Weekly Update: India likely to introduce mega sized solar projects soon
The Ministry of New and Renewable Energy (MNRE) has been planning to build mega size solar projects (>500 MW) in India (refer to the July 2013 edition of the India Solar Compass). These projects would be aimed at bringing down the cost of solar power to around INR 5/kWh (USD 0.08/kWh).
- PGCIL, the key stakeholder of the ultra-large solar project, is expected to bring an equity contribution of 16%
- The high cost of convntional power has already made solar power viable (on the consumption end) in some parts of India
- If mega projects can bring down the cost of solar power to INR 5/kWh, it should be an option worth looking at
There has been no official confirmation as to how the government plans to develop these projects. However, according to recent reports, India’s first ultra-large solar power project, perhaps under the same objective and with a capacity of 1,000 MW is being planned in Rajasthan (refer). Based on this report, the Power Grid Corporation of India Limited (PGCIL) is the key stake holder in the project is expected to bring an equity contribution of 16%. Along with PGCIL, Hindustan Salt is another stakeholder as it will ensure land availability for this proposed project. Hindustan Salt has over 20,000 acres of land available in the salt plains of Rajasthan. Other stakeholders in this project include Solar Energy Corporation of India (SECI) and Satluj Jal Vidyut Nigam. Bharat Heavy Electricals Limited (BHEL) is likely to be the EPC partner as well as bring investments for this project. The work on this project is expected to begin as soon as a Special Purpose Vehicle (SPV) company is created after the government’s cabinet level approval. Apart from these five partners, the consortium would also be roping in other investors in the project as equity partners. Power produced by this project would be transmitted to the grid by Power Grid under its green corridor project. It is expected that the overall objective of these mega projects would be to build a capacity of 3,000 MW in six phases of 500 MW each.
According to BRIDGE TO INDIA, there are two fronts on which solar power will compete with conventional power in India in the future. The first is at the generation end and the second at the consumption end. At the consumption end, the tariffs are high (as high as INR 10/kWh in some cases) for conventional power due to all the losses, charges and margins in between. This has already made solar power viable in some parts of India, especially for commercial consumers who pay the highest tariffs among all consumer categories in India.
Under all existing policies, solar power is currently competing with conventional power at the generation end as most of these projects are ground mounted and located away from consumption centers. We understand that new coal based generation now costs between INR 3.5/kWh to INR 4.5/kWh and solar power still costs around INR 6/kWh for project sizes above 10 MW. If these mega projects can bring the cost of solar power down to INR 5/kWh, it should be an option worth looking at, on the generation side.
However, we think that it makes more sense for the government to facilitate the adoption of solar power at the consumption end, where it already makes financial sense. This can be done by taking steps to enable easier grid connectivity, by providing net-metering for sale of excess power and removing open access and other such charges for co-located projects.
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