India uses coal tax to help fund 21GW of new solar development

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The Indian government has today announced the approval of 21GW in new solar development with over US$800 million in government funding made available.

The new solar projects will predominantly use Viability Gap Funding (VGF).

VGF is available due to India’s ‘polluter pays’ system. Coal companies pay INR50 (US$0.80) per tonne of domestically produced, and imported coal.

These polluter fees are channelled onto the National Clean Energy Fund, operated by the Ministry of Finance, and awarded to the Ministry of New and Renewable Energy (MNRE).

The national government is providing INR5050 crore (US$809 million) in total, for two solar development schemes, one for at least 20GW of ‘ultra mega’ solar power parks, and another for 1GW of on-grid solar.

The national cabinet approved 25 solar power parks, 500MW and up in size, or ‘ultra mega’ solar power parks, across India, where land is available, including some smaller parks in challenging terrain, such as Himalayan territory.

State government is to oversee development of the ultra mega solar parks, with construction from 2014 to 2019, and INR4050 crore (US$649 million) in government funding to be made available.  

The second scheme approved is part of the National Solar Mission’s second phase and aims for 1GW of on-grid solar to be developed by central and state schemes.

The 1GW on-grid will be funded by VGF of INR1000 crore (US$160 million).

Announced by the Cabinet Committee on Economic Affairs (CCEA), the 1GW of on-grid solar is to begin development nationwide in three year segments, to start in between 2015 and 2018.

The 1GW developments are also to be 100% local content – cells and modules must all be made in India. In August, energy minister, Piyush Goyal told Indian manufacturers to run at full capacity and expand.

Central Power Supply Unit (CPSU) and government agencies will be able to participate in the 1GW scheme, with inexpensive land used in rural areas for solar parks, and tenders awarded from central and state governments.

To allow the 1GW to be on-grid, transmission lines for the 1GW will be developed, allowing solar developers to save on the cost of also building transmission lines. This will also protect landscapes with limited transmission line development and will enable more developments quicker, as fewer clearances will be required.

State government will be responsible for picking suitable land to develop the 1GW of solar parks, and for choosing developers and sending proposals to MNRE for approval.

Both the 20GW ultra mega scheme, and the National Solar mission 1GW on-grid scheme, will see developers VGF amounts of up to INR25 lakh (US$40,000) for carrying out reports and surveys on possible solar developments. Reports are then to be sent to the national government solar body, the Solar Energy Corporation of India (SECI), for a further INR20 lakhs (US$32,000), or, if lower, 30% of the project costs.

Grants will be made by SECI at various milestones of solar project development  with a 60 day time limit for reports to be carried out.  

Already thermal power plant companies, utilities and power distribution companies as well as entities such as Indian Railways are applying for solar power development grants.

Another INR500 crore (US$80 million) was also set out in India’s national budget for the 20GW scheme, with renewable energy said to be highly prioritised by the new Finance Minister, Shri Arun.

Before the elections, the national budget saw MNRE’s allowance slashed by prior Finance Minister, Shri Chidambaram.

The two schemes are in line with reports of India raising its solar ambitions to 100GW by 2022, and reports of solar parks being mapped out last month to meet solar advocate Prime Minister, Narendra Modi’s election ambitions.

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