10 September 2012
Uttar Pradesh became the 6th state in India to draft a solar policy and it’s none too soon, as the state’s economic growth is being hampered by inadequate power supply. As of June of this year, the state had a monthly peak power deficit of 9.7% and an energy deficit of 15.3%.
The renewable energy share in the state is just 5.14% in its total installed capacity. The fact that 1000MW in solar capacity is to be installed by end of 2017 is a positive step and it will narrow the supply and demand power gap. It also supports the regulation passed by Uttar Pradesh Electricity Regulatory Commission, which calls for a progressive increase in its solar renewable purchase obligation to a minimum of 1% by 2012-2013 (and beyond until revised).
Under the Jawaharlal Nehru National Solar Mission (JNNSM), Uttar Pradesh got just one 5MW project in Phase 1 of the program. Going forward, Uttar Pradesh’s new solar policy is positioned to tap its untouched solar potential.
Qualification criteria are quite stringent letting only the most experienced developers take part.
Unlike other state policies, Uttar Pradesh has clearly defined targets for 4 years though no capacity has been allocated to FY 2012-13. Project size has been characterized into small (2 to 10MW), medium (>10MW to 25MW) and large (>25MW). There is no clarity on proportion between thermal and PV technologies for which the commissioning deadline set is 12 and 18 months respectively. No action has been taken in the rooftop category, which Uttar Pradesh plans to implement through the Ministry of New and Renewable Energy only. Projects will be allocated through tariff based competitive bidding where power purchase agreements will be signed with a distribution licensee/utility and/or an REC mechanism where a third party sale will also be allowed.
Uttar Pradesh has learned from the mistakes made under JNNSM and will avoid the possibility of default from employing novice project developers. Qualification criteria are quite stringent letting only the most experienced developers take part. Project developers will be required to have successfully commissioned aggregate capacity of 1MW, 3MW and 5MW in last three years (assuming 1MW costs around INR 10 million and cost incurred is proportional to capacity in MW) when bidding for small, medium and large size projects respectively. And net worth of INR 30 million per MW (additional INR 20 million per MW beyond 25MW) and annual turnover of INR 50 million per MW is necessary from any of last three annual accounts.
The required infrastructure for building solar power capacity in Uttar Pradesh is in the planning stages. To make projects bankable, a Renewable Energy Fund will be created (from fees levied on conventional power generators) for promoting renewable energy such that INR 1000 million from fund will be available under a “Solar Incentive Scheme” for payment to developers on PPAs signed.
Solar parks will be created by the government for project development (by providing land on nominal lease basis) and associated manufacturing facilities. Also, necessary common infrastructure will be provided. Uttar Pradesh New and Renewable Energy Development Agency will act as a single clearinghouse for projects making the process hassle free. Other attractive incentives are there for the developers:
- Exemption from transmission/wheeling and open access charges for third-party sale and captive units
- Relevant incentives under industrial policy of state will be available for power plants
- Exemption from electricity duty on energy used by developer for own use
- Timely provision of evacuation infra by transmission and distribution utility
Uttar Pradesh’s state policy is quite well planned as far as the required incentives, infrastructure and administrative support for solar power development. The policy takes into consideration the mistakes made in other solar policies, such that experienced and serious players will be only invited to participate to prevent project default. Investments by developers are made risk free by devising the necessary payment security system, greatly increasing the bankability of the projects. The only thing missing is the rooftop segment, where significant capacity could have been allocated and new aspirants could also take part in solar power development story in Uttar Pradesh.
Written by Varun Mittal, a freelance writer based in India, and specialising in clean energy technologies.