India solar feed-in tariff proposal ‘not serious’

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Rumours that the Indian government is considering a fixed feed-in tariff to boost solar deployment have been dismissed as “not serious”.

Last week media reports suggested that India’s Ministry of New and Renewable Energy was considering a FiT after the government of New Delhi mooted the idea as an alternative to competitive auctions, the system currently widely used in India.

A report from Livemint quoted Tarun Kapoor, joint secretary of the MNRE, saying that New Delhi’s move had prompted a debate on tariffs versus auctions.

According to Livemint Kapoor said as solar prices come “close to the bottom, then the distribution companies would be more comfortable shifting to feed-in tariffs.”

But commenting on the idea, Bridge to India analyst Jasmeet Khurana told PV Tech the idea was unlikely to work in India.

“It would be a huge challenge for India to fix a tariff in a way that maybe Germany and other countries have been able to do,” he said.

Khurana said the cooperation between central government departments responsible for deciding a tariff and state regulators “is not there”.

Electricity in India is “a state subject” and the current bidding mechanism is “more secure” and less likely to be tainted with corruption.

“India is not the place where you can fix these things, as it is more prone to corruption,” said Khurana.

Khurana said the bidding system in India works in getting the cheapest power-per-unit costs. “India has some one of the cheapest rates for solar generation,” he said.

Khurana said other countries in Africa and Asia have copied the bidding system and “India is proud” of the current bidding mechanism.

Khurana conceded that implementing a FiT at the right range could bring “clarity and certainty” for developers and investors and would generating interest in developing solar as “many stay away from the bidding mechanism as they don’t know what the price will be”, he said. 

But for implementation, he said: “A FiT is not something India can do confidently – to fix the right price and then keep providing it regularly.” says Khurana. “It is better if India keeps the bidding [mechanism].”

“The government is not really considering this,” he added.

The rumours around how prime minister Narendra Modi's new government will live up to its pledge of extending access to solar energy in India came as new figures emerged on India's solar deployment rates so far.

However Pradeep Palelli, co founder of local installer, Zolt Energy and former Efficient Carbon consultant, agrees that FiT could be a “good alternative” for investors and developers because of the added certainty for the 20 year period of the tariff.

As the lowest bid becomes the common tariff for the rest of the participants, although the auction process is “equally useful”, Palleli says that the bidding mechanism can also have the effect of “capacity limitation due to aggressive bidding by some players which puts a few other out of the race.”

In Andhra Pradesh, 1GW offered for solar bids in 2013, ended with just 200MW commissioned, despite initial interest of 1760MW. One company quoted INR6.49 per unit which “made it unviable to most other bidders resulting in 90% of bidders backing out” explains Palleli.

The solar leading state where prime minister Narendra Modi headed many successful solar programmes, Gujarat, had an initial tariff scheme for INR15 per unit for 12 years, followed by INR5 for 13 years – but developer’s where then accused of making ‘windfall profits’ from the tariff, although this claim was eventually rejected.

Some states have proposed a Generation Based Incentive (GBI) for residential and commercial solar projects instead of subsidies, says Palleli. This incentivises efficient systems and avoids delays in distributing subsidies, says Palleli.

Palleli says it is unlikely that there would be any complications of overlapping benefits from State and Central funding – as this already occurs in many states.

The government advisory panel for regional transmission, the Central Electricity Regulatory Commission (CERC) already proposed a solar tariff of INR7.72 for 2014-2015.

This would be a good tariff rate, says Palelli, however, when looking at a time period of ten years or more, due to global trends and market variation, a lower tariff of INR7-7.5 per unit could be set, and then “huge capacities can be added” says Palelli.

Piyush Goyal, minister for power, coal and new and renewable energy, said in a written reply today to a question in the Rajya Sabha, the upper house of India’s parliament, that total solar power generation capacity in India had reached 2.68 GW as of 30 June.

Goyal also said that solar growth for 2012-2013 was 64%, whereas for this year, the growth rate is expected to slow slightly to 56%.

This article was updated with further commentary on 12 August.

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