The funding deadline for the first batch of solar projects under the Indian solar mission has now passed. The projects which didn’t achieve financial closure will be cancelled. Furthermore, a spokesperson at the Ministry of New and Renewable Energy (MNRE) told Mercom Capital Group that the capacity for the next batch of projects will be increased based on the size of the cancelled projects. For example, if 50 MW worth of projects get cancelled then the next batch capacity will be 300 MW plus 50 MW. The funding deadline for the first batch of solar projects under the Indian solar mission has now passed. While the final project numbers have not been released, it appears that roughly half failed to secure funds. India scrapped its feed-in-tariff policy last August due to an overwhelming number of applications and replaced it with a reverse bidding mechanism where solar projects were awarded to the lowest bidder regardless of their previous experience in developing such projects.
This resulted in some aggressive bidding on the part of project developers. The Union Minister for New and Renewable Energy, Farooq Abdullah, was quoted as saying he was “really shaken” when he saw the tariff go down from 17.91 rupeees to 10.95 rupees in the bidding process.
The situation has been quite disconcerting since the chosen policy basically states: “Aggressive bidding welcome. No experience required.”
JNNSM’s decision to use reverse bidding instead of the feed-in tariff has created confusion among state solar programs. Since most state policies and tariffs expired on March 31, 2011, many states are in the process of developing new policies.
Some will be adopting the same reverse bidding program as JNNSM. Notable states with feed-in tariffs are Gujarat, Karnataka, Madhya Pradesh and possibly Maharashtra.
In conclusion, it now comes down to how many projects are funded in this batch. If a large number of projects do not receive funding, it will be a clear indication from the markets that the policy in its current form is not “bankable” and an immediate course correction will be required to renew confidence in the financial community.