Weekly Update: Penalties for CSP projects likely to be deferred by 10 months as no project is ready for timely commissioning

Weekly Update: Penalties for CSP projects likely to be deferred by 10 months as no project is ready for timely commissioning

The Ministry of New and Renewable Energy (MNRE) has decided to defer the penalties that are to be levied on delayed solar thermal (CSP) projects. 470 MW were allocated under phase one of the National Solar Mission (NSM) in December 2010 and were to be commissioned in May 2013. However, none of the projects are expected to meet this deadline.

  • No project is expected to reach completion before at least June 2013
  • Many common and genuine reasons caused the delays, the most important of which was incorrect solar resource assessments
  • A shift in the short-term CSP strategy can be considered towards its hybridization with other technologies. CSP should also be promoted to provide process heat solutions to factories with high energy and heat demand

A 50 MW project being set up by Godawari Power is the closest to completion and might be fully commissioned by June 2013 (refer). The next project to be commissioned is by Reliance (100 MW), which is delayed by at least six months. The MNRE has suggested that the commissioning deadlines for these projects could be extended by another 10 months.

Some of the common reasons cited by project developers for not meeting the deadline are: a delay in laying of a water pipeline by the Rajasthan government, delays in procurement of heat transfer fluid (HTF) and other components for the plant and delays in achieving financial closure. However, according to industry sources, the main, unstated cause of delay is the incorrect solar resource assessment for the projects. The actual direct normal irradiation (DNI) at most locations in Rajasthan is significantly lower than what was assumed at the time of planning. This realization led many developers to contemplate the relocation or even cancellation of projects. This is not news. In the October 2012 INDIA SOLAR COMPASS, BRIDGE TO INDIA had already mentioned that all projects are behind schedule (refer).

Under phase two of the NSM, it is expected that a capacity of 1,080 MW is to be allocated for CSP projects in 2014. The allocation process for these projects will draw from the learning of the 470 MW projects. However, the complexity of setting up CSP plants has been systematically underestimated so far (refer to this blog entry for a detailed analysis). It is unlikely that these issues will be resolved and lessons learnt by 2014, especially considering that the previous projects would have just come up (if at all).

It might not be the time to write off CSP just yet. CSP power plants retain a key benefit over PV in that they can produce better quality (more stable, predictable) power. This is crucial for a country with a fragile power grid infrastructure such as India.

India should probably consider a shift in its short-term CSP strategy towards hybridization of CSP with other technologies such as conventional thermal and biomass. In addition, CSP should also be promoted to provide process heat solutions to factories reeling under power shortages and rising power prices across the country. This would be relevant especially for industries with high energy and heat demand such as pulp and paper, steel, cement, or textiles. At this stage, more working examples of how CSP can reduce energy costs and improve energy security need to be provided.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE. Sign up to our mailing list to receive these updates every week.

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