The Indian government launched the Indian Solar Mission in 2010 (GoI, 2013). Targeting 20 GW in CSP and solar PV investments by 2022, it is one of the most ambitious expansion plans for renewable energy in any emerging economy. The government faces a significant challenge to bring it to completion on time while avoiding excessive burden on the public budget.
Indian Policy :
•The Indian National Solar Mission plans 20 GW in solar investments by 2022 divided in three phases: 2 GW by 2013, 10 GW by 2017, and 20 GW by 2022. CSP is expected to make up almost 25% of the total installed capacity.
In the first phase of the plan, seven CSP projects have been allocated a guaranteed tariff through a reverse bidding process for a total of 470 MW of CSP (NRDC and CEEW, 2012).
••The reverse auctioning of the final tariffs obliges project developers to compete up to a fixed tariff ceiling for the right to provide electricity to utilities. This competitive process can result in an electricity rate that is higher than the market going rate, but still pushes costs down. Theoretically, reverse auctioning provides effective price discovery by ensuring that bidders request a tariff at which the project is commercially viable, while still yielding their minimum acceptable rate of return.
••Dispatchable renewable energy sources can help India replace high emitting coal (42% of the energy mix, see WEF,2012) and improve energy security.
••Synergies between national and state level policy can be explored. Two states (Rajasthan and Gujarat) have launched their own state level solar missions whose interaction with the nationwide mission deserves analysis.
FINANCING
••Cost of capital is a barrier for clean energy development in India, especially with the high costs of debt (Nelson et al,2012). This is driven partially by central bank rates aimed at controlling inflation.
••Despite very limited experience with project financing and non-recourse lending, a significant number of both public and commercial banks both international and local are involved in the first phase of CSP financing for the solar mission (NRDC and CEEW, 2012).
••Potential interactions with CTF concessional lending: the Clean Technology Fund (CTF) has two streams of concessional funding for solar power in India. Firstly, financing for solar parks (this does not include direct funding for CSP but it may benefit from the infrastructure, such as transmission lines), and secondly, a concessional pool of $50 million in funds to support several demonstration CSP projects, which is likely to be available for Phase II of the Indian Solar Mission (CIF, 2011).
TECHNOLOGY
••The Indian Solar Mission does not include specific technology requirements within the allocation for CSP, apart from minimum local content requirements, letting developers select their own preferred technology so as to optimize production efficiency at minimum cost. The tender process in Phase 1 has selected five parabolic trough CSP projects totaling 350 MW, and two linear Fresnel projects totaling 120 MW (NRDC and CEEW, 2012).
••Phase 1 has already highlighted the high resource dependence of CSP technology; the tender was closed when data on the solar resource at each site were not complete and several bids were thus submitted based on interpolation of high level data1 (NRDC and CEEW, 2012), leading to high uncertainty on actual generation costs.. In the end,solar irradiation proved to be lower than expected. Furthermore, construction times and issues seem to have been underestimated in several cases, with most of the plants experiencing significant delays.
Indian Policy :
•The Indian National Solar Mission plans 20 GW in solar investments by 2022 divided in three phases: 2 GW by 2013, 10 GW by 2017, and 20 GW by 2022. CSP is expected to make up almost 25% of the total installed capacity.
In the first phase of the plan, seven CSP projects have been allocated a guaranteed tariff through a reverse bidding process for a total of 470 MW of CSP (NRDC and CEEW, 2012).
••The reverse auctioning of the final tariffs obliges project developers to compete up to a fixed tariff ceiling for the right to provide electricity to utilities. This competitive process can result in an electricity rate that is higher than the market going rate, but still pushes costs down. Theoretically, reverse auctioning provides effective price discovery by ensuring that bidders request a tariff at which the project is commercially viable, while still yielding their minimum acceptable rate of return.
••Dispatchable renewable energy sources can help India replace high emitting coal (42% of the energy mix, see WEF,2012) and improve energy security.
••Synergies between national and state level policy can be explored. Two states (Rajasthan and Gujarat) have launched their own state level solar missions whose interaction with the nationwide mission deserves analysis.
FINANCING
••Cost of capital is a barrier for clean energy development in India, especially with the high costs of debt (Nelson et al,2012). This is driven partially by central bank rates aimed at controlling inflation.
••Despite very limited experience with project financing and non-recourse lending, a significant number of both public and commercial banks both international and local are involved in the first phase of CSP financing for the solar mission (NRDC and CEEW, 2012).
••Potential interactions with CTF concessional lending: the Clean Technology Fund (CTF) has two streams of concessional funding for solar power in India. Firstly, financing for solar parks (this does not include direct funding for CSP but it may benefit from the infrastructure, such as transmission lines), and secondly, a concessional pool of $50 million in funds to support several demonstration CSP projects, which is likely to be available for Phase II of the Indian Solar Mission (CIF, 2011).
TECHNOLOGY
••The Indian Solar Mission does not include specific technology requirements within the allocation for CSP, apart from minimum local content requirements, letting developers select their own preferred technology so as to optimize production efficiency at minimum cost. The tender process in Phase 1 has selected five parabolic trough CSP projects totaling 350 MW, and two linear Fresnel projects totaling 120 MW (NRDC and CEEW, 2012).
••Phase 1 has already highlighted the high resource dependence of CSP technology; the tender was closed when data on the solar resource at each site were not complete and several bids were thus submitted based on interpolation of high level data1 (NRDC and CEEW, 2012), leading to high uncertainty on actual generation costs.. In the end,solar irradiation proved to be lower than expected. Furthermore, construction times and issues seem to have been underestimated in several cases, with most of the plants experiencing significant delays.
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