Coimbatore Corporation Plans 5 Solar Power Plants under Central Scheme

The City Corporation of Coimbatore has decided to implement five solar power projects under the Pilot Solar Cities scheme. The Corporation has sought financial assistance from the Ministry of New and Renewable Energy (MNRE) for them. The total cost is estimated at Rs 3.75 crore, with each plant costing Rs 75 lakh.

These include 70 kW projects at the Velliangadu water pumping station, Velliangadu drinking water treatment plant, Ondipudur sewage treatment plant, Ukkadam sewage treatment plant and the Vellalore dump yard.

Corporation Commissioner K Vijaykarthikeyan wrote to the MNRE on February 11, requesting to include Coimbatore in its Pilot Solar City scheme. He also requested the ministry to provide its share of Rs 2.50 crore.

The Centre has included Coimbatore among the cities under the pilot scheme.

Source: http://www.newindianexpress.com/states/tamil_nadu/Corpn-Plans-5-Solar-Power-Plants-under-Central-Scheme/2015/03/27/article2732408.ece

 

 

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Solar project allocations under the National Solar Mission: explaining VGF and Bundling schemes

On 10th March 2015, the Ministry of New and Renewable Energy (MNRE) of India released a couple of documents. First was a document of policy guidelines for adding 3000MW solar capacity through ‘bundling mechanism’ under the NSM Phase 2 Batch 2 Tranche 1. MNRE released a second document, policy guidelines for adding 2000MW solar capacity by following the ‘viability gap funding’ mechanism.

These announcements have caused confusion for some new players. Why has the Indian govt decided to take two different routes for adding capacity? Why couldn’t there be just one standardized roadmap?

After speaking with industry and ministry insiders, as well as depending on our own analysis, we have tried to shine more light on the project allocations under the NSM with this post.

There are two govt ‘facilitators’ for NSM solar projects – NTPC’s NVVN and SECI.

National Thermal Power Corporation of India’s Vidyut Vyapar Nigam Limited (power trading arm of NTPC) buys the power under PPAs with project developers, adds a trading margin and sells power to the state discoms and other entities under PSAs. SECI is expected to do the same, but specifically for solar power, and through a different route. By involving two agencies, the load to reach the ambitious targets has been shared, and there are more avenues to experiment with the policies.

NVVN is the preferred choice for power trading and even solar project financiers consider it to be more bankable compared to SECI. SECI would find it difficult to strike PSAs with the same discoms with which NVVN would already be selling solar power in a state, especially when both the recent policy initiatives are state-specific – states are expected to support these central initiatives by hosting solar parks and purchasing solar power to fulfil the renewable purchase obligations (RPOs) of their obligated entities.

The phase 1 of NSM followed ‘bundling’ scheme.

During the earlier batch, the average bid tariff for PV projects was INR 12.16/kWh. To soften the fiscal burden on the already-stressed discoms – the main obligated entities, the power purchaser of these states – NTPC’s NVVN bundled 4 units of coal power (trading at a price close to INR 3.00/kWh at that time) with 1 unit of solar power, and sold it to the obligated entities. For bundling, unallocated coal power is required, which, in a power-hungry country, is hard to come by.

Bundling is a good way to hedge costs. In future, it is expected that coal power will be more expensive than solar, during the lifetime of the current projects. We would witness a scenario under which the govt. entities would be paying INR 8/kWh for coal power, and INR 6/kWh for solar power, may be 8-10 years from now. By paying more for solar right now, compared to coal, policy makers are creating a hedge against future prices – a bigger driver than going ‘green’.

‘VGF’ scheme was devised to reduce dependency on availability of coal power for bundling.

‘Viability Gap Funding’ mechanism has been used for public-private partnership on infrastructure projects which have low IRRs and might be economically unviable. With a tariff fixed at a rate which discoms will be willing to pay (INR 5.43/kWh to start with, for the upcoming allocations) govt will fund the ‘gap’ to make the projects commercially viable. At such a low rate, bundling with coal power would not be required.

VGF lowers the debt size as well as the risk for financing institutions. With lower fixed tariff, the solar power under VGF is perceived to be more attractive for the discoms.

VGF increases the exposure of the govt. to solar projects – SECI will have to work harder to audit projects and release periodical VGF payments to project developers. Historically, VGF mechanism has already invited widespread criticism in past from other sector like road, airports, bridges etc. for poor operation and maintenance of infrastructure projects by the developers. Govt bodies don’t prefer this as much as direct purchase of power – VGF increases the risk for the govt.

Another point to be highlighted is that with 5.43/kWh offered in the first year, the most aggressive of the developers may bid as low as INR 10 lakhs/MW. It might be the last round of VGF that we may see – future projects may already be viable at this tariff.

