MNRE released the draft guidelines for 3,000 MW reflecting a shift away from solar park

The revised guidelines have been issued for implementation of tranche-I of batch II under phase II of NSM for 3,000 MW (see here). The development of the solar park in Andhra Pradesh is delayed due to land acquisition challenges. The delay has hampered the plan of Ministry of New and Renewable Energy (MNRE) to complete project allocation by March 2015. With the increased targets and strict deadlines, the bureaucratic machinery underneath is finding it difficult to keep up and issues with the implementation of solar parks seem far from being resolved. The salient changes in the guidelines are:

  • Projects can be set up outside of the solar park, too
  • The minimum project size has been reduced from 50 MW to 10 MW to encourage more competition
  • Some limited mitigation has been provided for development risk of solar park. But relief is provided only up to three months  and there is no provision of compensation, liquidated damages or deemed generation for developers due to such delays. BRIDGE TO INDIA is of the opinion that the provision of extra time should not be limited and must be extended in line with delays in implementation of solar parks
  • The maximum capacity for a single bidder has been capped at 300 MW in a single lot

For the first time, the bidding process will be conducted electronically. Solar power will be bundled with unallocated coal power from NTPC on a 2:1 basis (two units of solar with one unit of coal). This bundling mechanism reflects the extent to which the cost of solar power has fallen. In phase I, the bundling ratio for solar power and coal power was 1:4. The power will be purchased by NTPC Vidyut Vyapar Nigam (NVVN), which sells it on to state distribution companies.

The initial power purchase agreement (PPA) would be for 25 years. However, the developers will be allowed to operate the plant for longer period. The extension after the period of 25 years will be based on mutual agreement between developer and NVVN. The guidelines consider a plant life of 40 years. The developers will be free to reconfigure and repower their plants from time to time during the PPA duration.

Earlier, the MNRE was planning to allocate the capacity in three parts of 1,000 MW each for three states – Andhra Pradesh, Telangana and Madhya Pradesh. The guidelines have been reworked such that MNRE can decide the lot size and state depending on the readiness of solar parks and willingness of distribution companies to buy power. The domestic content requirement (DCR) is yet to be defined for each lot. The minimum project size has been reduced from 50 MW to 10 MW. Since these guidelines do not distinguish between developers claiming AD and developers not claiming AD, this puts pure renewable IPPs at a considerable disadvantage.

The removal of complicated two stage bidding process as suggested in the draft guidelines (January 5th 2014) is a welcome step.

 BRIDGE TO INDIA’s key observations and suggestions on the guidelines are as follows:

        i.            If the government is unwilling to underwrite solar park development risk, the project developer are likely to shun this alternative altogether. The project developers must be provided with suitable compensation in case of delay in solar park development

       ii.            Pricing differential needs to be provided between AD and non-AD investors to provide a level playing field

      iii.            Developers should be provided a mock session to the electronic bidding tool in advance of the actual bidding so that they are familiar with the process

 

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