India has released a draft policy with the goal of building 9 GW worth grid-connected solar plants by 2017, which is actually more than eight times its current capacity.
The overall plans include auctioning 1,650 MW of photovoltaic capacity by the central government in the next financial year, grants to cut project costs and loosening curbs on the purchase of equipment from overseas, according to the draft published on the website of the Ministry of New and Renewable Energy. The policy will be funding the solar industry for the first time with direct grants covering as much as 40 per cent of the upfront cost of building projects.
Developers including Leon Black’s Apollo Global Management LLC-backed Welspun Group and billionaire, Vinod Khosla’s Sunborne Energy Holdings LLC have so far built 1,045 MW of solar capacity and cut average costs of photovoltaic power 51 per cent since India began its so-called National Solar Mission in 2010. The program has sought to drive down the cost of solar power to the level of other forms of grid-supplied electricity by 2017.
While private lenders have been slow to fund solar because of lack of confidence in the technology, according to the draft and considering upfront investment costs and fixed returns are high, it is essential that the government supports infrastructure financing.
Developers submitting bids that need the least funding will win solar auctions, according to proposed rules. Grants would be paid in stages as projects reach milestones, to prevent developers from bidding too low and ignoring plant performance.
The grants would be financed with revenue from the National Clean Energy Fund, which has been taxing coal producers 50 rupees (92 cents) a metric ton since July 2010 and was expected to raise Rs 25 billion in its first year.
The draft also raises the possibility of doing away with a rule that requires projects to buy crystalline cells and panels from local manufacturers such as Indosolar Ltd. (ISLR), Websol Energy System Ltd. (WESL) and Jupiter Solar Power Ltd.
The government may help cut the cost of Indian machinery or require projects to source only part of their equipment locally to promote domestic manufacturing, according to the draft. The responsibility for building 60 per cent of the targeted 9 GW will be shifted to individual states.
The central government’s first auction will be for 1,650 MW capacity to be built in the financial year starting April 1. The following year, it will award 870 MW of photovoltaic capacity and 1,080 MW of solar- thermal capacity, according to the draft.
