Despite challenges such as the new indirect tax regime that may raise costs, the fast growth of big solar power plants in India looks unstoppable
The significance of solar parks in India’s renewable energy strategy was evident when Finance Minister Arun Jaitley announced that the central government would take up the second phase of their development for an additional capacity of 20,000 MW. This was reiterated after Power Minister Piyush Goyal said the Ministry of New and Renewable Energy (MNRE) would begin the auction for another 20 GW of solar parks.
The recently concluded 750 MW Rewa solar park auction in Madhya Pradesh (MP), where bids reached a new record low of tariff over 25 years at INR 3.30 per kWh (USD 0.05), more than a rupee lower than the previous tariff of Rs 4.34 in Rajasthan in January 2016 which had been big news at that time. “The winning bid for first year tariff hit a new low at Rs 2.97 per kWh and will escalate by Rs 0.05 over 15 years, bringing the levelised tariff to Rs 3.30 per kWh over 25 years,” said a report by clean energy consulting firm Mercom.
The Rewa solar park is a joint venture of Solar Energy Corporation of India (SECI) and Madhya Pradesh Urja Vikas Nigam (MPUVNL). International Finance Corporation (IFC), a member of the World Bank Group, is extending its expertise to structure and implement the transaction to help attract private investments of about INR 50.2 billion (USD 749 million) for the park’s development. The construction of a transmission sub-station within the park has led to heightened interest among developers and will take care of all the power evacuation. Inefficient evacuation infrastructure was one of the problems faced by developers in other solar parks, the Mercom Quarterly India Market Report had cited.
Reacting to this development, P. Vinay Kumar, chief operating officer at Greenko Energies, which is co-developing a 500 MW project along with SunEdison in the 1 GW Kurnool ultra mega solar park in Andhra Pradesh, told indiaclimatedialogue.net, “This means that the solar park model is working. We are able to scale up capacities faster. Also, the IPPs (independent power producers) are unburdened of the responsibility of land acquisition and constructing evacuation infrastructure, the activities that governments are better at doing.”
Another unique thing about the Rewa bid is the bundling of the off taker. Power is being sold to the Delhi Metro and the Madhya Pradesh government. It means that governments can collaborate with public sector units with good rating, mitigate the risk of projects and add capacity. In fact, this would be a role model for financially weak distribution companies (Discoms), Kumar added.
On whether this will impact the ambitious target set by the government, he believes that with lower than grid parity solar rates, Discoms may actually want to substitute their energy mix with more solar. This will no longer be driven by renewable purchase obligations (RPOs) and the set target.
“We have reached a tipping point in energy pricing and the scale is tilting in favour of solar over conventional fuel based power generation. Since it is commercial attractiveness that will drive demand in future, the clean energy capacity targets may no longer be prime drivers of demand. If the price trend continues, solar energy may take centre stage in the power mix,” Kumar said.
But there are challenges
However, the rollout of the second 20 GW phase of solar parks would be hampered by the Goods and Services Tax (GST), set to be effective from July 1. GST is India’s most ambitious tax reform to build a common national market. See: New tax regime may push up solar tariffs
According to analysts Neeraj Kuldeep and Anjali Viswamohanan of New Delhi-based think tank Council on Energy, Environment and Water (CEEW), “Until clear guidelines are provided by the government regarding the applicable GST slabs for the sector, the impact of GST on project costs will remain a concern for project developers and investors.”
This, they say, would impact the pace of setting up of the second phase of solar parks for an additional 20,000 MW as well. “Solar park projects are being allocated based on reverse auction, which has led to aggressive bidding by developers. Any direct increase in project cost due to GST will hinder the viability of realising such low tariffs and will set back project deployment.”
Earlier, Mercom’s Quarterly India Market Report detailed challenges being confronted whilst building solar parks. “Project development is being hampered by delays relating to infrastructure and site preparation issues. Developers are citing issues such as lack of access to roads, clean green lands and clear demarcation of land areas in these parks,” it said.
Dilip Nigam, Adviser, National Solar Mission, MNRE, says that the recent downward trends in solar tariff may be attributed to factors like economies of scale, assured availability of land and power evacuation systems under the Solar Park scheme.
