India to introduce a cap on solar tariff and reduces tender size for manufacturing unit

In a major development, the MNRE has directed the Solar Energy Corporation of India(SECI) to fix the upper permissible solar tariff at INR 2.50/kWh and INR 2.68/kWh for developers using domestic cells & modules (without safeguard duties) and imported products (with safeguard duties), respectively. SECI has reduced its solar manufacturing tender size from 5 GW to 3 GW and curtailed minimum bid capacity from 1 GW to 600 MW. However, the size of the PPA remains the same at 10 GW. This comes to post an announcement by the Power  Minister – that all the future renewable energy projects bid would have to cover at least a 50% of a project’s components with domestic manufacturing. Regarding the PPA, it must be executed within a maximum time frame of 90 days from the date of award and a minimum of 40% of commissioned within 21 months from the date of PPA signing. The remaining 60% of the capacity will have to be commissioned within 36 months from the date of the bid award letter. SECI has also revised the time allowed to set up manufacturing capacity to two years from the earlier three-year time period.

  • For silicon-based facilities, the module manufacturing unit has to be set up in India whereas polysilicon can be imported.
  • For non-silicon-based technologies, the primary functional raw material can be imported.

To support this development SECI has announced a 5 MW solar manufacturing tender linked to a 10 GW PPA, also in June. It was the first solar tender where developers were required to locally produce equipment in order to win projects.

Reinstatement of AD for Wind Power

The sun has risen again for Wind Energy stakeholders in the country.

Earlier this month, after the Union Budget was presented, there was a mention of reinstatement of AD (Accelerated Depreciation) for Wind Energy generators in the Hindi version of the budget, whereas it found no mention in the English version.

This had created an air of confusion among the wind power stakeholders, as they didn’t know whether it would really be reinstated or not. Since 2012, when AD and GBI (Generation Based Incentive) were withdrawn for wind power, they have kept lobbying for its reintroduction, but in vain. GBI was later restored at Rs. 0.5/Unit.

The primary reason for withdrawal of AD was that some generators were misusing it by installing mills using old machines and did not care about the production after first year.

As per IANS, the new government has announced that it was reintroducing AD (possibly 80%), much to the delight of Wind Power stakeholders. This will help utilize the wind manufacturing capacity of 10000 MW, and attract heavy investment in the sector.

The Clean Energy Cess on coal has gone up from Rs. 50/ton to Rs. 100/ton and concessional customs duty on import of equipment is to be continued.  This will infuse more funds for research and site assessment under NCEF.

Wind tariffs in recent years have become very attractive and are close to solar tariffs in many states. In Rajasthan, Maharashtra and MP, tariff in the range of Rs. 5, whereas solar tariffs are generally in the range of Rs. 6, leaving a very small gap.

At the same time, wind energy policies do not generally cap the amount of MWs a state would buy, which is often the case in solar energy. As a result, many states restrict their solar energy purchase to few hundred MW, but technically have no upper limit for wind energy purchase.

The boost to wind energy will come at the cost of the solar sector which is suffering on various counts – no preferential tariff regime, steep fall in tariffs, poor state of RECs markets, and uncertainty on the anti-dumping duty issue. With the flight of AD capital, the sector is likely to suffer further.

This can be seen as a good signal for exponential growth of Wind Power and a fallback for Solar Power.

The relevant media article can be accessed here.

Contributed by Vibhav Nuwal

MNRE issues Draft Guidelines for JNNSM Phase-2 Batch-2 Scheme

MNRE (Ministry of New and Renewable Energy), has officially issued Draft Guidelines for selection of 1500 MW Grid Solar PV power projects under National Solar Mission, Phase-II Batch-II Scheme.

Here are some key points of the proposed scheme:

  • It is to be carried out by NVVN (NTPC Vidyut Vyapar Nigam Limited) through a transparent, tariff based reverse bidding process.
  • NVVN shall enter into suitable Power Purchase Agreement (PPA) with Solar Power Developers and Power Sale Agreement (PSA) with Distribution Companies/ Utilities/ other Bulk Consumers.
  • There will be two bid tranche: 750 MW in 2014-15, and remaining 750 MW in 2015-16.
  • Projects with minimum capacity of 10 MW and maximum capacity of 50 MW, and connection level with transmission utilities at 33kV and above, shall be permitted to bid.
  • A company can only bid for a maximum capacity of 100 MW per tranche.
  • DCR to be 500 MW out of the total 1500 MW. It was 50 % (375 MW) in Phase-II Batch-I scheme.

Interested stakeholders are required to send their comments by 23rd July, 2014.

It is interesting to note that out of the target capacity of 9000 MW in Phase 2 (2013-2017), 750 MW bids have been successfully completed, and as per this scheme 1500 MW bids will be completed by 2015-16. That leaves just 2 years i.e. 2016-17 and 2017-18 for the remaining 6750 MW of bid capacity.

Target achievement will be difficult but not impossible, considering that by 2017 India aims to achieve Grid Parity with respect to Solar Power, by extending the incentives (concessional customs duty) given to the Solar manufacturing sector and inflow of funds from NCEF.

The draft document can be accessed here.

Our previous Blog on JNNSM Phase-II Batch-I can be accessed here.

Union Budget FY 14-15 Highlights (Power Sector View Point)

Honorable Finance Minister Mr. Arun Jaitely presented the Union Budget on 10th July, for the financial year FY 14-15. The Finance Minister during his speech of the Union Budget has made some important announcements for the energy industry.

In the Power and Renewable sector perspective, these were the prime focus areas:

  • The Finance Minister extended the 10 year tax holiday for power companies who start production and distribution by March 31, 2017.
  • Rs. 500 crore has been allocated for Setting-up of Ultra Mega Solar Projects in Tamil Nadu, Rajasthan, Gujarat and J&K to promote the Renewable energy.
  • Allocation of Rs. 400 Crore for launching a scheme for solar power driven agricultural pump sets and water pumping stations for energising one lakh pumps.
  • Allocation of Rs. 100 crore for the development of 1 MW Solar Parks on the banks of canals.
  • The Ministry also allocated Rs.100 crore for cleaner thermal energy scheme.
  • Extension of the concessional basic customs duty, of 5 percent, to machinery and equipments required for setting up solar projects.
  • A sum of Rs. 500 cores has been allocated for strengthening of transmission and distribution infrastructure in rural areas under the ‘Deendayal Upadhyaya Gram Jyoti Yojna’.
  • Clean Energy Cess on coal has been increased form Rs.50/ton to Rs.100/ton, to raise more revenue for National Clean Energy Fund, that provides financial support to entrepreneurial ventures and research in the field of clean energy technologies.
  • Apart from these, the government has also said that they are committed to provide 24*7 Electricity to all the households in the country.

As can be inferred from the above, no time frames have been mentioned for some of the above mentioned schemes, but it is expected that concrete guidelines will be laid down with subsequent orders and notifications on the same.

Contributed By: Dheeraj Babariya

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