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Revised phase II norms of solar mission to address many concerns

According to reports, the Union ministry of new and renewable energy (MNRE) has come out with revised draft guidelines for phase two, batch I, of the National Solar Mission (NSM) programme. The re-examined guidelines are reported to be addressing many concerns raised earlier, while the final guidelines will be announced shortly.

The cabinet committee on economic affairs has recently approved the implementation of 750 mw grid connected solar power projects of phase II batch-I of NSM (2013-17) with viability gap funding (VGF) support from the national clean energy fund (NCEF).

The Solar Energy Corporation of India (SECI) will carry out the allocation process, provide VGF and sign the power purchase agreements (PPA). SECI wants to sell the solar power to state distribution companies. Under the revised guidelines, it has now decided to first obtain confirmation from them on their willingness to buy solar power under VGF scheme at Rs 5.50 kwh, prior to issuing a request for selection (RfS) for the developers. This process is currently under way. The RfS document is expected to be available till November 21.

“This process addresses a key concern for developers and help them chose right locations for their projects,” said renewable energy consultancy firm Bridge to India.

“Most developers look to high irradiation locations in the west and south of India. However, considering that states like Rajasthan, Tamil Nadu, and Karnataka are already meeting their RPO (renewable purchase obligation) targets, their state utilities may not be interested in buying power from SECI. On the other hand, states like Maharashtra, Bihar and Haryana that do not have a dedicated state policy in place and fall short of meeting their solar RPO targets might want to buy solar power from phase two of the NSM. It will be one of the cheapest options for them,” it added.

The revised document has also cleared the ambiguity over domestic content requirement (DCR) in solar projects. Out of the total capacity of 750 mw, a capacity of 375 mw will have a DCR. At the time of bidding, the developers can either opt for “DCR” or “Open” or both categories; however, separate bids have to be made for DCR and non-DCR projects.

“It is expected that the tariffs for projects with DCR will be slightly higher. Indian cell manufacturers such as IndoSolar, Webel and Jupiter are expected to benefit the most. International suppliers such as ReneSola, which have contract manufacturing in India, are also likely to benefit,” said Bridge to India.

While VGF mechanism is almost the same as defined in the previous draft, disbursement of the incentive has a new approach. VGF will be released in six tranches through a performance-based approach instead of three tranches announced earlier.

The document also stipulates penalties for delays in completion of the projects. Going by the rules framed, any project that is delayed beyond three months will become unviable.

On the bankability front, the draft also calls for the NTPC Vidyut Vyapar Nigam (NVVN) to step in, in case there is any delay on SECI’s part with respect to payments. To avoid a default from SECI, the developers might be required to sign short-term PPAs with NVVN, which in turn, will sign short-term power sales agreements (PSAs) with interested state utilities. Even though this increases the complexity, we believe that this provision safeguards the interests of the developers in case a given state distribution company does not honor its commitment towards SECI and SECI in turn is unable to honor its commitment to the developer, pointed out the consultants.

The document states that as and when SECI is fit to carry out its functions, the short-term contracts will be terminated and long-term contracts with SECI will become effective. All the PPAs and PSAs (short-term with NVVN and long-term with SECI) will have the enabling provision for such a changeover so that the transition from NVVN to SECI is smooth and neither the solar power developers nor the buying entity is affected in this process.

All in all, the revised guidelines have addressed many concerns that were voiced after the release of the previous draft of these guidelines. The PPAs for these allocations are expected to be signed end-February 2014. This means that with a 13-month timeframe, these projects are to be commissioned around March 2015.

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