However, Vinay Kumar clarifies, “The Andhra Pradesh Solar Power Corporation is providing us with land and power evacuation facilities for our solar farm coming up in the park. While there are no issues with land, there is a minor anticipated delay in evacuation, but it is not so alarming that we need to be overly concerned.”
Initial hurdles only
“Since this is an initial phase and is being undertaken for the first time in India, initial hurdles are bound to be there,” an MNRE official told indiaclimatedialogue.net, speaking on condition of anonymity. On challenges relating to infrastructure, the official hoped it will be sorted out this year, but added, “It is going to take time to saturate solar panels.”
Talking about infrastructure in the solar parks, the official explained that the land has to be developed and a common facility created. However, it cannot be uniform in all parks owing to geographical and topographical factors. “These are the ground realities. Even though there are challenges, what is encouraging is that the government has a full-fledged scheme,” he said.
“Also, in just one and a half years, 34 parks have been approved. The aim was to achieve 100,000 MW by 2022. Owing to the policy regime, it has become feasible and there is now a five-fold increase. So, we can achieve 40,000 MW from solar parks and another 40,000 from solar rooftops,” the official said.
Concurring, Vinay Kumar said, “Solar parks such as the one in Kurnool are a good initiative from the MNRE and the government of Andhra Pradesh to drastically reduce the project completion timelines by mitigating the risk that a developer faces in land acquisition and in construction of the evacuation system.”
India now has globally competitive solar tariffs. “In Andhra Pradesh, we have had no issues so far and the state government has done a great job with the solar farms in Kurnool and Anantapur. We have been able to get land and evacuation facility. Had this not been there, it would have been a mammoth task to organise land and begin work on the solar park,” said Kumar.
There are positives aplenty
The Power Grid Corporation of India has confirmed that the government will spend INR 127 billion on building dedicated transmission lines to serve 20 GW of photovoltaic capacity from 34 solar parks across 21 Indian states. German development bank KfW will provide a soft loan of around USD 1.1 billion towards the project. However, the industry has a different take on the issue.
When queried as to whether upcoming solar capacities in Andhra Pradesh would mean a better power situation for consumers, Kumar said better power supply is a result of a mix of factors of which generation is only one part. Last mile grid robustness, available transfer capability (ATC) losses, regulatory environment and tariffs are important in this respect. “Andhra Pradesh distribution companies have nationally low ATC losses and a high degree of automation. Also, Andhra Pradesh has been declared a 24X7 power availability state. Under these circumstances, better and smarter grid management would play a decisive role.”
In order to evacuate renewable energy from generation point to load centre, a Green Energy Corridor project is currently under implementation. The Ministry of Power along with the Power Grid Corporation is constructing these corridors for evacuation of renewable energy capacities coming up in these solar farms and in renewable energy rich states such as Rajasthan, Gujarat, Andhra Pradesh, Tamil Nadu, Karnataka and Maharashtra. Most of the work in the first phase of the corridor project is complete.
When the concept of solar parks was promulgated, the government had proposed establishing 25 of them, having a capacity of 20 GW. But now, 34 solar parks have been sanctioned, with a capacity of 20 GW in 21 states, Dilip Nigam told indiaclimatedialogue.net. The aim was to create infrastructure in terms of land development, road construction, water availability, all the internal, external sub-station and transmission facilities.
According to the MNRE official, the solar parks concept is moving in a big way. “The Centre and MNRE provide Central Financial Assistance (CFA) of INR 25 lakh per solar park for preparation of a detailed project report. Besides this, CFA of up to Rs 20 lakh per MW or 30% of project cost, including grid connectivity cost is also provided.” He was confident that solar parks would serve the purpose of the country, change the solar ecosystem and help in moving towards the ambitious target that has been planned.
More solar parks are in the offing. Sajjad Gani Lone, Minister for Science & Technology in Jammu and Kashmir, said the state government had signed an agreement with the Centre for the development of two mega solar parks of 5 GW capacity in Leh district and 2.5 GW capacity in Kargil district.