 

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Funds released for Solar City Project; Kochi set to go Solar

The Ministry of New and Renewable Energy has released Rs. 19.42 lakh as the first installment of the preparation of a master plan for the development of Kochi as a solar city.

Besides the preparation of the plan within one year, the city is expected to develop a detailed project report along with other promotional activities using the funds. The Agency for Non-conventional Energy and Rural Technology (ANERT) will be responsible for monitoring and implementing the programme.

The project mainly aims at installing solar energy systems to power  streetlights, garden lights, households, hotels, restaurants and major administrative offices, thereby making Kochi the first solar city of the state. It also aims at 10 per cent reduction in projected demand of conventional energy at the end of five years.

Last month, the Kochi Corporation authorities, convened a meeting of various stakeholders in City’s development, including Ernakulam District Residents Association Apex Council (EDRAAC), Greater Cochin Development Authority (GCDA), Kerala State Electricity Board (KSEB), Agricultural Department, Cochin Port, Indian Navy and Indian Chamber of Commerce and Industry to discuss the draft Master Plan of the Solar City project prepared by  International Council for Local Environmental Initiatives, (ICLEI). According the Draft Master Plan, the total indicative budget for the development of Kochi as a Solar City is estimated to be at 696.5 crore which will be invested over the five years. The total budget will be shared by MNRE, state government, Kochi corporation and private users.

Kochi is among the 60 cities selected for implementing the solar city projects in the country.

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PSBs commit ₹1.71-lakh cr for green lending

Public sector banks have made ‘green lending’ commitments totaling ₹1,70,740 crore to help stakeholders put up renewable energy projects over the next five years.

At an average project cost of ₹5 crore per megawatt (MW), green energy generation in the country is expected to increase by 34,148 MW during this period.

The green lending commitments were recently made by the banks to the Ministry of New & Renewable Energy (MNRE). Among the banks that have made large commitments to green energy lending are: State Bank of India (₹75,000 crore/ 15,000 MW); IDBI Bank (₹14,700 crore/ 2,940 MW); Bank of Baroda (₹12,500 crore/ 2,500 MW); and Bank of India (₹10,000 crore/ 2,000 MW).

Some of the other state-owned banks that have made commitments include: Bank of Maharashtra, Punjab National Bank and Union Bank of India (₹7,500 crore/ 1,500 MW each); and Andhra Bank, Central Bank of India and Corporation Bank (₹5,000 crore/ 1,000 MW each).

Source: http://www.thehindubusinessline.com/industry-and-economy/banking/psbs-commit-171lakh-cr-for-green-lending/article7000080.ece

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NSM Phase 2 Batch 3 Tranche 1 Revised Guidelines

Ministry of New and Renewable Energy has released a revised draft of the draft guidelines for setting up of 2000 MW capacity solar projects under the National Solar Mission Phase 2, Batch 3, Tranche 1. Link to the document released on 10th March 2015 is here. The salient points of the document are as follows:

  1. MNRE has described this allocation to be under a “state specific VGF scheme” where the power will be procured by the respective states.
  2. The proposed 2000 MW Solar PV Projects to be selected under Batch-III of JNNSM Phase-II, will be implemented by SECI in Solar Parks to be developed through association of Central and State Agencies / Land provided by State Governments or Land identified and arranged by Solar Power Developers in the respective States.
  3. MNRE is facilitating total of 25 Solar Parksto be developed under this scheme. Solar Park Implementation Agency (SPIA) will provide the land and connectivity. SPIA will provide all details like Cost of Land, Annual Charges, and Connectivity Charges etc. which the bidder would take into consideration in their bid.
  4. Out of the total capacity of 2000 MW, a capacity of 250 MW will be earmarked for bidding with Domestic Content Requirement (DCR).
  5. The tariff payable to the Project developer is fixed at Rs.5.43/ kWh for the initial year and then escalated annually by Rs. 0.05/ kWh for next 20 years, resulting in the maximum allowable tariff of Rs 6.43 / kWh at the end of 21st year. The tariff would thereafter, remain fixed at Rs. 6.43/kWh. The levelized tariff for the term of the Power Purchase Agreement thus becomes Rs. 5.79/kWh.
  1. The bidders will be free to avail fiscal incentives like Accelerated Depreciation, Concessional Customs and Excise Duties, Tax Holidays, etc. as available for such projects.
  2. The upper limit for VGF is kept at 1.0 Cr/MW for open category (Rs. 1.31 Cr/MW for projects in DCR category).
  3. The Project developer has to infuse capital in the form of his own Equity for an amount of at least Rs. 1.2 Cr. /MW. The remaining amount can be raised as loan by the developer.
  4. Minimum solar capacity to be allocated to a project developer under the tranche 1 will be 10MW. Maximum capacity has not been specified yet.
  5. SECI will purchase the Solar Power generated from the selected Solar PV plants at the pre-determined tariff and sell the power to willing State Utilities under 25 years Power Sale Agreements (PSAs), at the applicable tariff determined after including a Trading Margin of Paisa Seven (7) per kWh.
  6. The Bidders shall submit non-refundable processing fee of Rs. 2 Lakhs for each Project upto 20 MW capacity, Rs. 3 Lakhs for each Project above 20 MW capacity and Rs. 10 lakh for each project of 100 MW and above capacity, along with the response to RfS.
  7. The Net Worth of the Company should be equal to or greater than the value calculated at the rate of 1.2 crore or equivalent US$ per MW of the project capacity.
  8. Earnest Monet Deposit (EMD) of INR 10 lakh per MW in form of Bank Guarantee along with a Performance Bank Guarantee of INR 20 lakh per MW at time of PPA will be payable.
  9. Excess power generated will be purchased at a notional Support Price of Rs.3 per kWh only.
  10. The declared CUF shall in no case be less than 17% over a year. They shall maintain generation so as to achieve CUF* within -15% and +10% of their declared value till the end of 10 years from COD subject to the CUF remaining over minimum of 15% and within – 20% and +10% thereafter till the end of the PPA duration of 25 years.

