India's Solar Policy JNNSM in Jeopardy due to Irrational Bidding,Financing Difficulties and Small Plant Size

India’s JNNSM Phase 1 which is targeting 1000 MW of Solar Power Capacity by 2013 is in jeopardy due to irrational bidding,financing and small size.The 150 MW Solar PV and ~500 MW of Solar Thermal Capacity which has been put to bidding is seeing massive discounts to the base price which would allow normal return.This will eventually lead to project winners abandoning these projects or delaying it inordinately,leading to a failure of the first phase.India Solar Thermal Bidding has already seen Massive Discounts from the base prices of Rs 15.31 set by CERC and the Solar PV project bidding for 150 MW is going to see equally ferocious discounts.Tata Power,which is India’s largest private utility is staying away from these auctions due to the above problems.Renewable Energy in India has a huge growth potential with Solar Energy the brightest Green Energy Sector.This has attracted companies in droves leading to hyper competition for the first phase of India’s Jawaharlal Nehru National Solar Mission.However huge competition in this subsidy driven sector is not necessarily good for the growth of Renewable Energy as irrational bidding by small players would lead to project failures.

State Banks in India  have already cast doubts on lending finance to these solar projects which depend on debt for 70% of the capital requirements.The convoluted nature of payments which involve the financially weak Electricity Distribution Companies,the trading arm of NTPC and  Developers has made the Banks wary of lending to the new solar sector.Also in case of Solar PV,the restriction of 5 MW per Business Group has made it unattractive for some of the  multi billion large utilities from taking part in the process.Note the involvement of large utilities is necessary for the development of the nascent solar sector.They bring in the required financial heft ,project management skills and power expertise.Winning of these projects by fly by night operators out to make a quick buck by flipping won’t do the government any good.

India’s Biggest Private Power Developer to Shun Solar Bidding

Tata Power Co., India’s largest non- state electricity developer, is shunning the country’s first major solar auction on concerns that terms set by the government will make it difficult for projects to be built profitably.

The country’s Solar Mission initiative seeks to draw investment to the sector by offering incentives including special tariffs and a power-bundling arrangement designed to assure projects of a buyer for their electricity. It has also set restrictions, including limits on solar equipment imports and a 5-megawatt limit on any one developer.

“To restrict the size to just 5 megawatts per business group we felt was too small,” Agrawala said. “Also, you’re not allowed to import equipment. As an owner, I’d like to discover what is the least possible price in the global markets.”

Tata Power determined it would have trouble raising loans from banks under the program because it wasn’t clear whether the designated power buyer, a unit of state-run utility NTPC Ltd., has the financial backing to ensure developers are paid for what they generate, Agrawala said.