Fog lifting for project developers in the Indian solar market
For a significant part of 2012, project developers in India have had very limited visibility on their project plans and pipelines. This scenario is expected to change with the announcement of new policies.
- The Andhra Pradesh solar policy will provide various exemptions under the open access mechanism and will allow developers to sell under the REC mechanism
- The Tamil Nadu solar policy aims to create demand for solar power by enforcing obligations on select power consumers
- Implementation of Viability Gap Funding under phase two of the NSM will emphasize the shift from a government-backed to consumer driven off-take
The India solar market is anticipating many alterations with the recently released state solar policies in Andhra Pradesh and Tamil Nadu, the expected announcement of the guidelines for phase two of the National Solar Mission (NSM) in December 2012 and phase three allocations under the Gujarat solar policy in January 2013. Each of the newly announced policies is taking an innovative route to promote investments in solar power and set a precedent for other states to follow.
Andhra Pradesh solar policy aims to remove regulatory hurdles for captive use and third-party sale of power, provides exemptions from various levies under open access mechanism and allows developers to sell Renewable Energy Certificates (RECs). Project developers have lauded the policy as it provides a conducive environment for investments and at the same time does not put any financial burden on the state exchequer.
A part of the Tamil Nadu solar policy promises higher tariff if the power is sold to the state-owned distribution company, but given the poor financial health of the distribution company, it is unlikely that many project developers will be interested in that. To ensure investments into the state, a large part of the policy aims to create demand for solar power by enforcing an obligation to buy solar power on select power consumers.
The market can be seen to be moving away from the state backed Feed in Tariff (FiT) and towards a consumer driven off-take. Implementation of Viability Gap Funding (VGF) for NSM projects will also be a step in that direction (refer to the October 2012 edition of India Solar Compass to read more). The falling costs of solar are responsible for such a shift in the market and a key learning for other states at this stage is that a transparent and conducive regulatory framework can go a long way in promoting investments into solar power. This can now be done without putting any significant financial burden on the state exchequer.
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