 

Sl. No. Event Date
1. PPA Signing Within 30 days after LOI
2. Financing Arrangement Within 210 days after PPA
3. Commissioning 13 months from date of signing of PPA
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India releases policy guidelines for developing 15GW of solar capacity by 2019

Highlights

  1. According to documents released by MNRE on 9 March 2015, the government plans to add 15000MW of solar capacity through NTPC/NVVN over the next 5 years, under the National Solar Mission.
  2. 15000MW aggregate capacity in 5 years will be added in three tranches: 3000MW in tranche 1 (2014-15 to 2016-17), 5000MW in tranche 2 (2015-16 to 2017-18) and 7000MW in tranche 3 (2016-17 to 2018-19). Essentially, tranche 1 represents the previously-defined batch 2 of phase 2 of the National Solar Mission.
  3. The targeted capacity mentioned above doesn’t include NTPC-owned solar projects, but the projects to be developed by private players and Public Sector Undertakings (PSUs). NTPC/NVVN will act as the facilitator/trader/guarantor for the solar projects.
  4. Only the roadmap for the tranche 1 has been defined yet. Tranche 2 and 3 guidelines will be determined at a later stage, after taking lessons of tranche 1 into consideration. In these later stages, the government will try to minimize its exposure and role, and it may offer low-cost long-tenure loans.
  5. Tranche 1 details:
    • Under the tranche 1, NTPC/NVVN will allocate 3000MW solar capacity through reverse bidding mechanism, under which the prospective project developers will offer to sell power to NTPC/NVVN at a fixed-levelized tariff under a 25-year power purchase agreement (PPA).
    • NTPC/NVVN will bundle purchased solar power with thermal power – 3000MW of solar with 1500MW of thermal. The bundled power will be sold by NTPC/NVVN to the states which will provide land and grid connectivity for solar projects and agree to purchase majority of the bundled power. A fee of INR 0.07/kWh will be charged by NTPC/NVVN before selling the bundled power.
    • The bidding will be state-specific. For example, Andhra Pradesh has agreed to provide infrastructural support (land, grid connectivity, etc. – read solar parks) to develop 1000MW and buy the generated solar power after bundling. The rest of 2000MW under the tranche 1 will be supported by other states.
    • Minimum solar capacity to be allocated to a project developer under the tranche 1 will be 10MW. Maximum capacity has not been specified yet.
    • Various benefits that developers can claim are: accelerated depreciation of the asset, concessional custom duties and tax holidays. There will not be two separate bidding processes for developers claiming accelerated depreciation benefit and non-claimants of the same – not a favourable news for pure-play solar developers.
    • Solar power plants can be re-configured and sized up at a later stage after commissioning, within the CUF limits. If the generated power exceeds CUF limits, the solar power plant could sell this excess power in the open market.
    • The government will form a working capital fund of approx. INR 2300 crore (USD 370 million) for payment security of the projects under tranche 1, thereby improving the bankability of these projects. With this fund, the government will be able to ensure payments for 4500MW of bundled power for 3 months.
    • Projects under the tranche 1 are expected to be allocated by December 2015.
  6. To protect domestic manufacturing, some capacity (unspecified yet) will be earmarked for separate bidding under various bids in the future, and the projects will be developed under domestic content requirement (DCR).
  7. States can procure solar power outside of these schemes under the National Solar Mission, if required, thereby, clearing the way for state solar policies.

