Bridge India

Weekly Update: Solar Power Developers’ Association meets Dr. Farooq Abdullah

On 29th January 2014, associates from the newly organized Solar Power Developers’ Association (SPDA) met Dr. Farooq Abdullah, Minister of New and Renewable Energy (MNRE), and Tarun Kapoor, Joint Secretary MNRE, for the first time to discuss and examine critical issues from the perspective of the project development and investment community in India. For this meeting, SPDA was represented by associates from Welspun, Azure Power, Green Infra and BRIDGE TO INDIA. These were the main topics discussed:

  • Incoherence in state level allocations and targets vis-à-vis the national policy
  • Unrealistically low capital cost estimates for solar PV by CERC for the FY 2014-15
  • Need for green corridors
  • Impact of possible anti-dumping duties on the on-going NSM bids

 

Incoherence in state level allocations and targets vis-à-vis the national policy

The developers pointed out that the state level allocations are not in sync with the national mission and not all states have taken initiatives to help meet their share of targets. As per the NSM targets, state level projects should account for a capacity addition of 5.4 GW. Over and above that, 3.6 GW capacity is to be allocated by Center through phase two of the NSM until 2017. Associates from the SPDA pointed out that several states are not serious about promoting solar power and for those that have policies, often, the allocation mechanism is not well thought-out, leading to delays and cancellations. Dr. Farooq Abdullah acknowledged the issue and proposed to involve the Prime Minister’s Office to initiate formalized co-ordination with the states. Also, the Joint Secretary pointed out that a template for a sample bidding document for procurement of solar power has been submitted to the Ministry of Power. This could help to standardize, professionalize and streamline to the allocation processes in the states.

 

Unrealistically low capital cost projections for solar PV by CERC for the FY2014-15

The Central Electricity Regulatory Commission (CERC) has recently released a tariff order (refer)which estimates the capital cost for solar PV in India at INR 61.2 million/MW (USD 1 million/MW or EUR 724,000/MW) for the financial year 2014-15. The CERC estimate is significant as it likely forms the baseline for any upcoming solar auction processes. Developers alleged that it has two inconsistencies: (i) the calculations consider module prices from imported equipment that faces a risk of imposition of anti-dumping duties, and (ii) the depreciation of the INR in recent months (and the risk of continuing volatility) is not adequately reflected. The minister acknowledged that this needs to be looked into and the impact of currency depreciation should be accounted for, if not already done.

 

Need for green corridors

Developers cited the example of wind projects in Tamil Nadu, where evacuation infrastructure constraints often force wind projects to stop supply of power. Developers fear that solar projects under the NSM might face similar issues in Rajasthan, causing financial losses and eroding the viability of projects. Investment into green energy corridors that allow for transmission of power over long distances is perhaps the best way to avoid such a scenario.

 

Impact of possible anti-dumping duties on the on-going NSM bids

The impact of possible anti-dumping duties on the ongoing allocation process was also taken up. Any such duty poses a significant risk to the bids currently submitted. In a clear message, the MNRE informed that based on their discussions with the Ministry of Commerce (the ministry responsible for the investigations), it is highly unlikely that these allocations will be impacted by the ongoing anti-dumping investigations.

SPDA promises to be the only functional investor and developer focused platform for the discussion issues critical to the development of the solar sector in India. SPDA plans to meet at least once in every two months and provide discussion forums for stakeholders from the government, financial institutions and regulatory bodies.

 

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