A sunshine year

Written by Sanjay Chakrabarti | Updated: Dec 27 2010, 06:00am hrs
The year 2010 brought a lot of sunshine into Indias renewable energy sector with the launch of the National Solar Mission (NSM), which envisages an ambitious target of achieving 20,000 MW in 10 years time. The magnitude of the mission can be better understood when compared to the fact that the entire global solar installation in 2009 was just above the 20,0000 MW.

Corporate India from diverse sectors has shown significant interest in participating in the solar projects. The first phase of bidding for grid connected projects received 418 applications for a cumulative 150 MW for solar PV projects and 470 MW for solar thermal projects. The winning bidders offered discounts of around 30%-40% for solar PV and around 20%-30% for solar thermal projects over the respective CERC determined base tariffs. Rajasthan has emerged as the clear favorite amongst project developers accounting for 571 MW or an overwhelming 80% of the total allocations of 704 MW made so far, including the migration projects.

The RPSSG programme which is being administered by IREDA targets 100 MW solar capacity connected to the distribution network at voltage levels below 33kV. Out of the 96 short-listed projects, 67 projects worth around 78 MW have been approved. On the off-grid side, around 20MW worth solar projects have been sanctioned. Here too, Rajasthan leads the allocations, emerging as the solar project development capital of India.

In addition to the solar mission, various states have also taken independent steps in harnessing the respective state solar potential. Gujarat, which had announced allocations of 716 MW in 2009, has in the current year, signed power purchase agreements for approximately 400 MW. Maharashtra became the first state to introduce a solar specific component as part of its renewable purchase obligations (RPO).

The focus now shifts to the financing and execution of the above projects. While at present the cost of financing and availability of non-recourse facility is proving to be a major challenge, especially for solar PV, the hope is that with greater involvement of banks and financial institutions and with appropriate messaging from the central government, we should be able to tide over this situation.

Other key developments during 2010 include the establishment of a National Clean Energy Fund by the government. Financed by a tax of INR 50 per ton of coal produced domestically or imported, the fund is expected to generate Rs 50 billion annually going forward. The government is proposing to set-up a green bank to help fund projects across wind, solar, tidal and other forms of renewable energy by utilizing a part of this clean energy fund.

The Central Electricity Regulatory Commission (CERC) on its part has reduced the threshold limit for grid connectivity for hydro power stations and other renewable energy based stations to 50 MW, to improve their inter-state grid connectivity. The introduction of the Generation Based Incentives scheme for wind projects has got the independent power producers more interested in the space and we are seeing some large investment plans in the pipeline.

The year 2010 which began on a high note with the launch of the National Solar Mission and saw sustained activity through the year, would end on a bright note with the recent launch of the renewable energy certificate mechanism. The REC would encourage states to focus on harnessing their renewable potential and would even allow states with lower renewable potential to aim for higher RPO targets.

Going forward, it is estimated that total cumulative investments of around Rs 450 billion will be required over the next two financial years for renewable energy capacity additions. Also, with FY2011-12 being the last year of the current Five Year Plan, the execution of projects is likely to gain momentum as all stakeholders would be keen to maximize the achievement of targets.

(The writer is partner & national cleantech leader, Ernst & Young. Views are personal)