According to reports, photovoltaic as a technology for solar power generation has struck a chord with developers in India unlike the concentrated solar thermal power, which has yet to prove its worth with most of the projects running behind the schedule.
However, the 100-megawatt Rajasthan Sun Technique, being developed by Reliance Power and set to come on stream in a month, offers some lessons on how the concentrated solar power (CSP) can become a viable technology in India.
Of the seven CSP plants combining a capacity of 470 MW auctioned under the National Solar Mission in 2010, only two developers are set to meet the extended deadline of March 2014.Apart from Rajasthan Sun Technique and Godawari Green Energy, which commissioned its 50-MW plant in June 2013, the future of other five plants is still uncertain with a couple of them running the risk of being shelved.
In a case study of Rajasthan Sun Technique, the San Francisco-based Climate Policy Initiative finds that subsidized tariff is not enough for developers to implement the projects as per schedule.
It said the choice of technology, long-term debt, state-level incentives and a developer with strong balance-sheets have worked in favour of the plant making it the largest CSP project worldwide using the promising linear Fresnel technology.
“The Rajasthan Sun Technique plant received overseas long-term debt from development agencies like ADB and US EX-IM bank. Though the cost of funding is not subsidized, it is cheaper than domestic rates in India. But such financing is limited and involves substantial costs for hedging foreign exchange risks. Reducing the cost of financing is one of the key areas where government intervention is required to make CSP viable in India,” said Martin Stadelmann, Senior Analyst, Climate Policy Initiative, one of the authors of the case study.
The Rs 2,250-crore plant has overseas funding of 75% requiring it to pay high hedging costs that come with long-term offshore loans. The study said if the government lowers the hedging costs to half, the plant’s viability gap will come down from $42 million to roughly $37 million annually.
The challenges of tying up funding, sourcing technologies, unreliable solar radiation data are the main reasons for the CSP story going sour in the country.
“Our conversations with stakeholders identify potential improvements including stricter qualification requirements for bidders, setting out more realistic timelines for bidding, making better solar irradiation data available, and allowing sufficient time for construction and then enforcing penalties more strongly for delayed projects,” the authors said in the report.
Incentives by states through policy measures can help CSP projects. For example, the Rajasthan Sun Technique project benefited from the state’s solar energy policy, which reduced VAT for solar products from 14% to 4% and exempted project equipment from entry tax. The plant also benefitted from leasing earmarked land at subsidized rates.
Similarly, the plant also gained from technology front by opting for linear Fresnel instead of the commonly used parabolic trough. Though linear Fresnel is new to Indian market with no past experience, it is cheaper and can achieve about 61-70% localization, which enhances return on investment and generates more local jobs.