Japan’s Proposal to Rollback on Solar Subsidy Angers Investors and Operators

The 15,000 MW of solar photovoltaic (PV) capacity to be developed under National Thermal Power Corporation (NTPC)’s state-specific bundling program has been reduced to just 3,000 MW.

The Minister for Power, R. K. Singh apprised the Lok Sabha of this significant development in a written response.

While replying to a question asked by Sirajuddin Ajmal, Minister for Power, R. K. Singh said, “The government of India had launched the state-specific bundling program for implementing 15,000 MW of grid-connected solar PV projects under the National Solar Mission (NSM) in a span of five years from 2014-15 to 2018-19 in three tranches, with NTPC as the implementing agency.”

Under Tranche-I, 3,000 MW of solar capacity was to be developed from 2014-15 to 2016-17, under Tranche-II, 5,000 MW was to be developed from 2015-16 to 2017-18, and under Tranche-III, 7,000 MW was to be developed from 2016-17 to 2018-19, Singh informed the House.

Elaborating further, Singh added, “The Ministry of New and Renewable Energy (MNRE) issued the guidelines for selection of 3,000 MW of solar PV capacity in March 2015. The entire capacity of 3,000 MW Tranche-I has been awarded. Capacity of 2,750 MW has already been commissioned and remaining 250 MW capacity is under construction. Under the program, it was envisioned that the then costlier solar power will be bundled with cheaper thermal power, so as to supply the combined power at an affordable price.”

“Since the price of solar power has fallen recently, it is not proposed to take up Tranche II and III,” Singh announced.

These projects were in the pipeline to be tendered. These comments just clarify that the remaining 12,000 MW of projects under tranche 2 and tranche 3 will not be developed.

The MNRE had amended the guidelines for the state-specific bundling program back in November 2017. India has witnessed a sharp decline in solar tariffs in the past few years. In recent months, the industry has witnessed solar power tariffs plummeting to an all-time low of ₹2.44 (~$0.0355)/kWh, remaining much below the ₹3 (~$0.04) mark.

A few weeks ago, the NTPC emerged as the lowest (L1) bidder in the auction conducted by the Uttar Pradesh New and Renewable Energy Development Agency (UPNEDA) for 550 MW of grid-connected solar projects. It quoted a tariff of ₹3.02 (~$0.0431)/kWh to develop 85 MW of grid-connected solar PV projects.

Solar penetration in India is highly cost sensitive, a recent working paper stated.

The study based on India’s energy and emissions outlook by the National Institute of Transforming India (NITI) Aayog stated that solar penetration in India is highly cost sensitive. Additionally, by analyzing future alternative renewable energy technology cost developments, the working paper found that a decrease in solar cost by 50 percent can increase solar penetration by more than eight fold, when compared to the baseline scenario.