1. EICS POWER SERVICES (P) LTD
SOLAR POWER:
A DEVELOPER PRESPECTIVE
S.PONMANICKANDAN
01/07/2010
This document is prepared on the basis of discussion the author had with several policy makers, financing
bodies, regulatory authorities & other project developers. The facts provided are taken from the recent 3rd
annual conference on solar power conducted by POWERLINE. The views expressed are the views of
Industrywallas and some of the views are his personal opinion.

2. EICS Group of Companies,
EICS Power Services (P) Ltd. Chennai – 600 058.
Quality Management System - ISO 9001:2008
India is blessed with good sunshine over most of the parts and more number of clear sunny days than any
other country in the world. But the grid connected solar energy is estimated to be 15 MW which is below
than the expectation. Karnataka is leading the nation with 9 MW under its crown, while West Bengal has 2
MW connected to the grid and Punjab & other three states have 1 MW each which in total sum up to 15 MW.
States like Rajasthan & Gujarat were estimated to receive highest solar energy; the fact sheet shows that, till
date no solar plant has been connected to the grid. The national solar mission has identified a target of 20000
MW of solar power generation potential by the year 2022. Will this be possible without encouraging private
players? No, certainly not. But what makes the private companies to put a hold on their initiatives? The
answers are provided below.
SOLAR MISSION TARGET:
The targets are divided into three phases.
Phase I (2012 – 13) - To ramp up capacity of grid-connected solar power generation to 1000 MW within three
years – by 2013
Phase II (2013 – 17) – Adding another 3000 MW to make the cumulative power generation to 4000 MW or
even to 10000 MW by suitably enhancing/enabling the technology and finance from international bodies.
Phase III (2017 – 22) - The ambitious target for 2022 of 20,000 MW or more, will be dependent on the
‘learning’ of the first two phases, which if successful, could lead to conditions of grid-competitive solar power.
The transition could be appropriately up scaled, based on availability of international finance and technology.
What is happening?
The central government has allotted a capacity addition of 1000 MW of solar power in the phase I on 1st
come
1st
serve (FCFS) basis. This 1000 MW is again divided into two, (i) 500 MW for Solar PV modules and (ii) 500
MW for Solar thermal systems.
For a grid connected solar plant, the maximum capacity of the PV module shall be 5 MW/project/developer
and 50 MW/project/Developer, considering 5 MW & 50 MW are most economic modules of their respective
technologies. That is, 100 projects of PV modules and 10 modules of solar thermal plants can be allowed in
the first phase.
The states that are actively participating in solar agenda are Karnataka, Gujarat, Rajasthan, A.P, M.P, and CG.
If these projects to be allotted a state can have 2 plants with PV technology and 1 plant with CSP technology.
For this small piece of cake, a heavy competition exists.
Any projects allowed beyond this limit do not fall under JNNSM policy and hence cannot be claimed to have
the recommended tariff, subsidies and other benefits from the government. The policies of the central govt
and state govt differ.
The CERC declared a tariff of Rs. 18.44/Kwh for PV Modules & Rs. 13.45/Kwh for Solar thermal plants. The
Rajasthan ERC declared a tariff of Rs. 15.30/Kwh & Rs.12.38/Kwh for PV & CSP plants respectively. Gujarat
govt has gone a step ahead and announced a two phase tariff for the projects. The tariff for PV module shall
be Rs. 14.00/Kwh for 1st
12 years and Rs. 4.00/Kwh from 13th
year to 25th
year. And similarly the tariff for CSP
module shall be Rs. 10.00/Kwh for the 1st
12 years and Rs. 3.50/Kwh from 13th
year to 25th
year.
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3. EICS Group of Companies,
EICS Power Services (P) Ltd. Chennai – 600 058.
Quality Management System - ISO 9001:2008
Solar projects are exempted from transmission charges when the transmission is “interstate”. It’s unclear that
who will bear the transmission charges when transmission is “intra – state”. In addition the exemption is
applicable till 2013 only. The policy did not mention about the charges beyond 2013.
While estimating the tariff, the project cost considered by CERC was Rs. 17.00 Crores/Mw for PV & Rs. 13.00
Crores/MW for CSP plants. But in actual, the project costs are higher than the assumed costs. The reason for
the difference is that, till date in India, we do not have any installation of CSP plants. The project cost differ
with technology, site conditions, configurations etc., therefore arriving at a firm project cost for estimating
the tariff becomes difficult.
Under RPO (renewable purchase obligation) scheme, DISCOMs are advised to buy 0.25% of their power
requirement from renewable (solar, wind & hydro). This % shall be increased to 3% by 2022. The policy does
not clearly state the % of solar power to be bought by the DISCOMs. Considering that all the states have only
solar as the renewable energy, a simple calculation can be prove that the % needs to be increased many
times.
Avg power requirement of any DISCOM (for say) – 5000 MW
0.25% of the power required - 5000 x 0.25% = 12.5 MW
Only 12.5 MW of power will be bought by the DISCOMs, whereas the installed capacity of solar would be 150
MW (1000 MW shared by 7 leading states). Therefore, the RPO should be increased to attract the
investments.
The central also insists that, 30% of the project cost should be used to buy indigenous equipments. India is
now opening for the solar manufacturing and slowly growing in the arena. Many leading Navratna companies
and private companies have JV agreement with foreign manufacturers. But none of them have a proven
experience in supplying their equipments. A project developer cannot rely on Indian make equipments at this
stage. This rule shall be relaxed.
Funding agencies are worried about the uncertainties of the government policies. They say that, if the tariff
specified by the commission is given to any project, the DISCOMs would be bankrupt. They still didn’t have
convinced with the tariff by DISCOMs. 1 MW of solar plant will generate 1.4 Million units in a year. But the
developers project 1.7 million units, which is practically impossible. A plant can achieve a max.PLF of 18%
which will lead to the generation of 1.4 Million units. Unless PLF increases, the unit generation never
increases. PLF can be increased for which advanced technical systems are required which will further increase
the capital burden.
Implementation – the project needs 12 to 18 months for installation. Construction is also a complex problem
in solar. Our lands are not developed, we have an unpredictable weather conditions. The land required for PV
module based on crystalline technology is 4 – 4.5 acres/MW and PV with thin film technology requires double
the area. Plant based on CSP technology needs 6 – 7 acres/MW. Some state governments insist to developers
to buy their piece of land and they do not allocate any lands. There are few EPC companies available in this
sector and very few skilled manpower for operation.
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4. EICS Group of Companies,
EICS Power Services (P) Ltd. Chennai – 600 058.
Quality Management System - ISO 9001:2008
On a whole, the challenges in this sector are as listed below.
Huge land requirement
High capital costs
Dependency on foreign manufacturers / JV companies
Few EPC companies
Government’s policy beyond 2013 regarding RPO, Tariff & Transmission charges etc
Banker’s dilemma
We believe that, these challenges will be taken in to serious considerations by the R & D institutions, financial
institutions, govt regulators & mfg companies to innovative technology based solutions to the industry which
will help India to obtain its mission.
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