Phase two of the NSM proposes direct incentives for states to increase solar PV installed capacity

Phase two of the NSM proposes direct incentives for states to increase solar PV installed capacity

Jasmeet Khurana, Market Intelligence Consultant at BRIDGE TO INDIA, works on project performance benchmarking, success factors for module sales, financing and bankability of projects in India.

The Ministry of New and Renewable Energy (MNRE) has released a draft policy document for phase two of the National Solar Mission (2013-2017) on December 4th 2012 (yesterday). As predicted by BRIDGE TO INDIA, majority of the allocations under the new phase will be based on Viability Gap Funding (VGF) (read our analysis of the impact of VGF on the Indian market in the October 2012 edition of the India Solar Compass).

  • Phase 2 of the NSM will stress mostly on allocation of utility scale projects
  • A capacity of 2.5 GW of PV and 1.1 GW of CSP has been proposed to be allocated over the next two years
  • Phase 2 of the NSM will also support states in increasing their solar power installed capacity through various incentives

The key learning that has emerged from phase one of the NSM is that serious developers are interested mostly in utility scale projects and phase two of the NSM is expected to stress mostly on such allocation. A capacity of 2.5 GW of solar PV and 1.1 GW of solar thermal has been proposed to be allocated in the next two years for Phase 2 of the NSM. This leaves around 5.5 GW to be allocated at the state level for the NSM to achieve its target of a cumulative capacity of 10 GW by 2017. So far, only the state of Gujarat has contributed significantly towards this target so far(968.5MW under the Gujarat Solar Policy).

The MNRE has acknowledged the need to support state level allocations in the new draft for the NSM. It has proposed to provide support for setting up of solar parks in states. The policy document defines a solar park as a concentrated zone for solar development that consists of a minimum of 250 MW generation capacities on a land area of over 600 hectares with a minimum value of annual average global horizontal irradiance (GHI) greater than 5kWh/m2/day. For this, the MNRE will provide incentives which include 50% of the cost of the detailed project report (DPR), 40% of the cost of transmission infrastructure, 50% of the cost of civil infrastructure, up to INR 100 m for technical assistance and 100% support for irradiation monitoring stations. To receive these incentives, the states will need to take concrete steps that help promote capacity addition of solar power. Most significant of these are the requirement for states to declare their state Renewable Purchase Obligations (RPOs) and tariffs for solar power. With such condition, support for state solar parks are sure to strengthen the case for complete adoption and implementation of RPOs in states, providing a boost to the market.

India Solar Policy Overview

 

Click here for a policy comparison of all solar policies in India.

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