Analysis

Over the past six months, the Indian government has spoken a lot about its intentions to promote solar energy, hitting the crescendo with the finance minister’s union budget address. With this document, the market has got more clarity on at least one of the ways in which the government plans to reach the 100GW target it has been drumming about.

Project developers would be ignoring the noise and confusion, and would be pulling up the socks to get a piece of the pie before December 2015. This recent announcement builds upon the lessons of the past project allocations under the National Solar Mission and state solar policies. ‘Solar park’ model, larger project sizes, reverse bidding for price determination, revised bundling ratio and 25-year PPAs for hedging against future power tariffs are some of the steps the policymakers are taking to resolve issues raised by various stakeholders in the past.

The revised bundling proportion (2:1 solar to thermal instead of 1:4 in phase 1) means that lesser thermal power will be required to bundle, and unallocated thermal power is a rare commodity, so to speak. This phasing-out is also a step in the right direction – we estimate that bundling solar power with thermal power to lower the overall present cost may not be required in the future tranches; in fact, fixed long-term solar tariffs would hedge against future price fluctuations of thermal component of the bundled power.

An important point that MNRE has mentioned in the document is that after the project developers would supply the power at the pre-determined CUF to NTPC/NVVN, they could expand the capacity and sell the surplus power from the same solar plant in the open market. We see this as an additional opportunity for the project developers, who, after building a safer asset backed by long-term PPA, might want to take higher-risk higher-reward bets in the private, third-party power trading market.

This approach looks like a very good candidate for quick and smooth replication and scale-up. Implementation, as the story has always been, would be the key.

Source:

http://mnre.gov.in/file-manager/UserFiles/Scheme-for-15000-MW-through-NTPC-NVVN.pdf

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Maharashtra bets big on Solar Power; New Policy to be unveiled soon

The Bharatiya Janata Party led Maharashtra government is set to give a major push to green energy with a target of an additional 11,110 megawatts of renewable energy by 2019, over 180 per cent more than the state’s current installed capacity. Sixty-seven per cent (or 7,500 MW) of the ambitious target will be met through solar power. The new policy to be unveiled soon is to include the following:

  1.  Deemed industry status to solar parks, windmills and standalone solar power projects.
  2. Norms to be eased for sale of clean power. The policy proposes to do away with the norm requiring solar power plants to first sell power to state discoms for meeting the Maharashtra Electricity Regulatory Commission-mandated “Renewable Power Obligation”. Under the new policy, solar projects may either participate in a competitive bidding process involving discoms or directly trade power in the open market either within the state or outside through “Renewable Energy Certificates”.
  3. Land acquisition easier, exemption from procuring a no-objection certificate (NOC) from the Maharashtra Pollution Control Board.
  4. Pooling of resources from multiple solar projects would be possible during competitive bidding for sale of power.

The state has plans to generate 2,500 MW of solar power under the public-private partnership (PPP) model, which would be used to feed the renewable energy requirements of state discoms. Private developers would be encouraged to develop the remaining 5,000 MW. The plan is to encourage 1-MW solar power plants and solar parks in industrial areas, townships and irrigation canals. Even small investors developing solar projects of 250 KW or more will be able to opt for the “solar park” status.

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Guidelines for Selection of 3000 MW Grid – Connected Solar PV Power Projects under Batch-II

Ministry of New and Renewable Energy has released the final draft of the draft guidelines for selection of 3000 MW capacity solar projects under the National Solar Mission Phase 2, Batch 2, Tranche 1.

Link to the document released on 4th March 2015 is here. The salient points of the document are as follows:

