Current cumulative solar installations in India stand at 1,761 MW with about 557 MW installed so far in 2013. With most of the CSP projects that were due to be commissioned in May 2013 delayed, the forecast for installations in 2013 looks flat compared to 2012. Only about 60 percent of the targeted installation goal has been achieved so far despite the commissioning deadline of Phase 1 of JNNSM ending in May. Considering India is an emerging solar market where the growth rate is expected to be much higher than other parts of the world, installations in 2013 will likely end up disappointing the markets. The current solar policy environment looks more like an experiment than a serious policy that will help solve the current power crisis in India.

Solar can truly be a game changer in India as a disruptive energy source that has the potential to solve energy poverty, address India’s massive power shortage problem and dramatically impact India’s slow growth rate and inflation. However, the current “please all parties” policy regime is forgetting the key stakeholder, the consumer. Policy uncertainty is rife, with rules changing every other month.

The current PV/CSP split and domestic content requirements are examples of this. Our first analysis of the Indian solar market still holds true: We said  that dictating the ratio of technology (PV:CSP), rather than allowing the market to select the most efficient and cost-effective technology for India, was not a good idea due to CSP costs, water shortage in India, and a 30 percent domestic content requirement. Still, policy makers bent to the CSP lobby and sliced the solar pie to please everyone, and the result should not surprise anyone. The 470 MW CSP due to be commissioned in May 2013 are struggling to complete with only 50 MW to be commissioned and the rest have been granted a 10-month extension. We strongly urge JNNSM to discontinue the PV/CSP split and let the markets pick the most cost-effective technology.

Despite these early growing pains, there are few signs yet to indicate lessons have been learned. Domestic content requirement policies (like those that contributed to the delays that CSP developers are experiencing) are being pursued even more aggressively. There are talks about closing the thin film “loophole” in the domestic content requirement, again picking and choosing technologies to appease the local PV manufacturing lobby. There is a disconnect between the policies pursued and the original goal of procuring solar at the most cost-effective prices. In fact, many policy changes have been contradictory. The reverse bidding process was chosen so solar could be procured at the lowest possible bids but now all efforts are being made to ensure that developers can’t access the lowest priced equipment. The government is desperate for foreign investments in power projects, but at the same time, they scare away investors by dictating how projects are to be built and where their equipment should be made. All this has made the investment community very confused.

The latest WTO ruling against the Canadian province of Ontario sets a precedent and is a big blow for countries pursuing domestic content requirements. It would be wise for India to settle its trade dispute and remove the uncertainty clouded around this case.

If the policy environment was conducive for investments, a mechanism like VGF to make solar projects commercially viable would be unnecessary.

To make it even more interesting, the 750 MW Batch 1 of Phase II policy will be split into “Part A“ and “Part B”. Part A does not have a domestic content requirement and Part B does. The MW split is currently under review.

With so much complexity, developers have to ask the question: is JNNSM worth all this trouble? Or is it better to pursue individual state policies? Looking at the cumulative installation data and in spite of all the noise around JNNSM and since announcing the policy in 2010, only about half – 591 MW has come from JNNSM projects compared to approximately 1,170 MW installed through various state policies.

Update on Various India State Policies

JNNSM – Phase I

Batch 1 – PPAs for Batch 1 projects were signed on January 10, 2011 for 610 MW (140 MW-PV, 470 MW-CSP). PV projects were due to be installed by January 9, 2012. 130 MW have been commissioned, with several delayed for months, incurring fines. 10 MW has been canceled because two project developers failed to execute.

Only one 50 MW CSP project is expected to be completed out of the 470 MW that is due to be commissioned by May 2013. The remaining projects have been granted a 10-month extension giving the developers a total of 38 months to complete from their PPA signing dates, which would move these projects to a 2014 commissioning date.

Batch 2 – 300 MW of the 340 MW Batch 2 projects have been commissioned so far with the remaining 40 MW expected to be commissioned in the next 3 months.

