Indian states promote Solar Power -ENPOWER SOLAR 2009 - Feature

Power in Asia 2009-03-19
Showing keenness to develop solar energy, some Indian states are beginning to offer large-scale generation projects to investors. Interest in solar power reflects both concerns about increasing greenhouse gas emissions in an electricity sector dominated by coal-fired generation and the potential financial benefits of the certified emission reductions (CERs) available to clean development mechanism projects registered with the United Nations Framework Convention on Climate Change

Interest in solar energy was kickstarted by the incentive scheme announced by the central government's Ministry of New and Renewable Energy in January 2008. The offer of 50 megawatts (MW) of grid-connected solar capacity generated tremendous interest, with investors offering to develop forty times more capacity than sought, at 2,000 MW.

But time-consuming administrative approvals and the high cost of solar power have allowed only a few projects to get off the ground so far. India at present has only about five MW of off-grid and grid-connected photovoltaic capacity and only one megawatt-scale solar plant is operating in the country.

The central government scheme aims to promote 1 MW and larger grid-connected solar plants. It offers an incentive of up to Rupee 12/kWh ($0.23/kWh) for solar photovoltaic generation projects and up to Rupee 10/kWh ($0.19/kWh) for solar thermal projects to help bridge the gap between conventional and solar power plant costs.

But the scheme restricts the incentive to only 5 MW of capacity for any one developer and a maximum of 10 MW for any one state. Some states want to go for bigger projects. Some states have very high solar insolation and vast tracts of waste land ideal for solar plants. For instance 'just 1% utilization of about 45,000 square kilometers of the waste land available in the Kuch region of Gujarat can help generate about 10,000 MW of solar power,' said Gujarat Energy Development Agency Director V.H. Buch.

Buch was speaking at a solar energy seminar held in New Delhi on March 6 and organized by Falcon Media. GEDA is the nodal government agency responsible for the development of renewable energy in Gujarat state.

An incentive scheme announced by the state about three months ago to promote solar energy has resulted in offers for the development of about 4,000 MW of solar energy from 53 investors. 'There is tremendous interest among the investors, but we believe all of these may not be serious proposals. We are examining their seriousness, financial and technical capability to develop the projects before allowing them to move ahead,' Buch told Platts.

One would-be developer is the US-based Astonfield Renewable Resources Ltd, which wants to develop a 200-MW project, the biggest in India so far, at a cost of $800 million. 'Astonfield believes that India will most likely offer the largest solar program in the world within a matter of months. We have been working actively with the state and federal institutions on providing them extensive analysis from a developer's perspective on creating policy constructs that would lead to a successful program. It is quite amazing to see the geometric growth of the solar industry in India,' remarked Astonfield Renewable co-chairman Ameet Shah.

The Gujarat state promotion scheme aims to secure 500 MW of solar energy - 10 times more than the maximum benefit of the central government scheme which, moreover, is available for only 10 years. The Gujarat scheme would provide a longer incentive, covering 12 years of the 25-year power purchase agreements (PPA) to be offered by the state-owned distribution licensees. The licensees will buy electricity from photovoltaic and solar thermal plants commissioned before December 2010 at Rupee 13/kWh ($0.24/kWh) and Rupee e10/kWh ($0.019/kWh), respectively.

For projects commissioned up to March 2014, the developers of photovoltaic and solar thermal plants will get Rupee 12/kWh ($0.34/kWh) and Rupee 9/kWh ($0.17/kWh), respectively. A uniform rate of Rupee 3/kWh ($0.05/kWh) would apply for both categories of solar plants for the remaining 13 years of the PPA, and there will also be no tax on solar electricity generation.

Unlike the central government scheme, which stipulates a minimum capacity of 1 MW, the Gujarat scheme prescribes a minimum project size of 5 MW. If the benefits of clean development mechanism registration are available to an investor, half of the benefit will be passed on to the distribution licensee who buys the electricity.

Rajasthan state claims to have the third biggest solar insolation area in the world and in early March sanctioned 12 solar projects with 71 MW of capacity. But unlike Gujarat, the state has not come out with an incentive scheme.

