The Ministry of New and Renewable Energy (MNRE) has decided to include feeder level solarization under Component-C of Pradhan Mantri Kisan Urja Suraksha Evam Utthan Mahabhiyan (PM-KUSUM) program.
Last month, the central government ramped up the targets of the program. The MNRE said that these scaled-up targets would be executed in 2020-21. In the amendment, a target for the solarization of 7.5 lakh existing agricultural pumps has been kept through feeder-level solarization plan under Component-C.
Accordingly, the MNRE has now issued guidelines to provide a broad implementation framework for the feeder-level solarization plan.
Under the provisions of the PM-KUSUM program, grid-connected agriculture pumps can be solarized with a central and state subsidy of 30% each and farmer’s contribution of 40%. The solar capacity allowed is up to two times the pump capacity in kW, and DISCOM would purchase the surplus power.
DISCOMs and the power department will be the implementing agency for feeder level solarization in their respective areas. However, state governments may appoint any other expert agency to help DISCOM with tendering and other related activities to install solar power systems for feeder level solarization.
Although agriculture feeders have already been separated, the feeders can be solarised under the program as it leads to lower cost both in terms of the cost of capital and power. Feeders with a major load for agriculture can also be considered for solarization.
According to the notification, the total annual power requirement for an agriculture feeder will be assessed to install a solar power system that can cater to the agriculture feeders. The installation will be done either through the capital expenditure (CAPEX) model or the Renewable Energy Service Company (RESCO) model.
For example, with the capacity utilization factor (CUF) of 19%, a 600 kW solar power system can supply power to a feeder that needs 10 lakh units. There is no cap on the capacity of a solar power system for feeder level solarization.
A feeder level solar power plant may be installed to cater to a single feeder or for multiple agriculture feeders emanating from a distribution substation (DSS) to feed power at 11 kV or the higher voltage level. However, it depends on factors like availability of land, technical feasibility, etc.
The DISCOMs can identify land near the substation, get ownership of land or its lease rights, provide connectivity, and lay a sub-transmission line between the substation and solar system.
The cost of installing solar system has been estimated as ₹35 million (~$474,827)/MW to calculate the Central Financial Assistance (CFA). Solarization of pumps of any capacity is allowed; however, if the pumps are above 7.5 HP, the CFA will be limited to solar capacity for 7.5 HP pumps.
Implementation under CAPEX
The central government will provide a CFA of 30% (50% in the North-Eastern, hilly states, union territories, and islands) to install a feeder-level solar power system. The remainder will be met through a loan from the National Bank for Agriculture and Rural Development (NABARD), Power Finance Corporation (PFC), and Rural Electrification Corporation (REC).
Meanwhile, concessional financing will be available for the solarization of agriculture pumps. The RBI has already included this component under priority sector lending, and the Ministry of Agriculture & Farmers’ Welfare (MoAFW) has included community-level solarization under Agriculture Infrastructure Fund (AIF).
State government subsidy meant for electricity supply for agriculture pumps can repay the loan in five to six years. After this period, power will be freely available, and outflow from the state’s exchequer for agriculture electricity subsidy will cease.
On average, only 150 days of power is needed for agriculture in a year. Meanwhile, the electricity produced from the solar during the remaining days will generate additional income for the DISCOM. The income earned can be used to pay off the loans.
Up to 40% advance CFA will be released to DISCOMs to complete the tendering process and sign off the work agreement with engineering, procurement, and construction (EPC) to install the solar panel.
The remainder will be released after successfully commissioning the project. Payment for the solar system’s operation and maintenance can be linked with energy production.
In case the solar panel fails to supply the necessary power through its project life (25 years), the MNRE may direct the DISCOM to refund the CFA amount on a pro-rata basis.
Implementation under RESCO
Under the RESCO model, developers will be selected based on the lowest tariff to supply solar power for 25 years. The developer will get CFA at 30% of the estimated cost of installing a solar power project, i.e., ₹10.5 million (~$142,412)/MW, which translates to 30% of ₹35 million (~$474,827)/MW.
