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Cover Story

Jnnsm : Time to Prepare for Phase II
Shubhranshu Patnaik, Senior Director, Deloitte Touche Tohmatsu India Private Ltd.
Issue Date - 23/06/2011
The Jawaharlal Nehru National Solar Mission (JNNSM) was launched last year with the objective of achieving 20 GW MW of grid-connected (and 2 GW MW of off-grid) solar capacity in India by 2022 and to provide an environment for innovation, efficiency improvement and scale in the country to accelerate solar energy’s march towards grid-parity by 2022.

Over Phase I of JNNSM, 1 GW of solar power is targeted by 2013. As a significant first step towards achieving this, the Government of India, through a tariff-based reverse auction process, successfully selected 37 developers offering 620 MW (450 MW of solar thermal and 150 MW of solar PV projects) to sign Power Purchase Agreements with NNNV. Further, about 100 MW of projects, were allowed to migrate under the JNNSM at feed-in tariffs specified by the CERC (Rs 17.91/kWh for PV and Rs 15.31/kWh for solar thermal).

The auction settled the debate on the viability of CERC’s feed-in tariffs as qualified bidders bid substantive discounts over CERC tariffs up to Rs.5.75/kWh for solar PV and Rs.4.82/kWh for solar thermal. Despite unavoidable criticisms of the reverse auction process, caps on capacities, etc., investor participation was overwhelming and the government and NVVN deserve credit in having conducted the process in a time-bound manner and conveying the seriousness of the program to the global community. Phase I is at best a proof of concepts, the test of which is not just the successful award or even commissioning of projects but in its scalability, given the 20 GW target set out under the mission by 2022. It is time therefore to ascertain the progress under Phase I and prepare for Phase II of the mission.

Of particular interest is the realisation of the solar thermal potential in India, which is central to achievement of the ambitious targets under JNNSM. Solar thermal technologies are emerging in nature and there are only a few operating plants around the world, although several are in the planning / development stage.

Solar thermal plant designs ideally require accurate local irradiation data and extensive engineering inputs in calibration and design of solar fields. Relying simply on the satellite-derived data can lead to faulty conclusions, as some players are finding out with ground-measuring instruments. The above uncertainties combined with the lack of solar development experience amongst bidders and the fact that very few solar thermal bidders actually aligned with solar technology providers at the bidding stage, has increased the risk-perception amongst lenders and made it extremely hard for these projects to get non-recourse financing. Over three-fourths of all projects under JNNSM face challenges in achieving financial closure. This remains an important area to be addressed by the government and multilateral financial institutions (MFIs).

With over 4 GW of solar thermal plants likely to be operational globally by 2013, the technical requirements for selecting Phase II solar thermal developers ought to be made more stringent. While tariff-based bidding worked well in development of conventional thermal plants in India, it should not be applied blindly to emerging solar thermal technologies and the process must provide for demonstrating technical qualifications, which go beyond mere letters of support from technology providers. If required, the central government should get the technology proposed be evaluated by a panel of experts or the National Centre of Excellence. A better approach would also be to have specific solar thermal projects developed like Case-2 projects, with substantive preparatory activities undertaken upfront by the government and solar resource data provided to bidders.

The government and MFIs have a significant role to play in building capacity amongst the commercial banks in assessing and financing solar projects. The role of the World Bank and ADB in utilizing their global solar experience in supporting local and foreign commercial banks in India is critical to the success of the program. Three other aspects of JNNSM need to be advanced significantly over the next two quarters. First, demonstration projects under Phase I of JNNSM have to be conceived and awarded quickly, as these are meant to further research and local adaptation of newer technologies and to provide operational data for commercial deployment to happen. Involving Indian PSUs, e.g., NTPC and BHEL and identified technology centres like IIT, Rajasthan and the Solar Energy Centre of MNRE in such pilots is essential to further research, enable dissemination of operational data and to provide for localisation of manufacturing along the value chain.

Second, field measurement of irradiation and mapping of solar resources across the country needs to have been done for at least one full year before Phase II planning commences. Third, the government has to aggressively further the localisation of manufacturing, particularly along the solar thermal value chain. This is intricately linked to the pilot projects, which will determine the preferred technology choices in India for commercialisation and will require greater coordination amongst the ministry of industries and commerce and the user industries of MNRE and MoP to realise the dreams of low cost solar development in the country.

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