According to reports, Renewable Purchase Obligation (RPO), funding for solar projects and active participation by States are key issues that need to be addressed in Phase II of the Jawaharlal Nehru National Solar Mission (JNNSM).
Industry players feel these are the main hiccups that may dampen the Centre’s ambitious solar plan, which is likely to be unveiled shortly.
“There should be strict penalties for not meeting RPO. Every State should fulfil the obligation. Otherwise, there are no buyers for electricity produced from solar projects,” said Managing Director of a PV solar modules manufacturer, requesting anonymity.
According to the RPO norm, every electricity distribution utility, captive or open access, must buy a part of their electricity needs from renewable sources.
The electricity distribution utilities’ bad financial health is the primary reason why they don’t buy power from renewable sources. However, the recent restructuring scheme unveiled for the utilities is expected to improve things, he said.
“Successful implementation of the JNNSM needs formulation of favourable policy framework to overcome technology, finance, infrastructure and regulatory barriers, such as the RPO,” said K. Subramanya, former Chief Executive Officer of Tata BP Solar.
Solar project developers say they face critical problems while seeking loans from banks or financial institutions. Cheaper funding in the form of external commercial borrowings or buyers-suppliers credit from overseas is not available to domestic cell makers, which affects the viability of projects.
At present, each megawatt of solar power costs around Rs 9 crore. “Solar projects are low-risk and low-return investments. The returns take about 10-15 years to flow in. If funding is not at a desirable rate and conducive to the internal rate of return, it’s difficult to raise debt. The sector should be included in the priority sector of banking,” the executive said.
In the second phase, the Government proposes to follow a viability gap funding model. The scheme provides financial support in the form of grants, one-time or deferred, to infrastructure projects undertaken through public-private partnerships with a view to making them commercially viable, says the draft policy issued by Ministry of New & Renewable Energy.
“High penetration of solar power requires substantial funding support from banking and financial institutions. More importantly, there is the need to address the issue of dumping of thin film modules,” added Subramanya.
Nearly, 10-12 States, including Gujarat, Tamil Nadu, Chhattisgarh, Karnataka, Andhra Pradesh and Kerala have come up with ambitious models to install solar electricity generation capacity.
The companies involved in the sector claim that photovoltaic cells work in diffused sunlight, too. This means States that get less sunlight and heavy rains can also install solar panels.
The National Solar Mission envisages installation of around 10,000 MW utility scale and 1,000 MW off-grid solar power projects by the end of the second phase.
The 12th Plan also targets capacity addition of 10,000 MW of grid connected solar power in India. Of this, 4,000 MW would be developed under the Central scheme and 6,000 MW under various State-specific schemes.