By Richa Chakravarty
Tuesday, February 25, 2014:The solar industry in India has made some impressive strides since the launch of the Jawaharlal Nehru National Solar Mission (JNNSM) in 2010. According to figures from the Ministry of New and Renewable Energy (MNRE), by the end of August 2013, PV installations across India reached a cumulative capacity of 2.1 GW of grid-tied and off-grid solar power. While Phase I was flagged off with much fanfare and accomplished a generation capacity much beyond its target, the second phase of JNNSM, which was delayed, could not sustain the much needed enthusiasm.
After almost a year’s delay, final guidelines for JNNSM Phase II, Batch I, were released recently. According to the guidelines, 750 MW of solar capacity is to be allocated under Phase II with it becoming mandatory that half that capacity (375 MW) should be built up using solar cells and modules that are made in India. MNRE further announced that funds to the tune of Rs 18,750 million from the National Clean Energy Fund (NCEF) will be provided for funding projects under Phase II.
Phase II targets around 10 GW of utility scale solar projects and 1 GW off-grid solar power projects during the period 2012-17. Of the 10 GW target, 4 GW will fall under the central scheme and the remaining 6 GW under various state specific schemes.
However, the much awaited Phase II was not received with open arms by the industry. Most of the players worry that the delay in announcements will further defer the timely commissioning of projects. Also, inclusion of the domestic content requirement (DCR), where 375 MW will have a separate bidding process, is an issue of concern. Here, developers can either opt to bid for the ‘DCR’ or ‘open’ categories.
The payment schedule mentioned in the guidelines has not been welcomed by the developers. Under viability gap funding (VGF), developers will sign a power purchase agreement (PPA) for 25 years to sell power at a fixed tariff of Rs 5.45/kWh. The entire VGF payments will not be released at one time. Fifty per cent will be provided after the successful commissioning of the full capacity of the project, and the rest progressively over the following five years (10 per cent each year), subject to the project meeting generation requirements within a specified range, as per the policy guidelines.
Here we present a review of JNNSM Phase II by two industry experts.
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JNNSM Phase II—at a glance |
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“JNNSM Phase II: India has miles to go” —By K Subramanya, global consultant on solar energy and former CEO, Tata Power Solar Systems Ltd  It is not a question of whether the guidelines of Phase I or Phase II are better. What is important is, whether the objectives set out in the preamble, when the mission was launched, remain our focus and basis of performance evaluation. In my understanding, the key objectives were:
Both Phases I and II need to be analysed with these objectives in mind; we should never lose sight of the original objectives and framework. Achieving the target, though important, is not by itself a great achievement. It is the quality and robustness of implementation that is important. There is a difference between success and satisfaction. Success is a measure decided by others (let the global community analyse and comment on JNNSM’s achievements), but satisfaction about the impact of JNNSM is a measure that should be decided by the Indian public. Our mission targets are not necessarily reflective of the latent demand for energy or its potential, but of course, there is an improvement over 2009. Take the case of Gujarat—it was an achievement of just one state in two consecutive years. So where there is a will, there is a way. Yet, India has miles to go. We are still a marginal player in the global solar world. We have the potential to do much better, as we are blessed with sunshine all year round. MNRE could have accomplished three big achievements and won both national and global acclaim. But they have simply missed the opportunity to do so. These are: Diesel displacement: India could have conceptualised the world’s largest solar projects and attracted foreign investments. According to a KPMG report, India has nearly 25 million agricultural pump sets, of which 18 million are electric and 7 million run on diesel. Also, there are 400,000 telecom towers in India and about 70 per cent are in rural areas, of which 40 per cent are powered by the grid and 60 per cent by diesel generators. The latter consume about 2 litres of fuel per hour and produce 2.63 kg of CO2 per litre. This adds up to a 2 billion litre annual consumption of diesel and 5.3 million tonnes of CO2 produced. This offers us a brilliant opportunity to convert (in a phased manner) at least the diesel-run pumps and telecom towers to solar energy. The solar rooftop programme: India is growing and urbanising at a fast pace. Grid connected solar rooftop PV (RTPV) systems are becoming increasingly viable economically and offer multiple benefits. The policy should help create an enabling ecosystem for RTPV, and focus on the removal of procedural hurdles and other barriers in order to facilitate quick adoption and deployment of RTPV systems. This model is ideally suited for India, since it is socially equitable, economically viable and environmentally sustainable. Generating eco-awareness: New patterns of consumer demand are unfolding; consumers are becoming increasingly conscientious, choosing and preferring to buy energy conserving products and services. MNRE has the responsibility to engage with eco-aware consumers in the sustainability dialogue. Introducing viable projects: Programmes like solar cities look farcical and lack substance, and are unlikely to yield dividends. We need JNNSM to provide market certainty and stability, support the lending community, and provide at least a partial risk guarantee mechanism for forex exposure. A mission like the JNNSM has to be run and executed with missionary zeal and a sense of urgency. We have not achieved power generation targets in any of the five year plans. Other countries like China target to generate 50 GW of solar energy by 2020. Smaller countries like Germany and Japan (where sun insolation is not as good as in India) have set themselves huge targets. Japan targets to generate 28 GW by 2020 and 53 GW by 2030—much bigger targets in shorter time frames. Against this background, JNNSM’s targets are not impossible to achieve. However, we suffer from policy uncertainty. We have the potential and if the right policies are in place, much can be achieved. (You can contact the author at kssubra123@gmail.com) |
