India Set For 1,500 MW Solar PV Projects Auction

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Gujarat Solar Park

After months of financial and regulatory delays, India is back with its latest tranche of solar power project auctions under the ambitious National Solar Mission. This time around, the government agencies will allocate solar photovoltaic projects through one of the largest auctions in the country’s history.

The Ministry of New and Renewable Energy and the Solar Electricity Corporation of India will offer 1,500 MW capacity to prospective project developers. The capacity being very large, the ministry will split the auction into two offerings of 750 MW in each auction. The first auction will be held before the end of the current financial year (i.e., by March 2015).

The last auction of 750 MW capacity conducted by the Ministry of New and Renewable Energy last year attracted bids of about 2,170 MW.

The prospective project developers would be given a base tariff and would be asked to submit bids stating how much discount they are willing to accept on this base tariff. The base tariff will be equal to the one determined by the Central Electricity Regulatory Commission that is ₹6.95 ($0.12) per kWh for the current financial year. This is expected to fall next financial year when the second tranche is opened for bidding.

The entire process has been designed in a manner that the domestic consumers are not burdened with high electricity costs from these solar power projects. The power generated from these projects will be purchased by NTPC Vidyut Vypar Nigam (NVVN) Limited. This company trades electricity for India’s largest power producer NTPC Limited and has access to substantial supply of thermal fuels-based electricity.

NVVN Limited will pool the electricity generated by the solar power projects with the coal-based electricity from NTPC’s power projects, thus cutting the cost of the final quantum of electricity to be sold to power distribution companies across the country. NVVN Limited currently applies the same methodology to sell electricity generated from solar power projects operational under the first phase of the national solar mission. The company currently pools four units of coal-based electricity with a unit of electricity from solar power projects.

The four to one ratio was determined for projects awarded under the first phase of the national solar mission when the tariff for solar power was up to ₹12 ($0.02) per unit. Now that the tariff is half of that level, even if the ratio falls to 1:1 or 1.5:1 for coal-based to solar-based electricity, the end consumers would not be financially burdened. Whatever may be the ratio, the project developers would be assured that all their electricity is offloaded at the tariff they offer in the auction.

Project developers will be faced with set minimum standards of performance and plant operation and will be required to generate electricity at a set minimum plant load factor, failing which they may attract penalties. If the projects generate additional electricity, they can sell it at ₹3 ($0.05) per unit.

This planned batch of auction will prove to be a major milestone in the implementation of the National Solar Mission. India aims to have an installed capacity of around 10,000 MW by the end of 2017, which will be further enhanced to 22,000 MW by 2022. As of 31 May 2014, India’s installed solar power capacity stood at 2,821 MW.

Image Credit: Gujarat Power Corporation Limited

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