Council: Flaws in solar mission
In its evaluation of Phase 1 of India’s National Solar Mission (NSM), the Council on Energy, Environment and Water’s (CEEW) has highlighted many of the problems the mission needs to overcome in order to achieve its goal of producing 20 gigawatts by 2022.
The last two years have seen India’s solar capacity surge from 17.8 MW to over 500 MW but there are some inherent flaws in the NSM model that need to be urgently addressed.
For one, the reverse auction process has been criticised for not adequately vetting bidders allowing inexperienced and small developers quoting very low prices to win bids.
At the release of the CEEW report, Mr Rajinder K. Kaur, secretary-general of Solar Energy Society of India, stressed that these “rock bottom” prices “would kill the entire nascent industry”.
With the quotes being arranged in the ascending order, those that are willing to sell power at the cheapest rates were given the projects first with the allocation process stopping when the total capacity of projects allocation was reached.
Developers seeking domestic funding have criticised the high interest rates being offered by Indian banks which range between 11 to 13 per cent annually. Hence, companies investing in solar have chosen to access overseas credit at 9 to 10 per cent annually stretched over longer periods of time.
Financiers also highlighted the poor financial health of discoms which posted a combined loss of `29,000 crores between 2009-10. The report states that although innovative approaches like bundling thermal power with solar have reduced the cost burden on discoms for signed PPAs, uncertainty about the continuity of bundling and payment security schemes continue to plague stakeholders concerned about payments in the future.
Another problem was that banks are not comfortable about investing in a sector where they are not sure that NSM claims are achievable. Dr Arunabha Ghosh, one of the authors of the report, said: “There is a need to involve local communities since solar projects remain land-intensive.”
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