  1. MNRE has described this allocation to be under a “State-specific bundling scheme”. Interested states will support creation of Solar Parks and implementation of the whole scheme.
  2. Total of 25 Solar Parks will be developed under this scheme. Solar Park Implementation Agency (SPIA) will provide the land and connectivity. SPIA will provide all details for the project before submission of bids. The bidder will approach the SPIA for allotment of land and connectivity.
  3. NTPC Vidyut Vyapar Nigam Limited (NVVN) will be responsible for implementation of this policy initiative, in association with Central and State Agencies.  MNRE will indicate the total quantity for various states based on response received from the states. NVVN may then procure that quantity through one or more state-specific tenders.
  4. NVVN will purchase the generated electricity from these solar projects under Power Purchase Agreements (PPA) for 25 years, and bundle it with unallocated thermal power in 1:2 ratio. NVVN will sell this bundled power to state utilities under 25-year Power Sale Agreements (PSAs) at weighted average tariff, plus trading margin of INR 0.07 per kWh.
  5. Minimum project size should be 10MW. However the Minimum and Maximum Capacity of the Project in each State would depend upon the Lot Size and Availability of Land in the State. This shall be decided by NVVN.
  6. Bidders can avail fiscal incentives like accelerated depreciation, concessional customs and excise duties, tax holidays etc.
  7. Processing fees of INR 2 lakh for each project up to 20MW capacity, INR 3 lakh for each project above 20MW and Rs. 10 Lakh for each project of 100 MW and above along with the RfS will be payable by the project developer.
  8. The net worth of the bidder should be equal to or greater than the value calculated at the rate of INR 1.5 crore or equivalent USD per MW of the project capacity.
  9. Earnest Monet Deposit (EMD) of INR 10 lakh per MW in form of Bank Guarantee along with RfS will be payable. Performance Bank Guarantee of INR 20 lakh per MW at time of PPA will be payable.
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MNRE includes Punjab in Green Corridor Mission

Ministry of New & Renewable Energy (MNRE) has agreed to include Punjab in the ambitious “Green Corridor Mission” project on the request of minister of new and renewable energy of Punjab, Bikram Singh Majithia.
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Punjab will now be in line to receive funds for further strengthening of its transmission and distribution infrastructure to ensure efficient evacuation of solar power to the central grid.

Besides this, the Union Ministry has also announced a major roof top solar power pilot project to demonstrate as well as encourage people to set their own solar power roof top projects to successfully implement the net metering policy of the state.

Majithia said after the successful implementation of 240 MW solar power projects in the state; Punjab has taken a major initiative by offering 65 MW rooftop solar power projects in a single bid. He said the state had the world’s biggest single rooftop project of 7.5 MW in Dera Beas and that it was being further upgraded to 31.5 MW in next few months.

 

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MERC Issues Draft Guidelines for Rooftop Net Metering

Maharashtra Electricity Regulatory Commission has released draft guidelines for Rooftop Net Metering arrangement. Link to the official document is here: Draft MERC Regulations,2015.

The salient points of the document are as follows:

  1. Net Metering arrangement shall be permitted by the Distribution Licensee on a non-discriminatory and ‘first come, first serve’ basis to the Eligible Consumer who intends to install a Rooftop Solar system connected to the network of Distribution Licensee.
  2. The Distribution Licensee shall allow Net Metering arrangement to Eligible Consumers so long as the cumulative capacity utilized at a particular distribution transformer does not exceed 15% of the rated capacity of that distribution transformer.
  3.  The capacity limits for the connectivity of Rooftop Solar system to the network of Distribution Licensee  under these Regulations shall be as follows:
    Sr. No. Voltage level Threshold limit of Rooftop Solar PV system
    1 230/240 V (1 Ф) Less than 8 kW/40 A
    2 400/415 V (3 Ф) Less than 80kW/100 kVALess than 150kW/187 kVA (MunicipalCorporation areas)
    3 11kV and above Up to 1000 kVAUp to 1000 kVA (Mumbai Metropolitan Region)
  4. Net metering arrangement shall have two meters including one bi-directional meter which is also known as Net Meter. The Net Meter will be single phase or three phase as per the requirement.
  5. The location of Net Meter shall be at the point of interconnection which shall be ascertained by the Distribution Licensee. The Distribution Licensee shall also install another meter known as solar generation meter at appropriate location to measure the total units generated from Rooftop Solar system.
  6. For each billing period, the Distribution Licensee shall show separately;
    a) the quantum of units of electricity exported by Eligible Consumer,
    b) the quantum of units of electricity imported by Eligible Consumer,
    c) the Net units of electricity billed for payment to the Eligible Consumer
    d) the Net units of electricity carried over to the next billing period.
  7. Provided that in the event, the units of the electricity exported exceeds the units of electricity imported during the billing period, such excess units of electricity exported shall be carried forward to the next billing period as credited units of electricity.
  8. In case of any dispute in billing it would be settled as per Consumer Grievance Redressal mechanism under MERC (Consumer Grievance Redressal Forum & Ombudsman) Regulations, 2006.
  9. List of documents to be attached with Application Form for such an arrangement
    a) Copy of the latest paid electricity bill.
    b) General power of attorney in favor of signatory in case of joint ownership & partnership firms; Certified true copy of the resolution authorizing the signatory to deal with the concerned Distribution Licensee, passed by the Board of Directors in case of companies (as applicable).
    c) Proof of payment of processing fee of Rs. 1000/-
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