No domestic requirements in Rajasthan’s draft selection process, for 250 MW of solar capacity, including rooftop, CSP and 100MW of photovoltaics.
On April 19th of this year, Rajasthan finalized its Rajasthan Solar Energy Policy 2011. It targets a minimum of 550 megawatts (MW) of grid connected solar power in Phase 1 (up to 2013).
The Rajasthan Renewable Energy Corporation Limited (RRECL), the nodal agency responsible for implementing the states’ solar policy, has published the revised draft for the Request for Selection (RfS) document for 250MW worth of projects. The revised draft incorporates some crucial suggestions from industry players and will most likely be released as the official document to be used by developers looking to submit their bids for projects under the Rajasthan solar policy. The RRECL has also published the draft for the Power Purchase Agreements (PPA) for these projects.
According to the draft document, the competitive bidding for the 250MW worth of projects will include 50 rooftop projects of 1MW each, 100MW of Solar photovoltaics and 100MW worth of Concentrated Solar Projects (CSP) projects. The bidding will take place in the latter half of September this year, while the period for submission of the bids will be from August to September. The bench mark tariffs offered are INR15.32 per kWh for PV and INR12.58 per kWh for CSP projects. The developers will be required to offer discounts on these in order to win the bid. Bids are open to both Indian as well as international companies. Out of the 250MW going under the hammer, a single parent company can bid for 61MW worth of projects – one rooftop project of 1MW, up to 10MW worth of PV and 50MW of CSP projects.
Unlike the National Solar Mission, there is no domestic content requirement in the Rajasthan solar policy. The developer can choose any established and operational technology from India or abroad. The draft also gives clear parameters for setting up evacuation infrastructure from the plant to the nearest substation. This has been an issue between the distribution utility and developers in other solar policies so far. For solar PV and CSP projects, if the power plant lies within 15 kilometers of the nearest substation, the cost will be borne by the distribution company (DISCOM). For any length above 15 kilometers, the cost will be borne by the developer. For rooftop projects, the cost will be borne by the DISCOM but the developer will need to take necessary permission from the DISCOM before finalizing the location of the project.
The policy is an improvement on forerunners like the NSM and the Gujarat solar policy because the NSM had a provision of only 5MW of PV projects per developer which made it unattractive for big players and the Gujarat policy had no fixed limits on capacity allocation. The Policy also addresses the concerns of the developers, with regards to the allocation of land and water, availability of an evacuation network and the localized supply chain. Finding the right location and acquiring land is one of the major bottlenecks so far for projects in India. To solve this problem, the policy looks to create land banks from government land. Some of these land banks are situated near cities like Bikaner and Barmer. Under the policy, the developer can use this land for commercial projects after 25 years by selling them at a much higher price than originally paid.
Nonetheless, the Rajasthan policy will face competition from the NSM as bidding for its projects will likely coincide with that under the second batch of Phase 1 of the NSM, expected in the next months. The expected increase in project size allowed per developer under the NSM will attract more players. Most of the big players ignored the first batch of bidding, because of the small project size of only 5MW per developer. The government has introduced a Payment Security Scheme for projects under the NSM through which the government has guaranteed the payments to the developers in case of default by the state distributors.
This will make the NSM a first choice for developers as it makes their projects more bankable. Unlike the NSM, which offers a fixed levelized tariff for 25 years to the developers, the current tariff order of the Rajasthan Electricity Regulatory Commission (RERC) for solar power is only for the control period of ten years. After ten years, the RERC will re-calculate the tariff based on the prevailing market conditions. This makes the return on investment unclear as there is no certainty on the tariff beyond the ten year horizon while the expected lifetime of a PV plant is 25 years and even greater for CSP plants even greater.
BRIDGE TO INDIA is a consulting company with an entrepreneurial approach based in New Delhi, India. Founded in 2008, the company provides market analysis and market entry advisory to international solar companies looking to enter the Indian market.