The power supplied by the RESCO developer would be much cheaper than the present cost of power delivered at the substation, and the DISCOM will save the amount equal to the difference between the two.
States may choose to provide upfront subsidy to RESCO developers for the electricity subsidy given to agriculture consumers in the form of a viability gap funding (VGF). This subsidy is in addition to the 30% CFA, at current subsidized rates or any other rate fixed by the state government.
For example, if the present subsidized rate for agriculture is ₹1.50 (~$0.020)/kWh, the RESCO developer will be selected based on the lowest VGF bid for power supply at ₹1.50 (~$0.020)/kWh.
Full 100% of the total eligible CFA will be released to the RESCO developer through DISCOM on the successful commissioning and declaration of commercial operation date (COD) of the solar power panel. The maximum timeline allowed for commissioning of the solar power system by the developer will be nine months from the signing of the PPA.
If agriculture feeders are not separated, then a loan for feeder separation will be available from NABARD/PFC/REC. The savings due to electricity subsidy on agriculture and the income generated surplus electricity generated by solar when not used for irrigation can also be used to pay off the loan taken for feeder separation.
Water-saving and enhancing farmers’ income
Under feeder level solarization, farmers will get daytime reliable solar power for irrigation, but there is no selling surplus solar power. Therefore, farmers can be incentivized to save water and to enhance their income. The DISCOMs would assess the average power requirement by farmers of an area depending upon various factors, treated as their benchmark consumption. The DISCOMs would incentivize farmers for consuming power less than benchmark consumption. The power saved would be treated as surplus power injected by farmers, and DISCOMs will pay them against the saved power at a pre-determined tariff. These measures will help conserving groundwater levels.
Feeder level solarization with enhanced capacity of solar
States may install a feeder level solar project of a higher capacity than what is required to supply power to an agriculture feeder. The additional solar power generated may be used for supplying nearby rural or urban loads during day time or banked for supplying power during the evening hours. However, the CFA will be limited for the solar capacity required for supplying power to the agriculture feeder under such cases.
Allocation of capacity and service charges
Under Component-C of the PM-KUSUM program, solarization of a total of four lakh grid-connected pumps are targeted for approval by 2020-21. Around 50% of these pumps would be solarised through feeder level solarization and the remainder through individual pump solarization.
Since the program is demand-driven, the capacity will be allocated to states depending upon demand. MNRE will request states to send their demand within a timeframe- states may send their demand for individual pump solarization or feeder level solarization or both. The allocation of capacity will be made by the screening committee headed by the secretary of the MNRE.
System Specifications and Quality Control
All components used for installing solar systems should conform to applicable quality specifications and follow quality control guidelines. It is mandatory to use indigenously manufactured solar panels with indigenous solar cells and modules. Thorough maintenance of selected agriculture feeders is required to maintain feeder availability during sunshine hours. This includes maintenance of the substation, sub-transmission lines, and distribution transformers, among others, regularly in a time-bound manner.
It will be mandatory for DISCOMs to monitor solar power generation and the solar power system’s performance through an online system. The online data will be integrated with the central monitoring portal, which will extract data from the state portals to monitor the program.
In September, the MNRE issued clarifications for the program. According to the clarifications, for Component B and Component C of the program, the state share of subsidy will be a minimum of 30% of the applicable benchmark cost or the cost discovered in auctions, whichever is lower.
Read Mercom’s report on the amendments that the government must consider for KUSUM’s effective implementation.
Rahul is a staff reporter at Mercom India. Before entering the world of renewables, Rahul was head of the Gujarat bureau for The Quint. He has also worked for DNA Ahmedabad and Ahmedabad Mirror. Hailing from a banking and finance background, Rahul has also worked for JP Morgan Chase and State Bank of India. More articles from Rahul Nair.