Bridge India

Madhya Pradesh launches a unique 750 MW solar power project

Madhya Pradesh Power Management Company Limited (MPPM), Delhi Metro Rail Corporation (DMRC) and International Finance Corporation (IFC) have announced a tender for a 3 x 250 MW solar project in Rewa, Madhya Pradesh. MPPM, a holding company for all power distribution companies in the state, will buy most of the power from the proposed project but interestingly, DMRC will procure 363 million units of power in a year, equivalent to 210 MW, from this project through open access route.

Key highlights:

  • Largest long-term procurement of open access solar power by a bulk power consumer in India heralding the case for economic viability of solar power
  • Attractive opportunity for large international developers because of its large size and ready solar park infrastructure availability
  • Rajasthan and Madhya Pradesh to benefit from a surge in open access power procurement because of high irradiation and relatively easy availability of land

The Rewa 750 MW project has been in development for almost 2 years now. The original plan was that it will be developed by Solar Energy Corporation of India (SECI) and funded with concessional World Bank financing alongside participation of private developers as minority shareholders (refer). However, the project structure has been completely revamped due to onerous conditions attached with World Bank funding and lack of interest from private developers for minority shareholding.

A joint venture between Solar Energy Corporation of India (SECI) and Madhya Pradesh Urja Vikas Nigam Limited (MPUVN), the state implementing authority, will provide solar park infrastructure for the project. The solar park is likely to secure World Bank financing for development of internal substation and transmission lines. The tender provides 18 months for commissioning of the projects from the date of signing of the Power Purchase Agreements (PPAs). Assuming that the PPAs are signed by December 2016, these projects can be expected to be commissioned by the middle of 2018.

Until now, most of the utility scale solar capacity addition in India has been driven by Renewable Purchase Obligations (RPOs). Delhi Metro’s purchase of solar power from this project will perhaps be the largest such long-term procurement of open access power in the country, driven purely by cheaper cost of landed solar power after factoring in transmission costs and associated charges. Rapidly improving economic viability of solar power means that procurement by bulk power consumers through the open access route could account for a sizeable part of the Indian solar market.

Our understanding is that Delhi Metro will assume all cost risk associated with open access use of power and provide a demand forecast for the day ahead. Each project will need to then prepare a day ahead forecast of availability for every 15-minute time block taking into account the requirement of DMRC and preparing a matching schedule in coordination with MPPM.  Overall, BRIDGE TO INDIA believes that once transmission and open access related issues are addressed, the Rewa project will be very attractive particularly for large international developers because of its large size and ready solar park infrastructure availability.

With the central government waiving off inter-state transmission charges for solar power, states such as Madhya Pradesh and Rajasthan, that have high irradiation and plentiful waste land are likely to attract a large part of these new investments.