India To Hold 750 MW Solar Power Auction For Gujarat, Maharashtra
Originally published on Solar Love.
The Solar Energy Corporation of India will soon hold the first auctions under the phase 2 batch 3 of the National Solar Mission.
According to media reports, the Solar Energy Corporation of India (SECI) will soon announce details of the auction of 500 MW capacity in Maharashtra and 250 MW capacity in Gujarat. The projects will be auctioned under the viability gap funding program. The projects would be among the first utility-scale solar power projects to be implemented in Gujarat under a central government solar power policy.
Prospective project developers would be required to bid for the amount of capital cost support required to set up every MW of solar power project. Developers that place the lowest bids will be selected for project development.
The SECI plans to hold auction for 2 GW of cumulative solar power capacity under phase 2 batch 3 program. Auctions will be held following consultations with states. Governments that are willing to provide land and other required facilities to the projects shall be allocated a certain capacity.
Of the 2 GW capacity envisaged for implementation, 250 MW would be based on modules manufactured locally in India. The maximum allowed bid for financial support is ₹1 crore (~US$154,000) for the open category (no restriction on use of imported or domestic modules) and ₹1.21 (~US$186,000) crore for the domestic content category.
Developers will sell power at ₹5.43/kWh (US¢8.35/kWh) during the first year and the tariff would increase by ₹0.05/kWh (US¢0.07/kWh) every year for the next 20 years. Thus, the highest tariff of ₹6.43/kWh (US¢9.89/kWh) would be achieved in the 21st year.
Once the SECI announces the name of selected project developers, they will have 14 months to commission the projects.
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At first sight, viability gap funding looks a better bet than the parallel British Contracts for Difference. In CfDs, the government undertakes fill any gap between the guaranteed strike price and the wholesale market price, for 15 years. As the National Audit Office has pointed out, the liability is uncertain and open-ended, as nobody knows which way the wholesale price will move. With India’s viability gap scheme, the government makes an once-off capital grant. After that, the developer is on its own, and will make a profit or not depending on the price it can get, by PPA or spot. The cost to the taxpayer is known and controllable by annual budgets.
The strength of VGF is that it reduces the burden on the utilities. Considering they are already reeling from massive losses due to state subsidies.
That said, I do not expect the VGF to be considerably high. In a state like Gujarat, with high irradation and cheap land, VGF could be zero as well.
Maharashtra is a different ball game with farm land and low yield.
All said and done, another positive step in realizing the 100 GW target for the country by the centre.
I was comparing two mechanisms assuming equal expected cost. In both cases, the subsidy will drop, perhaps steeply.
Do you have any information on dual use of farmland in India? A priori, in a hot and (for most of the year) dry country, the partial shade created by rack-mounted solar panels is compatible with a variety of horticultural and livestock uses (link), from spinach to sheep and poultry. The water for cleaning provides irrigation.
Oh absolutely. As you said, cost to tax payers is known and its a grant/subsidy in a lump sum or over 2-3 years that the developer usually securitizes.
Farmland and farmers in India are a protected class. No contracts are enforceable against them as far as contract farming or renting the land is concerned. Even if the courts rule in their favour, corporates just don’t want to deal with the potential disruptions and end up buying the land outright.
Because of the huge wasteland available in the country, farmland has never been explored as an option in my experience. That is unlikely to change in the medium term unfortunately. Only options being explored are irrigation canals, reservoirs and dams, which by themselves provide considerable area for solar.
When it comes to Renewable Energy, the strategy is quite simple as I see it. Technology that is established and low cost (relatively) is utilized and the research is left to the developed countries.
This is why the Ministry of Renewable Energy has approved a policy for offshore wind TODAY.
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