Instead, Rajasthan has opted for a cost plus return on equity scheme, although the return remains to be specified. Selected investors will determine their costs and submit proposals for examination by the state, which will then determine what incentive it can provide them.

Later the state will invite offers from investors for the development of another 200 MW of photovoltaic and solar thermal energy.

'The scheme seeks to insulate the state from any criticism of being too generous to investors and at the same time becoming irrational to investors,' remarked Rajasthan Renewable Energy Corporation Chairman and Managing Director Rajeev Swarup.

But he added that the state cannot do much alone. Some hand-holding is required from the central government and there need to be clear-cut national plans for solar energy development backed by financial provisions, he said.

'Astonfield has development plans in place to aggressively build on a rollout of up to 500 MW of solar photovoltaic capacity in Rajasthan. We look forward to making our first five-MW project a stepping stone to a successful large-scale execution of solar in the state,' said Sourabh Sen, another co-chairman of Astonfield Renewable.

Astonfield Renewable also figures among the developers allotted solar projects in Karnataka, where the state administration has selected three investors to develop 70 MW of solar energy. The New Delhi-based Moser Baer is the biggest among them, accounting for 50 MW.

Like Rajasthan, Karnataka has yet to determine what incentives it will provide to developers. But discussions have already begun with the would-be investors, according to an official of Karnataka Renewable Energy Development Ltd.

The state is currently preparing a policy for the development of renewable energy. The first revised draft provides for 200 MW of solar capacity by 2012 from nothing at present, and for 1,000 MW by 2018. 'With necessary incentive from Ministry of New and Renewable Energy, Government of India and tariff fixation by the Karnataka Electricity Regulatory Commission, the solar power projects are likely to be viable,' according to the draft.

West Bengal state is emerging as the frontrunner in commissioning grid-connected solar projects under the central government incentive scheme. A 2-MW project is due to be commissioned by the end of March by the state-owned West Bengal Green Energy Development Corporation at a power complex owned by Dishergrah Power Supply Co. Ltd, which supplies electricity to the Asansol-Raniganj industrial area of West Bengal. All the electricity generated by the project will be purchased by Dishergrah Power.

Meanwhile Astonfield expects to commission its first Indian solar power project, a 5-MW facility, at Bankura in West Bengal state in late 2009. Later, the project will be expanded to 10 MW.

West Bengal will have 22 MW of installed solar capacity in the next two years, according to West Bengal Green Energy Managing Director SP Gon Chaudhuri, who said the local Videocon industrial group is developing a 10-MW project.

Some of the participants at the conference highlighted the need for policy and regulatory support from the government. Feed-in-tariffs by the regulator and direction from the government to its funding enterprises, such as the Indian Renewable Energy Development Agency and Power Finance Corporation, to provide loans at concessional interest rates could help boost solar energy generation, said Choudhuri.

A policy and regulatory framework for solar power promotion is currently being worked out, according to the Prime Minister's Special Envoy on Climate Change, Shyam Saran, who said a draft detailing the plan will be made public in the next few weeks. The solar mission has the highest priority among the eight missions identified by National Action Plan on Climate Change brought out in June 2008, he said. Solar energy potential is very large in India as solar insolation is much higher in India than many other densely populated countries, Saran said.

The solar mission has targeted 1,000 MW of solar power by 2017. But some conference participants felt that much more could be achieved in a comparatively short time given the sharp fall in solar energy material prices.

The Central Electricity Authority (CEA) will shortly bring out a draft report about the role of solar and other forms of renewable energy during the 2012 to 2017 five-year plan period, according to CEA Chairman Rakesh Nath. He suggested that the regulatory authorities could specify a solar component in the renewable energy purchase obligations that they impose on electricity buying utilities to promote solar energy.

Such obligations have been prescribed in 15 Indian states so far. National electricity legislation requires the regulatory authorities to determine a certain percentage of total annual electricity purchases by distribution licensees from the renewable energy producers.

(Source: Power in Asia / Issue 52 / March 19, 2009 - Platts Energy)