India has the potential to become a global manufacturing hub for concentrated solar thermal (CSP) manufacturing. An opportunity to harness the potential is knocking on its doors. However, the government must ensure policy and tariff uncertainty if the potential is to be realised……..The government has unveiled feed-in tariff for capacity addition envisaged under the first phase. Tariffs for power procurement under the second and third phases is yet to be announced.
“India has a lifetime opportunity to build the CSP industry like China did in the wind power industry,” according to Anil Srivastava, chief executive officer of Areva Renewables.
“We have to look beyond the first phase and provide certainty of policy framework and enable the value chain—from research & development, engineering and manufacturing to project financing. If we do not do, someone else will do,” Srivastava said. “India has the advantages of capital market, industrial base and size of the domestic market. But we want clarity on tariff,” he said.
“The real challenge will come when developers go to the capital market to raise money for project financing,” Srivastava said.
According to industry experts, while solar PV is better placed to meet the requirement of decentralised generation—for supplying power to areas where grid connectivity is difficult—CSP has the advantage of scalability and can be used to build utility scale generating plants. The Central Electricity Regulatory Commission has fixed feed-in tariff for CSP equipment plants at a lower level compared to photovoltaic equipment-based ones.
The author above has indicated that clarity on tariff in the second and third phase of the mission is something that is a must need at this point to provide better clarity to various players in the evolving solar utility scale grid connected eco-system.
However, MNRE has often repeated that they would be flexible yet adopt a policy only after they have some feedback on the first phase of the National Solar Mission and incorporate the learning of the same to come up with a policy for the second phase.
They hence anticipate this to happen closer to the end of the Eleventh plan period. It is pertinent to note that both these approaches do have their relative merits and demerits and it is in national interest and long term success that they be balanced.
It is important to note here that, there has already been significant discounts to the feed in tariffs, given by developers for the first phase of the Solar Mission during the bidding. The bid to avoid over discounting by the developer just to win the project had incorporated rather stringent bid bond conditions that have been enforced.
This reiterates the thought of MNRE that they expect costs to go down with scale, process maturity and evolving of the eco-system and that such reduction in tariff possible due to lower cost should happen and will be incorporated into the second phase.
Though there has been a lot of apprehension about funding for the projects from banks including ADB , it looks like Exim bank funding should be possible and vendors like the company mentioned above have stated that they would offer performance guarantees in terms of plant availability factor alongside other operational parameters that make projects bankable.
There has also been a lot of discussion on whether CSP is ideally suited for utility scale applications or if Solar PV would be a better choice in India’s case.
Though there are certain challenges and various thought processes on the approach forward there is no denying the fact that there definitely lies a once in a lifetime opportunity to build the CSP industry in India with the successful launch and bidding out of the first phase of the National Solar Mission.