GW of capacity was not built as a result of last year’s expiry.

Infrastructure investment steps up. Insufficient transmission infrastructure will continue to be a barrier to large-scale deployment, and present a risk of further nationwide blackouts. Acknowledged by politicians and investors alike, things are changing. The Government plans to spend €6.0b (US$7.9b) on new transmission lines across seven states over the next five to six years, with Germany’s KfW development bank contributing €1.0b (US$1.3b) in loans and grants toward these so-called “green corridors”. The first US$400m is expected shortly.

Also in this article:

  • Local content restrictions, or just restricting?
  • Record breaking solar
  • Crystal ball gazing for wind
  • Offshore anticipation

Read full article (pdf, 2.8MB)

 

Local office contacts:

   Sanjay Chakrabarti