Weekly Update: Punjab announces a bidding process for 300 MW of solar projects
The Indian state of Punjab has released a request for proposal (RfP) document for allocation of 300 MW of solar PV in the first phase of its state solar policy (refer to the RfP document). Punjab had earlier set a target of 1 GW of new solar capacity by 2022 in its ‘New and Renewable Sources of Energy Policy – 2012′ (refer to the policy document), which was released in December 2012.
- Punjab is the first state to allow the use of agricultural land for setting up projects
- 50 MW is to be allotted for companies with no experience in setting up solar projects, while 250 MW is to be allotted for experienced companies
- The policy is expected to attract higher tariffs than other states due to a higher cost of land and lower irradiation than other states
Project developers are given various incentives such as exemption from Value Added Tax (VAT) on equipment, exemption from entry tax for equipment supplies, exemption from payment of fee and stamp duty for registration / lease deed charges for the project’s land requirement and exemption from change of land use (CLU) charges. There is no domestic content requirement under the policy. Punjab is the first state to allow the use of agricultural land for setting up the projects. This is especially relevant as almost the entire state is made of up cultivable land as opposed to Rajasthan and Gujarat where large tracts of desert wasteland can be used for setting up solar projects.
The project allocation has been divided into two categories:
- A total of 50 MW is to be allotted for newly incorporated or existing companies that have no experience in setting up and operating solar projects. The minimum capacity of the project has been set at 1 MW and the maximum capacity at 4 MW. The allotment of project capacities in this category will be in the multiples of 1 MW.
- A total of 250 MW is to be allotted to experienced companies that have installed and commissioned at least one project with a capacity of 5MW or higher anywhere in the world which is in operation for at least one year before the last date of submission of e-bid anywhere in the world. The minimum capacity of the project can be 5 MW and the maximum capacity allowed for a single developer is 30 MW. The allotment of project capacities in this category will be in the multiples of 5 MW.
The benchmark tariffs for the bidding process have been fixed at INR 8.75/kWh for companies not availing accelerated depreciation and INR 7.87/kWh for companies availing accelerated depreciation. The RfP allows a period of six months for achieving a financial closure and 13 months for commissioning from the date of signing the PPA. The developers have to submit bank guarantees worth INR 4m/MW. Developers face a fine of 30% of this guarantee in case the project is delayed up to one month and the entire guaranty will be en-cashed for a delay of two months.
Punjab policy is expected to attract higher tariffs than other states like Rajasthan, Tamil Nadu and Odisha. This is primarily due to the high cost of land, which can be up to at least 5-10 times more than in Rajasthan, and a lower irradiation, which can be up to 20% lower than in Rajasthan.
The pre-bid meeting is scheduled for 3rd April 2013 and the last date for bid submission is 25th April 2013.
Overall, the policy has no salient features that make it either particularly attractive or risky, except for the fact that Punjab has a loss making power distribution company and payment security will be an issue. Given the short timelines as well as the fact that the policy requires developers for Category – II to have more than one year of experience in running a plant, established developers are clearly favoured over new entrants (who can still go for Category – I plants).
Jasmeet Khurana works on project performance benchmarking, success factors for module sales, financing and bankability of projects in India.
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