U.P. publishes draft solar policy: 1GW of opportunities for experienced investors in solar

U.P. publishes draft solar policy: 1GW of opportunities for experienced investors in solar

Ms. Ratnottama Sengupta analyses ‘policies’ as a consultant in the Market Intelligence team at BRIDGE TO INDIA which is responsible for the INDIA SOLAR NAVIGATOR – India’s only dedicated online business intelligence tool that is designed to enable leading solar companies to take strategic decisions to succeed given the ever-changing landscape of the Indian market. 

The Indian state of Uttar Pradesh (U.P.) has published (August 2012) a draft solar policy titled ‘The Uttar Pradesh Solar Power Policy 2012′. The policy is being introduced to fulfil U.P.’s Solar Renewable Purchase Obligation (RPO) of 3% (approx. 2.8GW) by 2020. The state had a shortage of 15% in its power requirement as of June 2012. The policy also intends to improve the overall energy situation in U.P.

  • The “Incentive scheme for solar power generation” shall attract investors as it provides robust payment security and ease in obtaining clearances and permissions from the government
  • The U.P. solar policy removes wheeling charges for all grid connected solar power projects
  • The eligibility criteria discourages participation from first time investors in solar and thus keeps inexperienced developers at bay

The U.P. solar policy is targeting 1GW of installed capacity in the state by March 2017. No PV or CSP breakup has been provided in the draft. Their target is distributed over five phases as follows:

Figure1: Target capacity for U.P. solar Policy

Phase

Period

Total target capacity

(MW)

I

2012-2013

-

II

2013-2014

150

III

2014-2015

300

IV

2015-2016

300

V

2016-2017

250

Total

1000

The Jawaharlal Nehru National Solar Mission (NSM) and other state solar policies’ targets follow a progressively increasing pattern in order to take advantage of the falling prices of solar power. For example in the NSM, only 1GW was allocated in phase one while a target of 10GW of allocation has been made for the last phase (3). The target allocation of phases under the U.P. solar policy is not driven by the same logic as the NSM. According to a Uttar Pradesh New and Renewable Energy Development Agency (UPNEDA) official the first priority of the U.P. policy is to achieve its target of 1GW by 2017 successfully. The phases have been drawn out with this in mind, rather than basing the phased targets on the falling price of solar power.  The policy initially aims to start out with allocating a smaller amount of 150 MW. Post this, the remaining target of 850MW has been divided over three phases. The second and the third phase have the maximum targets of 300MW each, while the last phase has a target of 250MW in order to cover the remaining part of the targeted allocation.

The nodal agency, the UPNEDA, will be the single window of clearance for all solar power projects under the policy. They will bear the sole responsibility of facilitating all clearances, approvals, permissions and consents required from the state government and its agencies. The UPNEDA shall have a dedicated fund of INR1billion (EUR15m). This shall be maintained through a cess on power generated from any non-renewable source, as well as government and other grants. The robust fund and the single window of clearance minimizing government red tapes shall ensure that government orders and permissions pertaining to the policy and the payments to the project developers are made on time. This should act as an incentive for solar project developers to bid for projects under the U.P. solar power policy.

Most state solar policies and the NSM, apart from Karnataka, apply wheeling charges for the transmission of solar power. However, the U.P. solar policy draft so far exempts all solar power projects from any transmission, wheeling or open access charges. This is expected to encourage investors to bid for grid connected solar power projects under the policy.

The eligibility criterion of the U.P. solar policy states that, only developers with prior experience of successfully commissioning solar power projects shall be eligible to bid for projects. The developers need to have previously made a capital investments, ranging from INR100m (EUR1.5m) to INR500m (EUR7.7m) depending on the size of the project bid for, on grid connected solar power projects. This considerably narrows down the eligible entities in India to only those developers who have commissioned projects under the NSM, the Gujarat solar Policy, the Karnataka solar policy, and under the allocations made by the states of Odisha, Madhya Pradesh, Andhra Pradesh and Maharashtra. International developers especially those from America, Germany and China who fulfil this criterion shall be eligible to bid for a project under the U.P. solar policy. This criterion ensures the participation of only serious and experienced project developers, warranting that the allocated projects shall be commissioned on time. It however does not offer any opportunities to new, smaller developers. This step has been taken to keep the inexperienced players out of the bidding process. However, it also reduces competition and creates an unnecessary hurdle for serious new players.

The draft of the policy can be read here: ‘The Uttar Pradesh Solar Power Policy 2012′

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