As India struggles to achieve its ambitious 160-gigawatt solar and wind power target by 2022, it has once again extended the expiry of a crucial incentive for those projects.
The Ministry of Power recently extended the expiry of waiver of inter-state transmission charges available to solar and wind power projects. All such projects that are commissioned before 30 June 2023 will not be required to pay any inter-state transmission charges for a period of 25 years.
The initial date of expiry of this incentive was 30 June 2017, which was first extended to 31 December 2019, then 31 March 2022, and later until 31 December 2022. The latest extension may have been the result of delay in commissioning of solar and wind projects due to the COVID-19 pandemic.
This incentive has been played a critical role in the recent sharp growth in tenders issued for solar and wind power. India’s solar and wind power capacity is concentrated in a very limited number of states. Through this incentive, developers are able to set up projects in high-resource states and sell to consumers in any state in the country.
Project developers have understandably welcomed this move. Last month, developers submitted a record-low solar tariff bid of Rs 2.36 (US¢3.15) per kilowatt-hour. Again, projects awarded under this tender can be set up in any state and can sell to any interested consumer anywhere across the country.
The incentive will also support India’s 40-gigawatt solar power park scheme. Under this scheme, large solar power parks will be set up across the country and power will be supplied to any interested consumers located across the country. A 2.5-gigawatt solar power park tender, issued by the Solar Energy Corporation of India, is currently open. Similarly, a 7.5 gigawatt solar power park will be installed in the union territory of Ladakh. A bulk of the power generated at this solar park is likely to be supplied to other states in north India.
Apart from the steep decline in price of solar modules in the last decade or so, this incentive has been a crucial factor for the fall in solar and wind power tariffs in India.