Wednesday, January 7, 2015

Indian Cabinet Clears Over 20 GW Ultra Mega Solar Projects



Taking inspiration from Gujarat’s Charanka Solar Park, during the 2014–15 financial budget, India’s Finance Minister had amongst other things announced a fund of Rs5 billion ($80 million) in order to promote Ultra Mega Solar Power Projects (UMSPP) across states with good solar potential. Accordingly, the Ministry of New and Renewable Energy (MNRE) had prepared a draft scheme for these UMSPP.

Prime Minister Modi and his cabinet has now officially cleared the way for setting up of 25 UMSPP across India. Each of these projects will have a capacity of 500 MW or more, with the total adding up to a mammoth 20,000 MW. The UMSPP are to scheduled to be set up by 2019 and will receive a Central Government financial support of Rs40.50 billion ($649 million).

The UMSPP or a “Solar Park” refers to a concentrated zone of development of solar power generation projects. Each of them are planned to run into several hundreds of MWs, generally with a cumulative capacity of 500 MW and above.

Documents from MNRE claim that large-size projects have a potential to bring down the cost of solar power. However this has been an open discussion with some saying that the modular nature of PV would stagnate the “economy of scale benefit” beyond a range of tens of MW.

But cost is only one part of the picture. The concept it touted to solve several other problems. Think of UMSPP as a shopping mall where the mall owners provide for the necessary infrastructure (at an additional cost) and the shops only need to sell without worrying about parking, security, housekeeping etc. Similarly, UMSPP proposes to iron out the common problems for a project developer.

UMSPP will provide specialized services to attract investment from private developers. This would include levelled land, roads, water, security, and communication, among other things — each of which would have entailed additional costs for the developers had they been on their own.

Providing these services in a central “one-stop-shop” format will make it easier to implement projects in a significantly shorter period of time, as compared to obtaining these services individually. It should also make it easier to secure financing. Holistic planning of the common infrastructure will also reduce damages to the landscape of the area.

These benefits will of course come at a price, but they will greatly help in reducing the risk and gestation period of the projects, as developers will not have to waste resources for getting statutory and other clearances. The project developers will however have to scout for the PPA all by themselves.

New Delhi has asked the states to identify and acquire inexpensive land which would be suitable for such large-scale installations. The guidelines suggest that the states prefer wastelands available with them. This will be followed by creation of infrastructure such as transmission system, water, road connectivity, and other facilities on the identified tracts.

As per information available from MNRE, large chunks of land have been identified across 12 locations in Andhra Pradesh (2500 MW), Telangana (1000 MW), Madhya Pradesh (1500 MW), Karnataka (750 MW), Rajasthan (4000–5000 MW), Odisha (3000 MW) and Punjab (3000 MW). Others in the race include the states of Meghalaya, J&K (Leh and Kargil) and Mizoram. Some private developers have also shown interests to individually take up very large projects. While the Himalayan states may face issues in identifying large contiguous land pieces, the official press release says that they “will also be considered.”

If the plans get implemented as designed, the solar park will help pour investments in these states, which will not only allow them to meet their solar renewable purchase obligationmandates but also provide local employment opportunities.

The State Governments will play an additional role in the development and operation of the solar parks. MNRE has asked each state to nominate an agency which will look after the development and operation of the UMSPP. This process is believed to have been completed in several states.

The project developers would be given a free hand to supply power to whomsoever they want and at whatever price they can negotiate. This could be a real game changer as it will both attract competition from project developers and also naturally favor states with better market potential. As part of the deal, the state governments will have to agree to buy at least 20% of the power produced in the solar parks through their Discom.

MNRE has provided a directive to the states that the grant from the central government be used for developing the evacuation arrangements in the UMSPP. States also have freedom to use loans from multilateral/bilateral agencies. In case more funds are needed, funding would possibly be made available from the National Clean Energy Fund (NCEF), Green Corridor Programme, or any other sources.

The scheme is in line with India raising its solar ambitions to 100 GW by 2022. At the moment, the total installed solar capacity in India roughly stands at 3000 MW.