National Solar Mission allocations showcase positive trends for solar in India
On 20th January 2014, Solar Energy Corporation of India (SECI) opened bids for the allocation under batch one of phase two of the National Solar Mission (NSM). A total of 68 bids were received from 58 developers, covering 122 projects and having a cumulative capacity of 2,170 MW. Of this, 36 projects with a capacity of 700 MW opted to bid under the Domestic Content Requirement (DCR) part of the bidding process and the remaining 86 projects with a capacity of 1,470 MW opted for the open bids.
- Domestic content requirement (DCR) part of the bids has been oversubscribed
- State power companies have also shown interest to invest in solar assets
- Pure-play solar IPPs get a level playing field
The following trends emerged from the bid process:
Domestic content requirement (DCR) part of the bids has been oversubscribed
A total of 36 projects with a capacity of 700 MW bid for the DCR part of the allocations, making it oversubscribed two times over. International developer, SolaireDirect, bid for a 30 MW capacity under the DCR part, based on its tie up with Websol Energy, from where it bought modules for its project under phase one. Module manufacturers such as TATA Power Solar, Waaree and Moser Baer also opted for the DCR part of the bidding. Most other developers opted for the DCR part along with non-DCR projects to increase their chances of getting an allocation. There has been widespread speculation that Indian suppliers might not be able to supply quality products within the required time frame owing largely to financial constraints on availability of working capital. Some of the developers we had spoken to pointed out that in the financial bids, they have prioritized their bids in such a way that the DCR allocations get second priority and their base line against most risks are covered. This means that the Viability Gap Funding (VGF) requirement for the DCR part will be significantly higher than the non-DCR bids. Many developers such as Green Infra, Renew Power and Essel Infra decided to stay away. However, many other prominent developers such as SolaireDirect, Azure Power, ACME, TATA Power Solar have taken the chance. This is a positive development for the domestic manufacturing industry.
State power companies have also shown interest to invest in solar assets
Green Energy Development Corporation of Odisha, Gujarat Power Corporation Limited, Karnataka Power Corporation Limited and West Bengal Power Development Corporation Limited, all participated in the bidding process and bid for a capacity of 10 MW each. Even though they might seem less ambitious than their private sector counterparts, the message, that state owned utilities have thrown in their hats to become a participant in the solar story, is a powerful one. This signifies a more conducive approach towards solar by state utilities, going forward.
Pure-play solar IPPs get a level playing field
The advantage of scale and separate tariffs for companies claiming accelerated depreciation (AD) and not claiming AD has given pure-play solar independent power producers (IPPs) a level playing field (refer to our blog on how pure-play solar IPPs have been at a disadvantage in most state policies). Among the bids received, we have seen that almost 60% of the capacity has been bid for by serious companies that aim to build an IPP company for solar assets. This is significantly higher than most other allocations that have taken place before this.
Jasmeet Khurana works on project performance benchmarking, success factors for module sales, financing and bankability of projects in India.