Indian government considers introducing FIT

The Indian government is reportedly considering introducing a fixed solar feed-in tariff (FIT) in place of the current reverse bidding auction process applied to developers.

Under the current system across most of India, applicants wishing to develop solar projects make bids based on the cost of solar energy produced, with the lowest bidder winning but, according to a report on news website livemint.com yesterday, the government of Narendra Modi is considering the FIT incentive model adopted in Europe.

Notwithstanding the fact governments across Europe have been forced to put the brakes on fixed FIT payments for solar, Tarun Kapoor, joint secretary of India’s ministry for new and renewable energy, said the new government is considering introducing a solar FIT payment, according to the livemint.com report.

A solar FIT is becoming increasingly viable as the cost of solar energy approaches parity with fossil fuel energy, a process which energy minister Piyush Goyal says will be complete by 2017 and which was given a helping hand when the cess, or tax, on coal mined in India was raised in last month’s budget.

A stabilization in the costs of solar projects also makes a FIT more tenable. Most of the problems experienced by European governments came as a result of developers rushing to build projects to benefit from fixed FITs as the cost of solar materials plunged.

The introduction of a fixed FIT payment would act as another spur for a beleaguered Indian solar manufacturing sector to re-activate its mothballed production lines just as news emerges of plans for state-owned bodies to kick-start the next phase of Indian solar by helping develop ‘ultra-mega‘ solar plants bigger than 500 MW in size.