Bridge India

India to allocate 10 GW under central government schemes this year?

Today, there was a meeting called by Ministry of New and Renewable Energy (MNRE) to discuss their revised plans for 10,000 MW of solar PV projects expected to be tendered in the next few months under National Solar Mission (NSM). These projects will be split between tariff based bidding (3,000 MW) and Viability Gap Funding (VGF) based bidding (7,000 MW).

  • MNRE claimed that tenders for further 2,500 MW of projects under the same scheme will be announced in the next two months
  • For the VGF based bidding projects, MNRE has so far received confirmation from states for 2,670 MW of projects
  • BRIDGE TO INDIA’s opinion is that these allocations might stretch beyond the timelines stated today due to multiple operational reasons

This meeting came close on the heels of a tender already issued by National Thermal Power Corporation (NTPC) for 500 MW in Andhra Pradesh (refer). These projects will be awarded on the basis of tariff based bidding and solar power will be sold by NTPC to power distribution companies on a bundled basis along with thermal power. MNRE officials claimed that tenders for further 2,500 MW of projects under the same scheme will be announced in the next two months.

In addition, central government approval has been obtained for the entire 7,000 MW of VGF projects. As per original plans, these projects were envisaged under NSM (refer) by 2021. MNRE expects to complete project allocations by the end of this financial year.

The entire 10,000 MW of these projects will be tendered on a state-by-state basis, which is a move away from previous rounds of NSM but consistent with previously announced plans. However, several issues around the implementation of the solar parks policy are yet to be resolved (refer).

For the VGF based bidding projects, MNRE has so far received confirmation from states for 2,670 MW of projects: Karnataka (500 MW), Uttar Pradesh (500 MW), Maharashtra (500 MW), Tamil Nadu (500 MW), Rajasthan (250 MW), Gujarat (250 MW), Kerala (100 MW), Uttarakhand (35 MW), Delhi (20 MW), Meghalaya (10 MW) and Lakshadweep (5 MW). This will suffice for first round of 2,000 MW.

To increase participation, MNRE is considering removal of net worth clause for bidding of projects. This is a debatable decision as non-serious developers may bid aggressively. However, there is a deterrent in form of developers having to furnish performance bank guarantee of INR 3 million (USD 50,000)/MW. Additionally, MNRE is considering relaxing the equity lock in period of one year before change in ownership.

If India is able to allocate the entire 10 GW in this financial year, it will be path-breaking from a global perspective. However, BRIDGE TO INDIA is of the opinion that these allocations might stretch beyond the timelines stated today due to multiple operational reasons, including land availability and off-taker willingness to procure power. Actually, it might not even be desirable to allocate so much capacity in such a short duration of time as lack of sufficient bidding interest may lower the competitiveness of the bids. Additionally, there might be issues around ramping up of execution capacity in such a short duration of time. A sudden surge in demand might also lead to higher input costs for developers and a higher VGF/tariff.

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