Bridge India

Why the Andhra Pradesh state solar policy could be a game changer

Mr. Akhilesh Magal heads the Project Development team as a Senior Consultant at BRIDGE TO INDIA.

The Andhra Pradesh State Solar Policy (APSSP) was announced on 26th September 2012 (download the entire policy here). The announcement of the policy comes at a crucial period in the Indian solar market.

  • Commencement of the APSSP is expected to create a boom of solar projects in India
  • The policy offers exemptions from charges like transmission and wheeling, Cross Subsidy Surcharges and Electricity Duty, as well as refunds on VAT, stamp duties and registration charges for purchase of land
  • Banking of solar power will also be allowed, but may not be carried over from one year to the next

The market has seen a lull since the announcement of projects under the Round 2 of Phase 1 of the National Solar Mission. This policy heralds the transition from a government subsidized market to a market mechanism based solely on the Renewable Energy Certificate (REC) mechanism (as BRIDGE TO INDIA has predicted). This is in contrast to other state solar policies like Gujarat, where the government provided a preferential tariff. The AP policy could serve as a precedent to other states to adopt the REC mechanism in full measure. From a state’s point of view, the success of the REC mechanism is extremely crucial since it takes away the subsidy burden from the government. However, the success of the REC mechanism also hinges on the enforcement of the Renewable Purchase Obligations (RPO). It remains to be seen if the Andhra Pradesh government will show the same enthusiasm in enforcing the RPOs.

This strong thrust towards REC based projects will open up the markets for three models:

  • Model 1: APPC+REC projects
  • Model 2: RESCO+REC projects
  • Model 3: Captive+REC projects

To know more about these models, download our REC report for free.

The state policy offers a bouquet of benefits for such models. They include:

  • No wheeling and transmission charges
  • No Cross Subsidy Surcharges (CSS)
  • Electricity Duty (ED) exemption
  • VAT refund on all components
  • Refund of stamp duty and registration charges for land purchased
  • RECs can be availed over and above all the benefits
  • Banking of solar power allowed. Banking charges are determined at 2% of energy banked
    • Banking not allowed within a single day
    • Consumption of banked units not allowed during peak demand season i.e. February to June and during daily peak hours between 6:30PM and 10:30P
    • Energy cannot be carried over to the next year i.e. banking allowed only between January to December

The major bottleneck in the widespread adoption of these models in other states remained the open access charges (wheeling, transmission, cross subsidy, etc.). Maharashtra for example has the following set of prohibitive charges:

Wheeling Charges (@11kV) 0.21 INR/kWh
Wheeling Loss (@11kV) 9%
Transmission charges 0.056 INR/kWh
Transmission Loss 4.85%
Cross Subsidy Charges 0.84 INR/kWh

[Source: MAHADISCOM. Commercial circular 155]

The announcement of the APSSP is a complete game changer and will definitely create a boom of solar projects (as BRIDGE TO INDIA had predicted months ago). It would also serve as a precedent to other states that are in the process of formulating their state solar policy.

Finally, foreign module manufactures have reasons to smile since the policy does not mandate a domestic content requirement. The sun seems to be shining all of a sudden – at least in Andhra Pradesh. It remains to be seen if there are any hidden clouds hovering in the horizon. Right now, it appears clear all the way.

Download our latest free INDIA SOLAR DECISION BRIEF on ‘The REC Mechanism: Viability of solar projects in India’.

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