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“Phase II should address the failures of Phase I and make progress” —By Raghunandan, vice president, Engineering, Kotak Urja Pvt Ltd  Before analysing JNNSM Phase II, it is important to review the successes and failures of JNNSM Phase I. If we weigh the achievements against the government’s objective of just commissioning 500 MW during Phase I, then the success rate is more than 85 per cent. But if we evaluate what has been achieved against those eight missions under India’s action plan for climate change through JNNSM, then the result is a combination of successes and failures. About 87 per cent of the PV power plants targeted under Phase I were commissioned by June 2013. However, not even one thermal power plant could be commissioned in this period. The mission of NTPC Vidyut Vyapar Nigam (NVVN) was to bundle the high cost solar with lower cost unallocated thermal power, thereby reducing the net average cost of electricity. This objective was missing during the process of reverse bidding, resulting in many start-up projects biting the dust—which would have otherwise helped the long-term objectives of the mission. This was the first failure of Phase I. The success-failure ratio of Phase I The reverse bidding rush and severe competition resulted in compromises on component quality. Only over time will we come to learn about the reality of reverse bidding. More than 75 per cent of the solar photovoltaic (SPV) base is of thin film in the first phase of JNNSM. The future of all those power plants remains uncertain due to issues related to the closure of thin film manufacturing lines, the complexities of warranty issues, etc. Also, there is no exact data available on the power generated from the Phase 1 power plants; hence, the success cannot be just measured on the basis of MW commissioned. Looking at import figures, from 2010 till June 2013, solar cell and module imports amounted to US$ 1924.12 million, growing from a mere US$ 400 million in the previous three years. Exports of the same dropped from US$ 549.54 million in 2010-11 to 80.88 million in 2012-13. This is a clear indication of the domestic industry being beleaguered by foreign players, further pushing plans of backward integration of wafers and polysilicon into the background. Hence, Phase I was unsuccessful in ensuring the healthy growth of the Indian solar energy industry. While the measure of success and failure varies depending on the different perspectives, one interesting aspect is that Phase I was highly successful in price discovery. Interestingly, the land mafia seems to have gained immensely since barren land turned into fortunes for many. Looking at Phase II To sustain the momentum, JNNSM Phase II must look at how the industry can sustain this growth. It is important that the long-term benefits are considered rather than short-term gains. In place of NVVN, now the Solar Energy Corporation of India (SECI) has taken charge of implementing Phase II. We have to wait and watch how SECI can make Phase II of the JNNSM a success. Funding schemes: If the solar mission has to be sustained, a comprehensive approach is required to gain the confidence of the industry and other stake holders. It is important for Phase II to address the failures of Phase I and make progress. On one hand, policy makers claim to have factored in the lessons learnt from Phase I, thus structuring Phase II with viability gap funding (VGF). Yet, on the other hand, there are doubts among developers about Phase II being a combination of various schemes like generation-based incentives (GBI), VGF and bundling schemes, since VGF may be scrapped if not successful. Domestic content requirement: Inclusion of 375 MW of DCR is another area of concern. No data is available regarding how this figure was arrived at. It seems to be an arbitrary choice. It is not yet clear whether the inclusion of DCR is a plan for the future or an attempt to satisfy the Indian solar community. Phase II may be successful in terms of MW commissioned, but the question of whether the mission was successful or not will be answered only by the overall growth of the industry. A comprehensive approach to make DCR a successful mechanism should be supported by an action plan. As of now, PV modules/cells are fully exempt from customs duty, whereas raw materials, chemicals and the gases imported for PV production attract duties, which makes it difficult to keep domestic pricing competitive. To make DCR successful in real terms, either a premium for DCR content must be allowed or there should be a review of the present policy that levies zero duty on import of modules. This will help in creating an ecosystem for R&D and manufacturing, and hence build a base which, in the long run, can compete internationally. It is to be noted that DCR alone is unlikely to revive India’s PV manufacturing plans. Creating ‘solar farmers’: It is important to create a model where private individuals become ‘solar farmers’. The model must allow the leasing out of land for power plants either based on land value or on power generation capacity. There should also be checks and balances in the land acquisition law to ensure the proper use of land resources. In addition, the commercial banks and insurance companies must be educated in the business practices of lending to/insuring solar power plants. Also, rationalisation and simplification of business regulations for manufacturing can ensure improvement in quality, reliability, power production and ROI. Promoting solar cities and mandating that the urban population set up rooftop PV panels will make the mission a big success. This has multiple benefits such as the utilisation of rooftop space, use of the existing power transmission network, saving on power transmission losses and increasing participation by the urban community in making the mission more successful. |
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