Land is Still the Biggest Impediment for Large-Scale Solar and Development

The Indian solar energy market has come a long way, from about 3 GW of installed capacity in 2014 to over 30 GW in 2019. The solar industry has been sparked by the NDA government’s goal of achieving 100 GW by 2022 along with the plummeting cost of equipment, making solar increasingly scalable. The government deserves credit for working with stakeholders to continuously introduce and improve new policies to make rooftop and utility-scale solar an attractive source of power in the country.

Even with the headway made in the solar sector, large-scale project development is still not easy. After hearing from solar developers, Mercom found that land acquisition, transmission, and successfully acquiring approvals remain a challenge to commission large-scale projects on time.

Land acquisition is one of the single biggest challenges, and even the most experienced developers seem to have problems with it.

We contacted a Delhi-based utility-scale solar developer who said, “Acquiring contiguous land for projects over 100 MW in capacity has been difficult in many states. We have had issues with local authorities, land-owners, and government agencies. Once land-owners figure out that a developer has started the land identification process in the area, they start increasing prices to unreasonable levels. In one case, we faced disgruntled locals who did not let us develop transmission lines for our projects in South India. It is also well known that the documentation process for land deals is extremely challenging. To successfully complete this process, we have to pay soft costs, and even then, there is no guarantee of timely acquisition. Some of our projects could not be completed as they were dragged into legal proceedings because of the land”.

On the issue of achieving project approvals, the source commented, “The single window clearance mechanism seems to be working well. Acquiring approvals is not as cumbersome as it used to be three or four years ago.”

We reached out to another developer, who is working on a project for an interstate transmission system (ISTS), who said,  “To start with, land acquisition is the largest problem for the developers especially with the ISTS bids which are in the large megawatt scale, requiring huge tracts of land. This requirement of large plots of land is also attracting restrictions under the “Land (Ceiling and Regulation) Act.” It is still unclear how this applies to different states. In Karnataka, the process of obtaining necessary approvals to acquire large plots of land takes close to 24 months while the time given to commission projects is 18 months. Maharashtra and Tamil Nadu are also expected to have this issue. Earlier, large projects were located in solar parks where the land was pre-acquired by the implementing agencies with large size bidding for ISTS-connected projects.”

Developers mentioned that solar park projects, where the government provides land, are also becoming increasingly competitive, forcing them to look at other state tenders. However, even the government is running into difficulties with respect to acquiring land and transmission infrastructure.

Another utility-scale developer pointed to location-specific issues; he said, “If you set up a project in proximity to airport authorities, there are red, yellow and green zones to follow. You can’t set up projects in a red zone. In a yellow zone, you can set up after suitable permissions for which the Survey of India has to certify at ground level which takes 4-5 months. Then, you require the MNRE to request a No Objection Certificate (NOC) letter from the Ministry of Defence which takes 12 to 15 months. These certifications are demanded even for green zones. Why should green zones require certification when they are categorized as green? When you have an excellent application like Google Earth, which takes minutes to give you the site location and other bonafide, why is the Survey of India taking 4-5 months? This is a typical red tape.”

According to Mercom’s Q1 2019 India Solar Market Update, solar parks have continued to face issues in providing clearly demarcated, ready land for project development, causing undue delays and pressure on developers who end up having a shorter timeline to complete the project and the fear of having to pay penalties due to no fault of their own. Government agencies have continued to tender and auction without making certain land, and transmission infrastructure is ready, and it is up to the developers to do the necessary due diligence and understand the risk profile before participating in the auctions.”

Wind projects are not immune either. In April 2019, Mercom reported that SECI’s 1.2 GW wind tender was undersubscribed by 50% owing to tariff caps and land woes. When Mercom contacted an executive at one of the companies after the undersubscription, he said, “Good generation sites have already been tapped in tenders up to SECI ‘tranche-VI.’ Now, finding new sites is getting tougher. OEMs are failing, pushing developers to move towards costlier foreign suppliers.”

Approximately 300 MW of large-scale projects did not get commissioned in the first quarter of 2019 due to issues including delays in land registration, power evacuation, and commissioning dates, which have postponed projects to Q2 and Q3 of 2019 according to the Mercom’s Q4 and Annual India Solar Market Report.

Digital India Land Records Modernization Program, which was launched in August 2008, to modernize management of land records, minimize scope of land/property disputes, enhance transparency in the land records maintenance system, and facilitate moving eventually towards guaranteed conclusive titles to immovable properties in the country could be a solution to the land issues plaguing the solar industry. The performance of this initiative until now has been patchy.

“It is taking longer and longer to acquire land for mega solar projects while project commissioning timelines are being shortened. The government agencies do not seem to be in touch with realities on the ground which clearly shows in the guidelines and orders that are issued,” said Raj Prabhu, CEO of Mercom Capital Group.

In March 2019, the Ministry of New and Renewable Energy issued a memorandum proposing modifications to the guidelines issued for its “Development of Solar Parks and Ultra Mega Solar Park Program,” to address land evacuation issues.