JNNSM – Phase II

Phase II policy announcements by MNRE are expected to be made sometime in the May-June timeframe. The target for installations under Phase II is about 3,000 MW, which would include different mechanisms like VGF and bundling of power. The draft proposal will be submitted to the cabinet for approval which is expected to take another month.

As part of the JNNSM Phase-II Batch-I, Solar Energy Corporation of India (SECI) will be announcing a Request for Selection (RfS) to set up grid-connected solar PV projects for a total aggregate capacity of 750 MW. The bidding process will be divided into two parts, Part A and Part B. Bidders can apply for projects under Part A or Part B or both Part A and Part B. Projects under Part B will have a domestic content requirement, the only difference between the two.

Tamil Nadu

Tamil Nadu proposed a goal of 3,000 MW of solar power by 2015 through utility-scale and rooftop projects. It announced a 1,000 MW tender in December 2012 for solar projects. However, qualifying bids only amounted to 494 MW. Out of that, only 266 MW of projects were issued a letter of intent; the rest are pending. Tamil Nadu used an L1 bidding process (the lowest bid has to be met by all bidders). This resulted in a very low (Rs.5.47/kWh – ~$0.10/kWh) bid which was deemed unviable and prompted Tangedco (the state DISCOM – or government utility) to fix Rs.6.48/kWh (~$0.12/kWh) as the acceptable bid. Essentially, Tamil Nadu is establishing an FiT even though it is calling the process “bidding.”

Tamil Nadu faces severe power shortage problems, but the state is also notorious for not paying the power producers on time.

Gujarat

Gujarat currently has 857 MW of solar PV plants commissioned and no policies coming up in the foreseeable future for solar development.

Odisha

Odisha is scheduled to announce a new solar policy by the end of June. The state has installed a total of 13 MW; 5 MW under JNNSM Batch-I and 8 MW under JNNSM rooftop projects. Another 55 MW have been allocated and work on these projects is expected to begin soon.

Madhya Pradesh

The Madhya Pradesh Power Management Company, the holding company for all DISCOMs in the state, signed PPAs for 225 MW of PV projects with five project developers under a reverse auction mechanism, and another 50 MW with National Thermal Power Corporation (NTPC) with a December 31, 2013, deadline for commissioning.

Andhra Pradesh

Andhra Pradesh announced bids for 1,160 MW of solar PV projects which was oversubscribed by 570 MW, totaling 1,730 MW. Project sizes are 5 and 10 MW each. The highest bid was Rs.15.99/kWh (~$0.30/kWh) and the lowest bid was Rs.6.49/kWh (~$.0.12/kWh).

Chhattisgarh

Chhattisgarh recently announced a solar policy with a goal to develop 500-1,000 MW of PV projects by 2017. Projects amounting to 225 MW are pending PPAs and may be signed in three to four months. The delay in signing PPAs is due to the local DISCOM reportedly sitting on a power surplus, a rarity in India.

Maharashtra

Maharashtra State Power Generation Company Limited (MahaGenco) currently has 160 MW of PV projects installed. 125 MW of the 150 MW Dhule solar project is complete with the remaining 25 MW to be commissioned. The project has a rich Rs.15.31/kWh (~$0.29/kWh) tariff and is split between 50 MW thin film and 75 MW c-Si modules.

Rajasthan

Rajasthan issued a 200 MW RfS for 100 MW of solar PV projects and 100 MW of CSP projects, resulting in only 75 MW of solar PV projects being selected due to a lack of interest in CSP projects. The lowest bid was Rs.6.45/kWh (~$0.12/kWh) through an L1 bidding process.

Punjab

Punjab had set a target of 1,000 MW of solar power generation capacity under the 2012 New and Renewable Sources of Energy (NRSE) Policy released in December 2012. The tender is expected to open in May and will follow the L1 bidding process.

About Mercom Capital Group

Mercom Capital Group, llc is a clean energy communications and consulting firm with offices in the U.S. and India. Mercom consults with its clients on market entry, strategy, policy, due-diligence and joint-ventures. For more information, visit: http://www.mercomcapital.com. To get a copy of Mercom’s market intelligence reports, visit: http://mercomcapital.com/market_intelligence.php.