India: 350 MW to be installed under Karnataka's new solar policy11. July 2011 | Top News, Markets & Trends, Global PV markets, Applications & Installations | By: Mohit Anand
The south-western state of India, Karnataka, has released its new solar policy. Announced on July 1, it is targeting the installation of 350 megawatts (MW) of solar projects by 2016.
Of this, 200 MW worth of solar projects will be developed for direct sale to the different distribution companies in the state, commonly known as ESCOMS. To achieve this target, the government will allocate 40 MW worth of projects every year until 2016, thus providing much needed certainty on the allotment timelines to the developers. The split between photovoltaic and concentrated solar power (CSP), however, has not yet been defined.
Meanwhile, around 50 MW worth of bundled solar thermal power will be allotted to state-owned utilities for development. In these cases, the utilities will mix thermal power sourced from outside Karnataka with solar power that it generates within the state.
The bundling of solar power from within the state with conventional power bought from outside is significant. Karnataka is a power deficit state and will be able to supplement its solar thermal power supply through this mechanism. These projects are reserved for the state and federally-owned utilities, as it is relatively easy for them to enter into power purchase agreements (PPAs) for thermal power.
The National Thermal Power Corporation (NTPC), a public sector undertaking and India’s largest power generation utility will be a key player in developing these 50 MW. It has aggressive expansion plans for renewable energy and a large capacity to bundle solar power with its self-generated thermal power.
The remaining 100 MW will comprise projects under the Renewable Energy Certificate (REC) mechanism. Such projects will not receive the preferential tariff under the policy. Instead, they will generate RECs while selling solar power to the public grid at the average power purchase cost (APPC) of the concerned distribution utility. Again, the split between photovoltaics and CSP is currently unknown.
The APPC varies from state to state and is between INR1.60 to 2.69 (€0.02 to €0.04) per kilowatt hour (kWh) in 2010 to 11.
Karnataka recently came up with its Renewable Purchase Obligation (RPOs) order. ESCOMS and captive consumers in the state now have to obtain 0.25 percent of their total energy consumption from solar power. Alternatively, they can purchase the RECs to meet their obligation. This will provide a ready demand for the 100 MW worth of projects that will be developed under the REC mechanism.
Project sizes have only been determined for the 200 MW of photovoltaic projects that will sell their generated electricity to the ESCOMS. These projects will have a capacity of between three and 10 MW. CSP projects, on the other hand, must be a minimum of five MW in size. There is no cap on the maximum limit. The small project sizes are due to the lower solar irradiation in the state.
Though Karnataka has come up with its own policy, it will continue to support programs like the National Solar Mission (NSM). As such, it has set a combined target of 126 MW of solar power to be developed by 2013 to 14 through the NSM and the state’s solar policy.
The Karnataka Renewable Energy Development Ltd (KREDL) is the nodal agency for the policy. The projects for sale of power to the ESCOMS will be allotted through the process of competitive bidding.
The KREDL will be responsible for coming up with the draft of the Request for Selection (RfS) document for these projects. The RfS lays out the terms and conditions for project allotments and the documents based on which the developers can submit their bids. The financial and technical requirements for the developers will also be given in the RfS. This document is expected to be available to the public soon.
The maximum tariff will be in accordance with that fixed by the Karnataka Electricity Regulatory Commission (KERC) in July 2010. The KERC has given a normalized tariff for 25 years applicable to projects commissioned till March 31, 2013. The maximum tariff for photovoltaics is INR14.50 (€0.24) per kWh and INR11.35 (€0.18) per kWh for CSP. The projects will be awarded to developers offering the highest discount on the maximum tariff.
The policy also lays out plans for building solar power capacity for captive users. There is no cap on the capacity installed by captive users. Further, the policy promotes projects for the sale of solar power directly to third party players through open access. This will help users fulfill their RPOs and will bring more investment into the state’s solar market.
The policy allows developers to inject power at 11kV and above, while under the NSM the requirement is 33kV and above. Developing 11kV substations at power plants is cheaper than a 33kV substation which requires high-cost components. This will help bring down project costs for the developers.
Mohit Anand is a senior consultant for Bridge to India, a consulting company with an entrepreneurial approach based in New Delhi, India. Founded in 2008, the company provides market analysis and market entry advisory to international solar companies looking to enter the Indian market.
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